At Caritas Law Group, we engage with nonprofit founders, directors, and officers every day. Whether newly formed or have been operating for years, nonprofit organizations face unique challenges, restrictions, and opportunities. We are often asked similar questions about how to navigate compliance, governance, fundraising, and more. In this post we will answer several frequently asked questions we get from clients every day.
1. What is Statutory Agent and Do We Need One?
A statutory agent is an individual or business that accepts service of process and other legal documents on behalf of your nonprofit. Statutory agents (also called registered agents) are required in every state your nonprofit conducts business in, including your nonprofit’s home state. The registered agent can be one of the nonprofit’s directors or officers, or it can be a third party.
2. How Many People Need to Be on the Board of Directors?
The answer depends on where your nonprofit is located. In Arizona, you only need one board member to form a nonprofit corporation. In other states, you may need more. For example, in Washington, nonprofits must have at three directors if it has applied for tax-exempt status with the IRS.
While state law governs the minimum number of directors, those nonprofits that wish to become tax-exempt should strive to recruit at least three independent directors. Doing so shows the IRS and potential donors that the organization is not overly influenced by any single person and that business decisions are made in the best interests of the nonprofit and the communities it serves.
3. I Have Filed My 1023/1024. When Will My Application Be Processed?
Once you have submitted your exemption application, IRS processing times vary. If you submitted the 1023-EZ, it typically takes 3-4 months to receive a determination letter. If you submitted a 1023 or 1024, it can take up to 6 months (if not longer) to receive a determination letter. However, these are just general rules of thumb. Processing times are based on the volume of applications the IRS receives and the complexity of your application, among other things.
For the most accurate timeframe, you can check the IRS’s webpage “Where’s my application for tax-exempt status?” here: https://www.irs.gov/charities-non-profits/charitable-organizations/wheres-my-application-for-tax-exempt-status. The IRS updates this page periodically to reflect current processing times.
If it has been more than 6 months since you submitted your application, you can reach out to the agent assigned to your case by calling the IRS at (877) 829-5500.
4. Who Hires/Fires the CEO?
As the name suggests, the Chief Executive Officer is a corporate officer position. Typically, officers are elected or appointed by the nonprofit’s Board of Directors or members. The rules and procedures governing election and removal of officers should be laid out in your nonprofit’s Bylaws. If not, your state’s nonprofit (often called “nonstock”) corporations statutes should provide a default rule for electing and removing an officer.
5. How Many Types of 501(c)s Are There?
There are 29 types of 501(c) organizations, with the most common being 501(c)(3), (c)(4), (c)(6), and (c)(7) organizations. While each exemption type is unique, it’s not uncommon for a nonprofit to fit into more than one type of 501(c). In those cases, it is important to weigh the pros and cons of each type of 501(c) the organization may qualify for to determine which best fits the nonprofit’s goals and activities.
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Kyler Mejia is an associate (bar admission pending) with Caritas Law Group, P.C. Kyler counsels nonprofit and socially responsible businesses on corporate, trademark, tax, and fundraising matters nationwide and advises donors concerning major gifts. To schedule a consultation, call 602-456-0071 or email us through our contact form.