For those who are passionate about a cause, the legal side of starting a nonprofit can be frustrating and time-consuming. For those who prefer to obtain professional assistance from attorneys experienced in representing nonprofits, we offer a complete, start-up package on a fixed fee basis. Fixed fees permit you to accurately budget resources and call us when you have a need, without worrying about the meter running.
We have in-depth knowledge of the tax and corporate rules applicable to nonprofits. As a result, we know where the lines are and can counsel you so that you do not cross them without being overly restrictive. Our experience includes all types of tax-exempt entities, not just 501(c)(3) organizations. We tailor documents to your organization, purpose and desired structure. We understand all of the different ways nonprofits can lock-in or share control. In addition, we help founders shape plans and make connections through our contacts, experience, and knowledge of the nonprofit sector.
Our fixed fee package includes all of the legal steps required to create the organization and gain tax-exempt status.
- Conferencing to discuss the purpose, programs and budget in detail
- Reserving the name with the state of incorporation
- Drafting the articles of incorporation to conform to 501(c) requirements and state law
- Filing and publishing the articles of incorporation
- Obtaining a new EIN number for the new corporation
- Conferencing with you to determine governance structure
- Drafting bylaws to reflect the governance structure
- Drafting organizational meeting minutes with required resolutions
- Drafting various governance policies that the IRS recommends including, as applicable, conflict of interest, gift acceptance, document retention and destruction, joint venture, fundraising, compensation, confidentiality, travel and expense reimbursement, among others
- Drafting certain ancillary documents that may be called for by the business plan and that the IRS may want to review in advance, which can include scholarship guidelines, grant agreements, and resource sharing agreements
- Drafting and filing Form 2848 Power of Attorney
- Drafting and filing the IRS exemption application (either Form 1023-EZ, Form 1023, or 1024) and related statements
- Representation before the IRS and response to IRS follow-up questions
- Providing a Board action calendar summarizing key governance and compliance deadlines
- Fundraising registration in state of domicile (or one state of choice if domicile does not require registration)
- Providing an explanatory letter regarding operational rules applicable to new the nonprofit including guides to taking minutes and acknowledging gifts
- Providing a minute book of all corporate documents
We will determine a fixed fee after consultation with you. Our fee is based on the nature of the proposed organization’s activities and our experience regarding the level of documentation and follow-up that will be required to obtain exemption, the novelty and complexity of the organization’s proposed activities, as well as the number of states the organization must register to fundraise in.
To begin the process of creating your new nonprofit organization, reach out Caritas Law Group today at (602) 456-0071 or firstname.lastname@example.org.
Frequently Asked Questions:
How do I get started?
A lawyer will discuss your proposed organization with you and determine whether it qualifies for exemption. If we believe your project can qualify and agree to represent you, you will need to sign an engagement letter confirming your understanding of the work we will perform on your behalf and the fees for our services as well as pay our flat fee in advance. If your organization needs more time to raise start-up funds, we can divide the project into several stages. Once we have accepted the representation, we will send you a questionnaire designed to gather the specific information needed to prepare all of the documentation required to turn your vision into reality.
How long does it take to prepare the documents?
Once we have received the completed client questionnaire detailing your plans for the proposed organization, it can take three to four weeks to prepare a completed draft that is ready to file with the IRS. Rush services are available but will add to the flat fee quote.
Are there other costs in addition to the fixed fee?
Yes. Clients are also responsible for the fee to file and publish the articles of incorporation in their state, ranging from $50 to $400, and for the IRS filing fee, which is currently $600. If your organization qualifies to file the Streamlined Application for Recognition of Exemption under 501(c)(3) (formerly, Form 1023-EZ), the filing fee is instead $275. Occasionally, we will charge for other expenses such as mailing and package delivery fees. We do not routinely charge for copies, phone calls or other routine administrative expenses for flat fee engagements. These are all included in the flat rate for the start-up package.
How long does the process take once I provide the requested information?
We will review the information you provided and confer with you, either in person, over the telephone, or online, to clarify any additional questions you or we may have about your plans. We will then prepare articles of incorporation, bylaws, organizational meeting minutes, governance policies, as well as the required IRS forms. Once drafts have been prepared, they will be sent to you for review and approval prior to filing with the IRS.
How long does it take to receive a determination letter?
Once the application is filed, the IRS typically takes approximately three weeks to acknowledge receipt. The IRS then screens the applications. Those that the IRS determines do not raise issues of fact or law are processed in as little as few weeks up to a few months. However, if the IRS has any issues or concerns, it assigns the application to a reviewer. Once the case has been assigned to a reviewer, obtaining a final result can take an additional several weeks to several months. Once assigned, the reviewer will typically contact us with follow-up questions within a few weeks. The questions are usually clarifications or confirmation of information that has been provided. However, there are some cases that require multiple responses to resolve all of the IRS reviewer’s concerns.
Is it possible to speed up the process?
It is possible to expedite the review process if a grant is pending and will be lost unless the new charity sends the funder a favorable IRS determination letter by a certain date. Be prepared to substantiate a request for an expedited review with a letter from the grantor. Letters from members of Congress in support of an Application for Exemption can also be helpful.
When can the new organization start fundraising?
If the organization files its Form 1023, Application for Recognition of Exemption, within 27 months of the date the entity is legally formed, and is ultimately successful in obtaining tax-exempt status, the IRS’s determination of exemption will be retroactive to the entity’s date of formation.
Newly formed organizations may need to register to solicit funds (or apply for an exemption) depending on where they are soliciting. Once the organization is registered, until the IRS determination letter is issued, new entities should explain to potential donors that an application for tax-exempt status is pending. Donors who claim a charitable contribution deduction for their gifts before then take the risk of an adverse IRS decision.
What if a funder wants to make a grant now but requires a determination letter?
Organizations whose status is pending can either defer acceptance of the grant if the grant maker is willing, or find a fiscal sponsor. A fiscal sponsor is a recognized charitable organization that is willing to offer legal and fiscal sponsorship of the project until the organization receives its tax-exempt status. For more information see our blog post on Fiscal Sponsorship v. Fiscal Agency.
How often does the IRS deny tax-exempt status?
If we believe there is a risk that the application will not be approved, we will counsel you as to the risks at the beginning of the representation. To date, we have not had an application denied. This is due, at least in part, to the fact that we do not take a case if we do not believe it will qualify for tax-exempt status.
What if we want to prepare our own application and just pay for a review?
For those with more time than money on their hands, we recommend self-preparing the application and are happy to recommend resources to assist self-preparers. We are happy to review your application on an hourly basis during which we will review the application and attachments, make comments, and provide suggested language where appropriate.