CATEGORY

Starting a nonprofit

What Is An L3C?

The L3C, or Low Profit Limited Liability Company, is a new legal entity that can be legally formed in six jurisdictions. The concept started in Vermont and is quickly catching on in other states across the U.S. including Illinois.

How is it different from an LLC?

The L3C’s primary purpose is to conduct activities that further a charitable or educational purpose. Earning a profit is its secondary purpose. Traditional corporate law requires that the owners’ interests are exclusively economic. This has been interpreted to mean that corporate directors have a duty to maximize profits for the company’s owners to the exclusion of virtually any other consideration. The statutory framework of the L3C turns the traditional view of the fiduciary duty to maximize the economic return for a company’s owners on its head. Instead, the L3C statutes require the managers to pursue the accomplishment of a charitable or educational purpose. They can earn a profit while pursuing their mission, but earning a profit can’t be a significant purpose of the company.

Read More »
February 21, 2010 No Comments
Year end donation tips
IRS

IRS Tips for Year-End Donations

Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following:

Read More »
December 23, 2009 No Comments
charter schools
Starting a nonprofit

How to Start a Charter School in Arizona (Updated 2025)

Ellis Carter and Deanna Rader will be co-presenting a webinar on December 15th at 4:00 pm as part of the Arizona Charter School Association’s Charter Starter program. One of the first sessions that the program will offer is a webinar on the legal aspects of starting an Arizona charter school.

Read More »
December 2, 2009 No Comments
Form 1023
Starting a nonprofit

Caveat Emptor – Legal Document Preparers

In my practice representing nonprofit and tax-exempt organizations, there are often themes that emerge. Over the last few weeks I have had a spate of calls from would be nonprofits that paid either a nonprofit start-up consultantÂť or a document preparation company to form their nonprofit and handle their IRS filings. In each case, the work product that made it to my office required substantially more work to fix than it would have taken to do properly the first time around. You get what you pay for, and sometimes, you pay dearly for what you get. Before hiring someone to help you with the legal and tax aspects of starting a nonprofit, make sure they are licensed to provide the type of assistance they are offering, have specific experience representing nonprofits, and are in fact representing you rather than helping you to commit malpractice on yourself.

Read More »
November 25, 2009 No Comments
private foundation vs private inurement
Starting a nonprofit

Nonprofit Law Jargon Buster – Private Inurement v. Private Benefit

The private inurement rule and private benefit rules exist to ensure that charitable assets are preserved for the benefit of the public and not diverted to private use. This is a fundamental concept that distinguishes tax-exempt organizations from for-profits.

The rules originate in the language of Code Section 501(c)(3). Code Section 501(c)(3) contains the specific requirement that:

[N]o part of the net earnings of [the exempt organization] inures to the benefit of any private shareholder or individual . . . .

In addition, under the regulations, an organization is not treated as organized and operated for exclusively exempt purposes unless it serves a public rather than a private interest,Âť Based on this provision, tax exempt status is not available to any organization if its net earnings inure to the benefit of private individuals in whole or in part.Âť

In practice, the law distinguishes between different degrees of inurement depending upon who is being benefitted. The two types of inurement are referred to as private inurementÂť and public benefit.Âť

Read More »
November 18, 2009 No Comments

Nonprofit Law Jargon Buster – 501(c)(3) Organizations and the Commerciality Doctrine

The well-meaning have been advising exempt organizations to operate like a businessÂť for years. If the organization is a Section 501(c)(3) organization, operating too much like a business can cost it its tax-exempt status due to the Commerciality Doctrine.Âť Practically, the issue of commerciality usually arises when a tax-exempt organization engages in any endeavor for which a clear for-profit counterpart exists in the marketplace. Typical examples include publishing, consulting and sales of arts and crafts. Today, the Commerciality Doctrine is a threat to the increasingly popular movement toward social enterprises. Those that choose to organize as Section 501(c)(3) organizations should only do so after a thorough review of the Commerciality Doctrine.

Read More »
November 8, 2009 No Comments
Private foundations and public charities
Nonprofit Tax

The Difference Between a Private Foundation and Public Charity (Updated 2025)

Private foundations are subject to a more strict regulatory regime than public charities. There are penalties for “self-dealing” transactions, failure to distribute sufficient income for charitable purposes, holding concentrated interests in business enterprises, making risky investments, and for making certain types of expenditures.

Read More »
October 19, 2009 No Comments
Forming the Entity
Starting a nonprofit

Starting a Nonprofit in Arizona – Forming the Entity

Once a non-profit founder has surveyed the non-profit landscape and found a legitimate need, recruited an initial board, created business and fundraising plans, and scraped together some start-up funding, he or she is ready to proceed. In Arizona, it usually makes the most sense to form the entity as an Arizona non-profit corporation. The steps required to form a nonprofit in Arizona are covered.

Read More »
September 30, 2009 No Comments
Starting a Nonprofit in Arizona
Starting a nonprofit

Starting a Nonprofit in Arizona – Laying the Groundwork

I receive several calls a week from people who want to start a new non-profit. Looking back on my legal career, I realize that many of the tax-exempt organizations I helped to create early on never got off the ground. Today, I consider it part of my responsibility to the potential new client and to the sector to educate would be founders on the realities of the marketplace. What follows is a walk through the typical discussion that I have with potential founders.

Read More »
September 28, 2009 No Comments
Scroll to Top
FREE DOWNLOAD

How to Start a Non-Profit Organization

Download our free guide to learn about the many elements needed to run a successful nonprofit organization, as well as how to avoid common pitfalls and mistakes.

FREE DOWNLOAD