Often prospective clients call us wanting to know whether we know of any dormant nonprofits that are going out of business that they could take over. The idea is that taking over an existing entity avoids the hassle and expense of incorporation, creating a governance structure and obtaining tax-exempt status for a brand new entity. Presumably, a new board of directors would be substituted in place of the old board and new officers would be elected.
Starting a nonprofit
The IRS has issued Notice 2021-56 outlining the requirements that LLCs seeking 501(c)(3) status must meet to be recognized as tax-exempt by the IRS. These
Misclassifying employees as independent contractors is a common mistake made by many nonprofits. Still, improperly misclassifying an employee as an independent contractor can be costly. Nonprofits can suffer payroll tax liabilities and penalties or lawsuits from federal and state authorities for reimbursement of workers’ compensation claims.
While many nonprofits may be enjoying the surge in volunteerism, relying on volunteers can come with its share of risks. Still, abiding by a few key practices can ensure that both the nonprofit organization and its volunteers get the most out of the experience.
Blackbaud is familiar to many nonprofits and universities as one of the world’s leading cloud software companies for fundraising, relationship, and financial management. Now they are in the limelight after a highly publicized ransomware attack in which perpetrators obtained a copy of a subset of data from its Raiser’s Edge and NetCommunity products that track clients’ donors and fundraising activities. Although Blackbaud maintains that no personal information (such as credit card numbers, banking information, or social security numbers) was compromised in the attack, Blackbaud users impacted by the breach have since filed a class-action lawsuit for negligence, breach of contract, and other allegations.
The unexpected has increasingly become¦.well, expected. And failure to adequately plan for anticipated risks can subject directors to scrutiny for breaching their fiduciary duties. Having a business continuity plan is increasingly important; not only for ensuring the continued operation of essential services but also to shield directors from liability for failing to plan for such disruptions. Here’s what you need to know:
Business interruption insurance is most commonly designed to replace lost income in cases where a business premise is physically damaged or where access to the insured’s property is prohibited by closure orders from a civil authority because of damage to property surrounding the insured’s business.
Fiscal sponsorship is when a nonprofit organization accepts tax-deductible donations on behalf of another organization that does not have 501(c)(3) status. Solicitations are made in the name of the fiscal sponsor and therefore permit the sponsored project to rely on the sponsor’s IRS determination letter, solicitation registrations, etc.