Law Offices: Non-Profit Or For-Profit?

Non-profit organizations are governed by a unique set of laws and regulations that differ from those applicable to for-profit entities. These laws relate to tax exemption, incorporation, board member liability, and charitable solicitations. Non-profit lawyers are experts in these areas and can provide essential guidance to organizations, ensuring compliance with regulations and helping them avoid penalties. They can advise on the ideal structure, the necessary paperwork, and the process of gaining tax-exempt status. Non-profit lawyers can also assist with day-to-day operations, including administrative, contract, employment, and tax law matters. While some non-profits may hesitate to seek legal services due to limited budgets, it is often more cost-effective to avoid legal problems than to fix them. Therefore, a law office specializing in non-profit law can be a valuable asset to any non-profit organization.

Non-profit lawyers can advise on the right structure for your organisation

Non-profit organisations are governed by four bodies of law that are unique to them, in addition to the laws that regulate all enterprises. These include tax-exemption, nonprofit corporation law, board member liability, and revenue laws. Non-profit lawyers are well-versed in these laws and can advise on the right structure for your organisation.

For instance, a non-profit lawyer can help you understand the different types of non-profits and the legal and tax obligations of each. They can advise on the right form of entity for your organisation, depending on your activities and goals. For example, a charitable organisation may be able to gain tax-exempt status under section 501(c)(3) of the Internal Revenue Code, while a political organisation, private foundation, or religious organisation will have different requirements.

Non-profit lawyers can also guide you on the necessary paperwork and documentation to maintain your non-profit status. They can advise on how to form a board of directors, appoint officers, and establish the proper bylaws and conflict of interest policies. Non-profit lawyers can help you navigate the complexities of state and federal laws, ensuring that your organisation complies with the law and avoids penalties.

Additionally, non-profit lawyers can provide expertise in tax law, which is crucial during the formation stage of a non-profit when obtaining a determination from the IRS as a tax-exempt organisation. They can also advise on matters such as executive compensation, transactions with board members, and permissible lobbying and political activities.

By seeking legal counsel from a non-profit lawyer, you can ensure that your organisation is structured correctly, complies with the relevant laws, and can focus on achieving its goals and making a positive impact.

Non-profit lawyers can help you achieve tax-exempt status

Non-profit organisations are exempt from paying federal income taxes on their net profits. In some states, they are also exempt from paying state income taxes. Non-profit lawyers can help organisations achieve this tax-exempt status. They can advise on the right form of the entity for the organisation, depending on its activities and goals. For instance, a charitable organisation may be able to gain tax-exempt status if it meets the conditions set forth in section 501(c)(3) of the Internal Revenue Code and maintains specific documents. A political organisation, private foundation, or religious organisation has different legal and tax obligations. Non-profit lawyers can also advise on the necessary paperwork, draft or review documents, and help with the filing process.

Non-profit lawyers can also advise on the management of the organisation, such as how to form a board of directors and appoint officers. They can also aid the education of directors, personnel, and other stakeholders so that the organisation can be run diligently. Expertise in tax law is especially important for non-profit lawyers, particularly in the formation stage of a non-profit, when they must obtain a determination from the IRS as a tax-exempt organisation. Non-profit lawyers can also help with issues such as fundraising and development, grant-making, labour and employment, executive compensation, and employee benefits.

In addition, non-profit lawyers can provide general business advice and legal counsel to their clients. They can also advise on a broad range of legal matters, including administrative, contract, employment, or tax law. They can also help with audits, examinations, litigation, and internal investigations. For example, Seyfarth Shaw LLP has provided tax-exempt healthcare organisations with legal advice on a wide range of tax-related issues, including two large-case IRS audits. They have also served as key outside tax-exempt counsel to a major university system on a variety of matters, including UBIT structuring of real estate investments (including hotels) and health care technology transfer joint ventures.

McGuireWoods' nonprofit and tax-exempt organisations practice team also represents a broad range of nonprofits, providing comprehensive advice on all issues these entities may face, including organisational, compliance, planning, governance, reporting, and tax issues. Their team consists of a core group of experienced lawyers whose practices focus on the special legal needs of nonprofit, tax-exempt, and charitable organisations.

Non-profit lawyers can help you avoid an IRS or Attorney General audit

Non-profit organisations are just as susceptible to IRS audits as for-profit ones. An IRS audit can be a disruptive process, as the IRS will examine records, books, and tax returns, alongside extensive interviews, which can take a considerable amount of time.

A non-profit lawyer can help you understand how to qualify for a specific tax status and ensure you are following all the regulations. They can inform you about the necessary paperwork, draft and review documents, and help you through the filing process. They can also provide advice on how to maintain your non-profit status, including educating directors, personnel, and other stakeholders so that you can run your organisation diligently.

Non-profit lawyers can also help you to maintain proper transparency and accountability in your dealings with the media and the public. This is important, as negative news stories or questionable public behaviour can spark an IRS audit, even if the information has nothing to do with the financial state of the organisation.

Non-profit lawyers can advise on the best structure for your board of directors

Yes, a law office can be non-profit. Non-profit lawyers can advise on the best structure for your board of directors, and they can also help you understand how to qualify for a specific tax status. They can give you information on the necessary paperwork, draft or review documents, and help you through the filing process.

Non-profit lawyers can advise on the right form of entity for your organisation, depending on your activities and goals. For instance, a charitable organisation may be able to gain tax-exempt status if it meets certain conditions. A political organisation, private foundation, or religious organisation will have different legal and tax obligations. Non-profit lawyers can also advise on the management of your non-profit, such as how to form a board of directors and how to appoint officers.

The board of directors of a non-profit has three primary legal duties: the "duty of care", "duty of loyalty", and "duty of obedience". The duty of care requires directors to ensure the prudent use of all assets, including facilities, people, and goodwill. The duty of loyalty requires directors to ensure that the non-profit's activities and transactions advance its mission, recognise and disclose conflicts of interest, and make decisions in the best interest of the non-profit corporation. The duty of obedience requires directors to ensure that the non-profit obeys applicable laws and regulations, follows its bylaws, and adheres to its stated corporate purposes.

It is important to note that lawyers serving on the board of directors are not providing legal advice but are participating in board deliberations. They are still bound by jurisdictional law practice rules and must disclose any conflicts of interest. While lawyers on the board can provide valuable insights and passion for the organisation's mission, it is recommended to seek outside counsel for legal advice to avoid any potential issues.

Non-profit lawyers can help you navigate the differences between for-profit and non-profit employment issues

Non-profit lawyers can be invaluable when it comes to understanding the differences between for-profit and non-profit employment issues. They can guide you through the intricacies of employment law, which can be vastly different for non-profits, especially when it comes to the classification of workers as employees or independent contractors. Misclassification can lead to legal disputes and liability issues for non-profits, so it's important to get this right from the start.

Non-profit organisations often rely heavily on volunteers, whereas for-profit corporations consist mostly of paid employees and interns. This difference in workforce composition alone can create a host of legal considerations that a non-profit lawyer can help you navigate. For example, understanding the legal boundaries of what volunteers can and cannot do, as well as ensuring that volunteers are adequately supervised and protected from potential liabilities, are important considerations.

Another key difference between for-profit and non-profit employment issues is the focus of the organisation's mission. For-profit entities primarily aim to generate profit and develop valuable products and services, so their culture tends to revolve around finances and business metrics. Employees are encouraged to be innovative and create new revenue streams. In contrast, non-profits are dedicated to promoting a social cause or advocating for a particular standpoint, and their success is measured by their impact on society rather than financial gain. This fundamental difference in mission can lead to distinct organisational cultures and approaches to problem-solving.

Non-profit lawyers can assist non-profits in understanding and complying with the myriad of federal, state, and local regulations they must adhere to. Non-profits often have to navigate complex tax laws, governance standards, and fundraising regulations, and failure to comply can result in penalties, loss of funding, or even threaten the organisation's existence. For example, non-profits must understand the rules and reporting requirements to maintain their tax-exempt status, which can vary based on the type of non-profit, its size, and its activities. Non-profit lawyers can also advise on intellectual property protection, ensuring that non-profits maintain their unique identity and prevent unauthorised use of their trademarks and copyrights.

Furthermore, non-profit lawyers can provide guidance on employment-related issues unique to non-profits, such as understanding state regulations of charitable solicitations and the complex web of regulations that multi-state fundraising campaigns must navigate. They can also advise on gift acceptance policies and donor restrictions, ensuring that nonprofits can meet donor expectations while staying true to their core values and legal obligations.

Frequently asked questions