Time to Schedule a Legal Check-Up?

With the year’s end in sight, now is a great time for nonprofit board members and other key leaders to think ahead to next year’s plans and goals.  From a legal perspective, the beginning of a new year may be an optimal time to check up on the organization’s annual and other legal compliance matters as follows.  By doing so, nonprofit leaders can better fulfill their fiduciary duty of due diligence to responsibly govern the organization.  The following guidance is an updated version of our law firm’s year-end reminders.

1)  Check Filing Deadlines for Government Reports.

Most nonprofits must file periodic government reports, ranging from annual reports owed the Secretary of State (typically in the anniversary month of incorporation), the IRS Form 990, state charitable solicitation renewals, and employment-related filings (due quarterly and/or annually).  For effective leadership, nonprofit board members should be aware of these filing requirements and exercise oversight to make sure they are satisfied.  A spreadsheet or chart may be helpful for organizations that operate in multiple states to track the applicable filing deadlines, since they can vary from state to state.  Coordination with the organization’s accountant and payroll service may be key, as well, especially for significant employment changes.  Since the proverbial buck stops with the board, directors need to stay informed and on top of these requirements. 

Note that the IRS Form 990 deadline is May 15 for organizations operating a calendar fiscal year (i.e., four and half months after the fiscal year close).  Early preparation can be critical, particularly for organizations that receive more than $200,000 in annual revenues and therefore must file the full-blown Form 990.  (And one question on the Form 990 asks whether board members have had an opportunity to review it.  The “right” answer is “Yes.”)  Other organizations with lower revenues may be eligible to file the considerably shortened Form 990-EZ or even the “e-postcard” Form 990-N.

Strategic Planning and Ice Bucket Challenges

Does your nonprofit need some strategic planning?  What does that mean, and what legal aspects should your nonprofit consider? The ALS Association is a useful and well-known example of how strategic planning provides pivotal opportunities, and raises important legal questions, for nonprofits.

For 30 years, the ALS Association aimed to raise awareness about amyotrophic lateral sclerosis (ALS).  The organization wildly succeeded through its 2014 Ice Bucket Challenge:  more than 17 million people uploaded their challenge videos to Facebook, and 440 million people reportedly watched the videos.  Now that’s awareness!  Tied to this great success, however, is a host of new challenges for the ALS.  How will the ALS Association work to achieve its more detailed mission, namely “to lead the fight to treat and cure ALS through global research and nationwide advocacy, while also empowering people living with the disease to live fuller lives by providing compassionate care and support?”   This is the role of strategic planning.

Asking the Right Questions – Practical and Legal Aspects

What does strategic planning look like?  In order to be effective and useful, a nonprofit’s strategic planning process should include articulating specific goals, gathering related data, and developing the action steps and resources needed to accomplish the nonprofit’s goals.  Strong board and executive leadership is essential. 

What’s the Plan? Nonprofit Business Planning for Success

Planning is key for any nonprofit – as it gets started, as it grows with new funding opportunities and program activities, and as pivotal changes occur (internally and externally) that may dramatically affect its impact.  Also essential is strong leadership, legal compliance, and responsiveness to changing circumstances.  The following guidance addresses key legal aspects for launching a new nonprofit successfully, along with reminders for keeping existing nonprofits well on track.

Start at the Beginning

No nonprofit venture should begin without a great deal of careful, advance planning.  Key questions include the following:  Who will serve as leaders?  What is the organization’s purpose?  What will the organization’s revenue stream look like?  Related legal questions include the following:  What legal responsibilities will the leaders owe, and to whom?   Will the organization’s purpose qualify it for tax-exempt status?  And what accompanying legal requirements, if any, will apply for its fundraising activities?  Another helpful perspective may be to start with the end in mind:  Where will the organization go, and how it will get there? 

In short, every nonprofit needs a business plan that includes provision for legal aspects.  The plan should include core elements such as the organization’s name, purpose statement, leadership, anticipated funding, planned activities for achieving its purpose, governance structure, and accountability measures.  After this business plan is developed, this tool may be used in a variety of ways: guidance for founders; marketing to donors and other supporters; recruiting for new board members; and groundwork for the organization’s IRS Form 1023 tax-exemption application.