Life Cycle of a Nonprofit Corporation

“From our birthday, until we die, / Is but the winking of an eye." - William Butler Yeats

How exciting to start a nonprofit, to dream about all the good to accomplish in the world! The starting passion, joy, and energy drives nonprofit founders to put in the time, effort, sacrifices, and money to create a new organization that will grow, change, and mature, in many ways like a human life will develop or a seed will take root and grow.

What are the legal aspects of a nonprofit corporation’s life cycle? It starts with “birth” or formation, then the first steps of corporate development, and onward into operational governance. Later nonprofit life comes with potential transitions like mergers and multi-entity structuring (i.e., corporate “marriage” and “children” or subsidiaries), and then possibly dissolution (i.e., “death,” at least in the legal sense). Many legal compliance and best practices considerations come into play for each stage.

Illinois’ New Non-Compete Employment Law

May employers prospectively restrict employees from “competing” – that is, from obtaining future employment that could harm their current employers - such as in terms of sales, market share, and other measurable organizational success? Less so now than before, per recent changes in Illinois employment law, as non-compete provisions must be carefully and narrowly circumscribed to be enforceable. Employers with employees in other states should note too the more generally applicable legal principles.

Aegis for Dreams: Lessons from IRS’s Denial of Historical Filmmaking Nonprofit’s Section 501(c)(3) Application

What suffices for “educational,” to garner IRS approval of Section 501(c)(3) status? Apparently, the IRS looks askance on educational filmmaking that involves commercial overtones and private intellectual property ownership.

The IRS recently denied tax exemption to an organization known as Aegis for Dreams Foundation. Following in the footsteps of Hamilton and Lincoln, the Foundation intends to educate the public about America’s founding fathers through the arts. In its IRS Form 1023 tax-exemption application, the Foundation articulated a squarely educational purpose: to produce a historically accurate film to exhibit in high schools and at other public events. Rejecting the application, the IRS concluded that the Foundation provided impermissible private benefits to its Founder and that its methods for producing and displaying the film were too commercial to qualify for tax exemption. Did the IRS err in its reasoning? What can other nonprofits learn, both in terms of initial tax-exemption application and ongoing Section 501(c)(3) qualification? This article evaluates the IRS’s analysis and provides responsive recommendations for educational nonprofits and their leaders.