forming powerpoint english 2013 update for distribution
TRANSCRIPT
Legal Aid Foundation of Los Angeles
2013
Forming a California Nonprofit
www.lafla.org
Introductions Please share:
Your name
Your role/position in organization
Organization’s purpose
Current formal structure of organization, if any
What you hope to learn today
Workshop Goals
OVERVIEW
1. Forming an Organization• Community Needs Assessment• Mission Statement• Organizational Structure• Legal Structure
2. Non-profit Incorporation
3. Tax Exemption – Getting Started
4. Tax Exemption – Maintaining Exemption
What are the needs and how does your
organization’s mission address them?
A brief study of your community
Community Needs Assessment
Avoid duplication
Community Needs Assessment:Why?
Demonstrate needsNetworking opportunities
Gather & Organize Existing Information
Map out the community
Get community input
Community Needs Assessment: How?
Who is the “target”?
Who should do it?
Community Needs Assessment:Who
?
Community Needs Assessment:
All the time!
When?
Mission Statement
Reflects vision: Provides focus & attracts funders
Specifies
long term goals
Who,
What,
Why,
Where, How.
All in 2-3 Sentences
Audience
Mission Statement
Internal External&
What: Who: Where: Why: How:
Mission Statement Specifics
Services provided to meet goalPersons servedCommunity servedGoal or community needMeans of providing services
Sample Mission Statement
Legal Aid Foundation of Los Angeles (LAFLA) is the frontline for LAFLA is committed to
law firm
low-income people
in Los Angeles. promoting access
to justice, strengthening communities, combating discrimination and effecting systemic change through representation, advocacy, and community education.
What?Who?Where?Why?How?
What will your organizational structure
be?
Structure
Anatomy of an Organization
Governing Body or Board
Advisory Council
Members
Staff Volunteers
Some Important Questions to Ask:Membe
rs
1. Do you want to be a membership organization?
2. What are the qualifications to become a member?
3. What are the membership requirements?
Some Important Questions to Ask:
Leadership Structure
1. Do you want to have leaders?
2. How will you select/elect leaders?
3. What powers will leaders have?
4. What powers will the members have?
Some Important Questions to Ask:Decision Making
Structure
1. Who has the power to make decisions?
2. What decisions?3. When?4. How will the decisions be
made?
Decision Making Structure
1. Avoids conflict
2. Members feel involved
3. Furthers the mission
Goals
The Board of Directors
Who should be on it?
Important Skills for your Governing Body:
dreamers and visionariesexperience in accounting or financial
managementability to follow legal formalitiesorganization and recordkeeping skillsconnections or access to fundingpolitical, media, or other connectionsability to facilitate a meeting or group discussionability to keep a group focused and movingcommunication skillsability to inspire, motivate, and mobilize a groupability to keep others informed
ROLES AND RESPONSIBILITIES
OF BOARD OF DIRECTORS
Legal Oversight of the Nonprofit Organization
Duty of Care Make informed decisions Act in good faith
Duty of Inquiry Make reasonable inquiries when necessary
Duty of Loyalty Act in the best interest of the corporation Avoid self-dealing transactions Avoid conflicts of interest
Standard of Conduct for Board of Directors
Directors Personally Liable When:
Not performing their duties in good faith
Not acting in corporation’s best interest
Not exercising reasonable care under the circumstances
General Board Responsibilities
• Finance & accounting• Planning• Policy• Personnel• Resource Development
• Board Governance
Can be delegated to Staff
What legal structure is best for your organization?
Legal Structure Determines:
Which laws apply to your organization
How government agencies will treat your organization
Legal Structure Considerations
Your organization’s mission and goals
How many persons you want to control your organization
How an organization will raise money
Personal liability or risks involved
Tax advantages and disadvantages
For-Profit
vs. Non-Profit
One or more owners
Profits distributed to owners
Formed for any lawful purpose
No owners
Profits reinvested
Formed for charitable, mutual, public or religious benefit
purpose
For-Profit
Unincorporated Association
Charitable Trust
Non-profit Corporation
vs. Non-Profit
Sole Proprietorship
Partnership (general, limited, or limited liability)
Corporation ( C, close, or S, Cooperative)
Limited Liability Company
Incorporation
Separate legal entity
Unlimited existence
Limited liability
Cost Structural
formality Reporting
requirements
Advantages vs.
Disadvantages
Alternative to Incorporation:
Operate as a "project" of existing non-profit
Tax and financing done by sponsorLess control over own organization
Fiscal Sponsorship
Nonprofit Corporations
Public Benefit
Mutual Benefit
Religious Benefit
Charitable or Public Purpose
Any Lawful Purpose Religious Purpose
No Assets to Members
Assets to Members on Dissolution
No Assets to Members
Most Government Regulation
Moderate Amount of Gov’t
Regulation
Least Gov’t Regulation
What is the nonprofit incorporation
process?
What is Incorporation?
Process of forming a corporation
Separate from 501(c)(3) tax exemption
We are focusing on California nonprofit corporations only; (governed by CA law)
File CA Form DE-1NPRequest for Employer Tax ID Number(if pay $100+ in wages per calendar
quarter)
Complete Initial Registration with CA Attorney General’s Office
Form CT-1 or URS v4.01Must be completed within 30 days of receiving
assets/funding
File Form SI-100 - Statement of Information(Domestic Nonprofit Corporation)
Due within 90 days of filing for Incorporation; FEE: $20.00
Incorporation Process Overview:
1. Choose & Reserve a name (optional) for the corporation2. Prepare/File Articles of Incorporation & Bylaws3. File a Statement of Information
SimpleDetailedFile Articles of IncorporationFEE: $30.00 + $5.00 Certification Fee
File IRS Form SS-4: Employer Identification Number
(Required even if organization has no employees)
Related Requirements
Get an Employer Identification Number (EIN)
Register with Registry of Charitable Trusts
Articles of Incorporation:
Creation document for your organization
What are they?
Articles of Incorporation:What needs to be in them?
Name of corporation
Statement about forming (CA law - see workbook)
Name & address of Agent for Service of Process
Articles of Incorporation:What needs to be in them?
Statement describing purpose
can be taken from mission statement neither overly broad nor narrow may think about particular funding
sources
Articles of Incorporation:What needs to be in them?
If applying for tax exemption:
Dedication of assets upon dissolution Restriction on political activity &
lobbying
Articles of Incorporation:Filing & Fees
$30 filing fee – check payable to Secretary of State
$5 certification fee
For additional certified copies, include $5 certification fee + $1.00 for the first page + $0.50 per additional page for each certified copy
Separate $15 handling fee check, payable to Secretary of State (optional, only if filing in person)
Filing Statement of Information (Form SI-100)
Must file within 90 days of filing Articles of Incorporation
$20 filing fee – check made payable to Secretary of State
Can e-file online at https://businessfilings.sos.ca.gov/
Must re-file biennially (every 2-years)
What is tax exemption and is it best for your
organization?
What is Tax Exemption?
Separate process from incorporation
Must obtain both Federal and State income tax exemptions
501(c)(3) = federal corporate income tax exemption
Property tax exemption
Is tax exemption best for your organization?
501(c)(3) Charitable,
educational, literary, religious, scientific or cruelty prevention purpose
Donations tax-deductible
Related business income not taxed
Lobbying limited & campaigning prohibited
501(c)(4) Social welfare purpose Donations not
deductible Related business
income not taxed Lobbying unlimited &
limited campaigning permitted, but taxed
vs.
Two types of Federal Tax Exemption:
Two types of Federal Tax Exemption:
Articles of Incorporation Must State:
501(c)(3) 501(c)(4)vs.
assets for exempt, not private gain, purpose, & on dissolution go to a 501 (c)(3)
no political campaigning & no substantial lobbying
assets for exempt, not private gain, purpose, & on dissolution go to a 501 (c)(4)
limited political campaigning
If your organization does not fall into one of the categories (question 9) IRS will consider you a private foundation
Most groups we work with are public charities Difference is based on breadth of financial
support Private foundations have extra reporting, taxes,
and restrictions
501 (c)(3)
Private Foundation v. Public Charity
Net income from any regularly carried on business activity that is not substantially related to the exempt purpose of the organization
Taxed
Devoting substantial resources and money of the organization to carrying on the unrelated business activity is prohibited.
501 (c)(3)
Unrelated Business Income
501 (c)(3)
Direct Lobbying vs. Grass roots LobbyingAn attempt to
influence specific legislation…
By communicating with a member or employee of a legislative body
An attempt to influence specific legislation…
By expressing opinions to the public
501 (c)(3) IRS Form 5764 – Election to Make
Expenditures to Influence Legislation
Best way to protect 501(c)(3) tax- exempt status
Sets specific dollar limit on amount of lobbying in which a 501(c)(3) can engage
Up to $1,000,000 Up to 25% of total expenditure for
Grass roots lobbying
Alternative to Tax-Exemption:
Enter into fiscal sponsor agreement with an existing 501 (c) (3)
Donors give to fiscal sponsor as 501 (c) (3)
Gives your organization benefits of exemption without independently filing for tax-exemption or in the period before your tax-exemption is granted
Often requires a percentage fee to sponsor
Fiscal Sponsorship
Federal Tax-Exemption:
SS-4 for Employer Identification Number (EIN)
1023 or 1024 for Recognition of Exemption
2848 or 8821 for Power of Attorney or Tax Info Authorization if attorney or CPA will represent corporation before the IRS
Application Forms
File SS-4 before applying for tax exemption
Complete form 1023 or 1024:
Attach detailed financial statements: If organization is less than 5 but more
than 1 years old Budget for 4 years, including current year.
If organization is less than 1 years old Budget for 3 years (current year + proposed budget for 2 years)
Federal Tax-Exemption:Procedure
Attach copy of Articles & board-approved Bylaws
Attach $400 or $850 fee
Send all to IRS
California Tax Exemption
501(c)(3) orgs can expedite CA tax exemption process using Form 3500A
Only orgs with special circumstances should file Form 3500
California tax exemption required to be exempt from state corporate income tax
California Tax Exemption
Complete and sign Form 3500A Include copy of IRS Determination
Letter Send it all to CA Franchise Tax Board
(FTB)
Form 3500A
County Property Tax Exemption
For 501(c)(3) corporations
To exempt real or personal property used for charitable purpose
Must be filed before 2/15 for coming year
Obtain a clearance certificate from State Board of Equalization, then file with the county assessor
What are the continuing reporting responsibilities of tax-exempt nonprofit corporations?
Registration/Renewal Fee Report (RRF-1)
File annually with Attorney General’s Registry of Charitable Trusts
Must send copy of the appropriate 990 Due 4 months + 15 days after end of fiscal yearRegistration fee may apply based on gross annual
revenue
Tax-Exempt Tax Returns
Gross Annual Revenue
Federal Forms (IRS)
CA Forms (FTB)
Receipt <$50,000 990 N (e-file) 199 N (e-file)
Receipt $50,000 ~ $200,000 &Total Assets <$500,000
990 EZ or 990 199
Receipts >$200,000or
Total Assets >$500,000
990 199
FTB Forms 199/199 N at www.ftb.ca.gov IRS Forms 990/990 N/990 EZ/990 PF at
www.irs.gov Due 4 months and 15 days after end of fiscal year
Statement of Information (SI-100)
File every 2 years with Secretary of State
Due on last day of anniversary month of incorporation
Must send $20 filing fee
Other Reporting Responsibilities
Notify appropriate agencies of changes in:
articles of incorporation bylaws principal place of address annual report to directors and members w/in 120
days of end fiscal year
County Property Tax Exemption-Welfare Exemption (BOE-267)
Obtain organizational clearance certificate from State Board of Equalization (BOE-277)
Then file BOE-267 with the County Assessor; www.lacountyassessor.com
File annually with county assessor
Due Feb 15 for coming year
Legal Aid Foundation of Los Angeles
www.lafla.org
To request assistance for your nonprofit
or to get more informationcall us at (800) 399-4529
or e-mail us at [email protected]
Thank you for coming!