As the executive director of a nonprofit, you wear many hats. These hats likely include master vision-caster, chief fundraiser, partnership builder, board liaison, and staff dispute-resolution guru. With all your responsibilities and in the interest of efficiency, it may be tempting to add legal compliance officer to the list. However, best practices strongly recommend against attempting to figure out complicated legal rules pertaining to your nonprofit by yourself. If you have any of the following sticky situations, it may be time to call in reinforcement in the form of a seasoned nonprofit lawyer.
- Human Resources Pitfalls
Remember two things: you have a lot of legal duties as a employer and your nonprofit employees have a lot of rights. Employment law is complicated and the statutes are not easy for an average busy nonprofit executive to easily follow. For example, do you know if your workers’ compensation policy meets your state’s guidelines? Have you set up retirement accounts with matching employer contributions which meet federal requirements? Do your hiring practices run afoul of your local human rights statute? Do you know how to make meaningful accommodations for disabled employees? If the answer to any of the above is a “no”…call for help!
- Keeping your Tax Exempt Status Safe
Even though nonprofits, in general, are not subject to taxation on their donations- nonprofits still owe other kinds of taxes and must file a tax return every year. For example, did you know that all payroll taxes need to be calculated accurately and submitted to your local and federal agency promptly each pay period? Also, if you are an organization engaging in any kind of lobbying work, do you have a mechanism for tracking these hours? Some organizations are subject to making regular reports of their expenditures on lobbying. Failure to report or spending too many hours lobbying may cause your nonprofit to lose its tax-exempt status.
- Board of Directors must meet Minimum Requirements
Your board of directors are considered fiduciaries of your nonprofit. Fiduciaries are tasked with ensuring that the nonprofit is both staying on mission and within budget. Furthermore, every state has basic minimum requirements for nonprofit boards- which could include the minimum number of board members, minimum number of board meetings per year and specifications for the taking and retaining of meeting minutes. Don’t let a great nonprofit go awry for failure to meet these minimum requirements.
- Proper Registration and Licensing with State and Local Government
Even though nonprofits exist for the public good, the government often treats nonprofits similarly to businesses. This means that nonprofits are often required to register as a corporation with their local authorities, obtain a basic business license, and submit annual reports. Additionally, most states require nonprofits to register as a charity if they have fundraising efforts in that state. This can be especially tricky with online fundraising, which can theoretically reach to all 50 states. No matter how wonderful your services are, the government may not be very sympathetic to your cause if they find you have ignored these important requirements.
In short, there are many legal requirements for nonprofit organizations. The four sticky situations above are just a sample of a host of issues you could come across as your lead and manage your organization. Feeling overwhelmed? It may be time to retain legal counsel. Ask the expert lawyers at Dhali P.C. about their monthly nonprofit legal counsel packages and sliding-scale fees.
