Attorney Matthew Kenney is passionate about helping social entrepreneurs. One method of assistance is through formation of non-profit organizations. In Florida, the first step in establishing a legal non-profit business is relatively easy. Founders simply choose to register a new corporation as non-profit through the Florida’s Secretary of State’s Office. It’s the second, third and fourth steps that, generally, require legal counsel.
Unfortunately, many aspiring non-profit entrepreneurs do not know IRS requirements for establishing a 501(c)3 non-profit. This causes problems when seeking tax-exempt status from the IRS. The purpose of a non-profit business, stated in the corporation’s Articles of Incorporation, must state a specific religious, charitable, scientific or educational purpose. If the wording isn’t correct in the articles of incorporation, the IRS may reject an application. This will cost the company time, money and effort.
The wording used to create a non-profit business in Florida should match wording sought by the Internal Revenue Service. Stated differently, a social entrepreneur should know exactly what the IRS wants to see before incorporating a non-profit business in Florida.
The IRS generally requires the submission of a company’s bylaws, including a conflict of interest policy. Aside from these bylaws, each non-profit should have an Operating Agreement drafted by an attorney. An operating agreement is a contract stipulating the roles and obligations of officers and managers, and is essential in settling disputes and establishing compensation.
Additionally, the application used in applying for 501(c)3, or other form of tax-exempt status, will depend on the projected revenues of the business. The cost and effort of an IRS filing may be significantly reduced by choosing the appropriate compliance path.
Once tax-exempt status is provided by the IRS, non-profit organizations generally cannot solicit donations in Florida until an application is submitted to, and approved by, the Florida Department of Agriculture and Consumer Services. In fact, most non-profit corporations (regardless of state incorporation) must register before soliciting donations in Florida. Failure to comply may result in significant penalties. The rules pertaining to solicitation of donations in Florida are found in Chapter 496 of the Florida Code.
Forming a non-profit, tax-exempt organization requires more compliance than forming a for-profit, private company. This is because non-profit businesses do not have owners. Rather, the company is entrusted to trustees. For public policy reasons, trustees must follow specific guidelines. Dr. Kenney uses his background in business planning, strategy, and administrative law to ensure fellow social entrepreneurs launch their ventures legally and successfully.