Navigating the Complex World of Nonprofit Regulations: What You Need to Know

If you want to help others, you may have considered starting a nonprofit organization. A nonprofit is a great way to ensure that the funds you raise go to your mission, not to taxes. However, there are some important rules and regulations regarding a nonprofit. You want to ensure that you are following them to make sure you do not jeopardize your nonprofit status.

Nonprofit corporations get plenty of perks, they are tax exempt, have limited liability, and are eligible for grants. They also have an air of legitimacy, which may or may not reflect reality. For a charity, it is one of the best ways to encourage people to give to your cause. Donors can generally use donations to qualified nonprofit corporations as tax deductions.

The IRS recognizes two main types of nonprofit organizations- 501(c)(3) and 501(c)(4). The majority of charities that people recognize have a 501(c)(3) classification. This classification impacts how you can operate your charity, it also imposes certain operational rules.

Because nonprofit classification is federal, the process for forming nonprofits is the same in most states. In many instances, you can do it yourself by following an online guide to forming a nonprofit.

Not all nonprofit organizations are charities. Under U.S. law, all churches are tax exempt. A church does not have to comply with the same rules as a charity organization. However, there are some rules and regulations that apply to churches in order for them to keep their nonprofit status. Plus, while the term church has a Christian orientation, they tax exempt status applies to all religious organizations.

A lawyer can help you establish governance policies for your nonprofit. Even when they are not required, these policies can help you ensure that your organization is furthering your mission. A common issue for nonprofits is getting stuck in the fundraising cycle. Many of them spend more money on fundraising than on any other part of their mission. Establishing governance policies ahead of time can keep the focus on your goal, even as the nonprofit grows.

Closing a nonprofit is not quite as easy as just shuttering the doors. You need to dissolve the nonprofit. The steps are straightforward but may take a while to complete. A lawyer can help you streamline that process.