“This week’s Ask Manny question comes from Alex.”

Question:

What obligations does a small nonprofit have with Federal, state and local governments?

Answer:

It’s important to recognize that a non-profit organization is still a business in the eyes of the government. There are differences between a non-profit and for-profit for sure. But most of the same requirements exist for both types. In fact, there are even more compliance obligations that a non-profit must adhere to. Why? Because a non-profit enjoys certain benefits that a for-profit company does not, such as zero income taxation, access to government funding, ability to fundraise and seek donations, etc. This comes with the additional scrutiny that non-profits must adhere to.

What exactly are these obligations? Before we get into that, a disclaimer: I am not an attorney. And so any legal advice, including compliance questions, should always be vetted through an attorney licensed to practice in your state. That being said, I can provide some general guidance from the CFO / financial perspective.

Here are the most common compliance requirements:

 • Articles of Incorporation: A non-profit is a corporation. As such it must file Articles of Incorporation in the state that it is formed.

Bylaws: Bylaws are essentially the rules by which the non-profit will run. A lot of these rules are financial in nature. For example: Who are the signers on the bank account? Who has to approve payments? Are we required to get an audit? Etc.

• Business License: Most states will require the organization to have a license to do business in that jurisdiction. Remember that a non-profit is a business that is conducting financial transactions and providing services to the public, and as such needs the “permission” of the government to do so.

• Tax IDs: While a non-profit does not pay any income tax, they can still be subject to other taxes. Payroll taxes, for example. So the organization will still need to open tax accounts in every jurisdiction that they operate in.

• Form 990: The tax return that non-profits file is called the Form 990. Unlike a regular tax return, this form is really meant to collect information about the organization and ensure that it is upholding its non-profit obligations. This is required to be filed every year. Note: If you are a super small organization (under $50k revenue per year), then you can file a very short version called the 990-N every three years.

There may be more compliance requirements for your organization, depending on your location, what services you provide, etc. so again, always make sure that you speak with a professional licensed attorney and even accountant to ensure that you are checking all the required boxes.

Feel free to reach out to us directly if you want to discuss your situation. We can either assist or point you in the right direction. Schedule an appointment and let’s chat.

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