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Key Roles and Responsibilities of a Lawyer for Nonprofit

A nonprofit organization, also known as a non-business entity, nonprofit institution, or not-for-profit organization, is committed to promoting a specific social cause or backing a common point of view. In simpler terms, it is a corporation or business that has been granted tax-exempt standing by the Internal Revenue Service (IRS) due to its scientific, religious, charitable, literary, educational, public safety, or cruelty-prevention work or mission. A lawyer for a nonprofit can help administrators think beyond issues and determine threats and solutions.

What Does a Lawyer for a Nonprofit Do?

While operating as a nonprofit organization holds significant benefits, there is also extensive statutory documentation you must perform to specify one. Furthermore, every state's legislation governing nonprofits is relatively different. Thus, you may face issues with the law, regional tax administration, or the IRS if you form a nonprofit without understanding your state's provisions. It is where a lawyer for a nonprofit can assist you in avoiding potential traps. Here are some ways how a lawyer for a nonprofit can help you:

  • Formation

    When creating a nonprofit organization, you must follow a combination of state and national regulations, submit numerous forms and draft different documents before your organization becomes operational. Your new nonprofit needs guidance with comprehending tax exemption classifications, filing, starting a corporate objective statement, preparing a budget, and negotiating with the IRS (Internal Revenue Service).

    Moreover, applying for tax-exempt standing with the Internal Revenue Service via Form 1023 is lengthy and complex. A professional nonprofit lawyer can make this process more seamless and allow the creator to concentrate on creating the organization's schedules, staffing, and fundraising.

  • Reinstatement

    Most states in the U.S. demand annual reports to be registered with the state to stay in a good position. If your nonprofit organization has relinquished its operational standing, reinstatement is needed. It needs extensive paperwork and settlement of the state fees. Likewise, if a nonprofit fails to register its annual Form 990 with the IRS for three successive years, its 501(c)(3) standing will be automatically canceled.

    When that happens, the nonprofit retains a relatively limited time to reinstate its tax-exempt position retroactively. However, a lawyer for a nonprofit always ensures that your organization never faces such issues and fills all the annual reports and forms to avoid cancellation.

  • Reorganization

    While you might be drawn to restructure your nonprofit independently, it is not as easy as it might sound. Furthermore, tax-exempt organizations' use of corporations, partnerships, and Limited Liability Corporations can sometimes produce unintentional outcomes and unforeseen issues. Also, dissolutions, mergers, and acquisitions can offer unexpected intricacies. Therefore, it is always reasonable to work with a reliable attorney who can readily handle all these matters for seamless reorganization.

  • Employment Matters

    The most significant litigation threat to nonprofit organizations is the employment statute's extent. Whether it is compliance with state labor laws or federal anti-discrimination regulations, nonprofit employment statute is a complicated network of interrelated regulations highly dependent upon personal circumstances. Moreover, a knowledgeable nonprofit lawyer can help organizations make suitable employment choices that guard the nonprofit and its employees from hiring to termination.

  • Tax Exemption

    While you have already received a tax-exempt position, an expert nonprofit lawyer can help you retain that status. Few nonprofit organizations lose their tax-exempt status since they did something intentionally or due to an unintended failure to follow the occasionally complicated regulations and statutes the IRS put in place for tax-exempt nonprofits. An attorney from a competent law firm can assist in controlling these unintentional infringements of IRS compliance.

  • Document Review and Drafting

    Nonprofit organizations, regardless of their extent, practically deal with the most typical legal problems of drafting and reviewing contracts and other formal records. In addition, even small nonprofits must regularly deal with arrangements from independent contractors, internet service providers, or suppliers. These agreements often remain drafted in a difficult-to-understand vocabulary, and many nonprofit managers sign the papers without in-depth evaluation.

    Likewise, when a nonprofit wants to draft a contract, the nonprofit generally skims through the internet to look for a template. However, these circumstances put nonprofit organizations at risk and end in unnecessary waste of corporate resources. A lawyer for nonprofits can analyze contracts given to the organization and pinpoint trouble areas and possible negotiation, often saving the company's funds or moving some of the accountability to the other party. In addition, an attorney for a nonprofit can prepare a valid agreement that best achieves the organization's objectives.

What Do We Mean by Nonprofits?

The phrase "nonprofit" implies different connotations to different individuals. It is a generally used term without a shared understanding between the reader and writer. In addition, many individuals use the terms "tax exempt" and "nonprofit" interchangeably. Moreover, for any company to fall into a nonprofit category, it must work and deliver its assistance without the principal purpose of earning profits. While it is true that they earn profits, it is only to pay reasonable wages to their workers, participate in the range of events specified by their institution, and pay the expenditures incurred for accomplishing so.

In general, they work exclusively for the profit of the public and not anyone immediately associated with the nonprofit. On the other hand, for-profit organizations aim to earn a return on their investments and earn money for their company and stakeholders. When a business's balance sheet displays a profit, they distribute it to its stakeholders or take other measures to expand the business. Most companies that offer goods and services to people operate for profit.

Understanding the Types of Nonprofits

Below are some prominent types of nonprofit organizations:

  • Social Advocacy Groups

    Social advocacy groups remain categorized under 501(c)(4). Furthermore, these social advocacy groups promote or lobby for some political or social effort. Funds generally arrive from grants or membership privileges. Some prominent examples of social advocacy groups comprise NAACP, Greenpeace, ACLU, and the National Organization for Women. These groups also engage in lobbying, fundraising, and educating the common public about their cause.

  • Charitable Organizations

    Most charitable organizations come under 501(c)(3) and include educational, religious, charities, literary and scientific organizations. Also, note that all the donations offered to 501(c)(3) groups are tax deductible. Additionally, these public charities are the widest variety of 501(c)(3), with almost 1.5 million registered in the U.S. Some models include museums, food banks, art groups, colleges, amateur sports, low-income housing institutions, and animal welfare societies.

  • Foundations

    Foundations are yet another nonprofit organization that aims to present funding to other nonprofit organizations and sponsor programs and events for education and awareness. Most foundations concentrate on discovering reputable nonprofit institutions to sustain through grants and supervision. Moreover, to remain categorized as a foundation, it must contribute a specific amount of its income yearly to stop the mishandling of a foundation for private profit or tax avoidance.

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Key Terms

  • Articles of Incorporation: A document registered with the state secretary or other applicable state headquarters by individuals establishing a company. It is the first legal measure in creating a nonprofit corporation.
  • Bylaws: Regulations controlling the process of a nonprofit establishment. Bylaws usually deliver the procedures for the appointment of directors, the creation of panels, and the conduct of sessions.
  • Challenge Grant: A donation offered on the condition that other funds must remain secure, usually within a stipulated period, to encourage giving from supplementary sources.
  • Endowment: The principal sum and bequests are accepted subject to a requirement that the principal is kept intact and invested in developing a source of revenue for a foundation.


In a nutshell, getting assistance from a reputed lawyer for nonprofits can be more beneficial than you might think. At ContractsCounsel, we concentrate on nonprofits' success and objectives by offering the best possible insights into their problems.

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