Why Hire an Attorney for Nonprofit Startup
When forming a nonprofit, details and tasks abound, and the costs can seem overwhelming to hire an attorney for nonprofit startup. Some nonprofits want to save money and take a DIY approach or hire a consultant to assist with their startup paperwork, including IRS filings, bylaws, and policies. However, the attempt to save money can have serious repercussions on the future of the organization if startup paperwork isn’t completed correctly.
Here are three reasons you should hire an attorney for nonprofit startup.
Create the right foundation
IRS paperwork is notoriously confusing. While most forms come with instructions, those can be confusing as well, especially for someone who doesn’t have experience completing them. Hiring a nonprofit attorney with experience in nonprofit startups ensures your IRS paperwork and your bylaws are done correctly the first time.
Incorrect information on initial IRS paperwork can create significant issues in the long run. Sometimes, an error may be as basic as an incorrect address or incorrect name on the paperwork. Other times, the information misrepresents the nature and size of the organization. For example, the Form 1023-EZ is a simplified version of the initial filing for organizations that project they will have gross revenue of less than $50,000 each of their first three years. If an organization uses that form and then exceeds $50,000 in a year, there are tax repercussions including an audit.
We have seen cases in which the initial filing is so incorrect that the only real course of action is to shut down the organization and start over. Though paying an attorney to file initial paperwork may seem like an extra expense, an incorrect initial filing can result in paying an attorney even more to fix mistakes down the line.
Understand the nuance
The internet offers all sorts of resources, including AI-generated bylaws and online templates that seem like an easy way to complete founding documents. However, there are different types of nonprofits and different scenarios that might apply. No computer-generated list of questions can adequately account for all the variables. Often, we pick up on nuances through conversations with our clients that help us better understand the organization and ensure it’s set up correctly.
“State-specific regulations may cause trouble for organizations that use online templates, as many state laws affect nonprofit organizations.”
State-specific regulations may cause trouble for organizations that use online templates, as many state laws affect nonprofit organizations. Most online templates and AI-generated paperwork only account for federal-level rules and regulations and may overlook state-specific nuances.
Save time and money in the future
Beyond incorrect IRS filings that take resources to correct, the bylaws and processes created during startup greatly influence organizational issues that arise in the future. These initial documents guide and govern the proceedings of the organization. When situations occur, bylaws and written processes can help resolve them in a timely fashion.
Poorly written bylaws or a lack of processes create potential risk for the organization and could even result in disagreements and possible litigation. On the other hand, well-written bylaws answer questions before they arise. They foresee the potential situations that occur in nonprofits –because experienced nonprofit legal experts have seen similar situations in the past – and create structures to reduce that risk.
While it’s tempting for startup organizations to take a DIY approach, choosing to hire an attorney for nonprofit startup helps you create the right foundation, understand the nuances, and save resources for future organizational use.
If you are considering starting a new nonprofit in Oklahoma, the Nonprofit Solutions team is here to help. Contact us today.
