Monthly Archives: August 2012

Video Friday: Juggling Personal Financing While Starting A Business

Bank Loan Tips From The Startup Garage

Video Friday: Juggling Personal Financing While Starting A Business

This week, Tyler Jensen explains how juggle personal financing while starting a business.  Enjoy!

If the link isn’t working, check out the video at: http://www.youtube.com/watch?v=3wVrZhTndDM&feature=player_embedded.

View our archived videos on our YouTube channel at http://www.youtube.com/user/thestartupgarage?feature=watch.

 

Whether you have a question about Juggling Financing While Starting, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Profit-Seeking Activities

Non-Profit Legal Team Setup from The Startup Garage

Non-Profit Legal Issues: Profit-Seeking Activities

Since non-profits are established with a specific promise to return the profits into the organization and to not pass them along to any officer, director or employee of the organization, some financial transactions are bound to raise a red flag or be a cause for a non-profit to lose access to federal grants, community donations, and tax exemption.  These transactions fall into two categories.

Private Benefit/ Inurement

  • While directors and staff employed by a non-profit have a right to a reasonable salary, anything beyond what is considered reasonable, even if it’s not a monetary compensation, is considered to be an inappropriate and illegal appropriation of non-profit funds.  This category includes the crime of embezzlement.

Unrelated Business Income

  • A non-profit could stand to lose its 501(c)(3) tax-exempt status if it has too much income generated from activities or trade that are regularly carried on and are unrelated to the exempt function of the organization.
  • If your business plan includes regularly carried on trade or business from which you would like to retain a profit, you can consider structuring your business as a social enterprise rather than a non-profit.  California recently introduced two “hybrid” corporate forms for social enterprises: flexible purpose corporations and benefit corporations.  The Startup Garage has helped several social enterprises begin their businesses – please look through The Startup Garage’s web site for more information on beginning a social enterprise.

 

Whether you have a question about Non-Profit Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Lobbying

Non-Profit Lobbying from The Startup Garage

Non-Profit Legal Issues: Lobbying

Lobbying is the act of working to influence legislative or administrative decisions.  Any activity by a charity relating to proposed or pending legislation or molding public opinion on legislative matters could qualify as lobbying.  Lobbying can be done either professionally or on a certain issue by passionate members of the community.  There are many organizations that are formed for the purpose of lobbying on behalf of a community or a cause. While this sort of advocacy is often motivated by the same desires to see change that motivate non-profits, the two activities have very little legal overlap.  This is because the actions of a non-profit are meant to benefit the public, not just a segment of the public with a particular political view.  A non-profit that has qualified for a 501(c)(3) exemption is prohibited from all lobbying efforts except for those that are “insubstantial”.  And to be permitted to do so, the 501(c)(3) organization must submit a 501(h) election, available as Form 5768.

 

However, a 501(c)(3) organization is expressly prohibited from  participating or intervening in any political campaign on behalf of, or in opposition to, candidates for public office. If a non-profit wishes to engage in a moderate to extensive amount of lobbying, they can still qualify for tax exemption as a 501(c)(4) action organization.  The downside to being a 501(c)(4) is that donations to a 501(c)(4) organization are not tax deductible to the donor.  For more information about applying for and your lobbying rights as a 501(c)(4) organization, please see the IRS’s web page about Social Welfare Organizations.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Whether you have a question about Non-Profit Lobbying Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Video Friday: Picking the Right Members for Your Startup Team

Non-Profit Team Building from The Startup Garage

Video Friday: Picking the Right Members for Your Startup Team

This week, Tyler Jensen explains how to pick the right members for your startup team.  Enjoy!

If the link isn’t working, check out the video at: http://www.youtube.com/watch?v=RalHr668zI0&feature=player_embedded.

View our archived videos on our YouTube channel at http://www.youtube.com/user/thestartupgarage?feature=watch.
 

Whether you have a question about Picking the Right Startup Members, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Fundraising

Non-Profit Fundraising from The Startup Garage

Non-Profit Legal Issues: Fundraising

As mentioned in our earlier blog post on State Filing, most states require that you register with the Attorney General for the right to solicit funds within the state, and most states additionally require you to report on your fundraising revenues and expenditures.  Fundraising for a non-profit can take many forms, and below we discuss some of the legal issues that come up in the context of non-profit fundraising.

Wills

  • A possible avenue to secure funds to be available in the future is to get donors to put your non-profit in their will.  The donor can use a legal device called a codicil to amend their will to include your non-profit.  You can offer to draft the codicil for the interested donor so their only step is to complete the codicil.

Planned Giving

  • A planned gift is a major contribution that can range in form between a bequest to a trust, and involves financial advisors, tax attorneys and others who assist in the process of putting the planned gift together.  The gift can include money, stock, insurance, property or other assets, and can either be paid to the organization at the donor’s death or during their lifetime, depending on how the donor wants to structure the deductions.  Setting up a planned giving program is best done under the advice of an attorney.

Telemarketing

  • Placing a telemarketing call from an automatic dialer to a cell phone is prohibited by the FCC, but calls from political organizations, charities or telephone surveyors that aren’t made to sell goods or services.  If you do sell products to raise funds, you may call someone who has made a purchase within the last 18 months, as an “existing business relationship” lasts for 18 months.

Disclosures to Donors

  • For 501(c)(3) tax-exempt organizations, contributors who gave a “quid pro quo” donation (received something in return) of more than $75 must receive certain disclosure information, and donors contributing more than $250 must receive additional disclosure information.  Further information can be found on the IRS’s web site on Substantiating Charitable Contributions.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Fundraising Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Overview of Common Non-Profit Legal Issues

Non-Profit Legal Overview from The Startup Garage

Overview of Common Non-Profit Legal Issues

There are two categories of common legal problems this post will discuss: the problems that arise by virtue of being a business (contract, employment and personal injury issues) and the problems that are common to non-profits (fundraising, lobbying, profit-seeking).  Here we will explain the former as they are more simple, and will reserve individual blog posts for the latter.

Contract disputes

  • Most of your everyday transactions will be based on a contract, either written or oral.  Make sure you are meticulous with the details of a written contract before you sign it, and try to avoid oral agreements.  A paper trail of your past agreements with their terms enumerated will be invaluable in protecting your non-profit if an issue arises.

Employment claims

  • Employment lawsuits are one of the biggest category of lawsuits against non-profits.  It is important that you are well versed in the relevant employment laws that apply to non-profits.  You can begin your research at the Department of Labor’s web site.  Some of the categories of employment claims include:
    • Wrongful termination: At-will employees may not be fired for an illegal reason, and contract employees must be fired with “good cause”.
    • Sexual harassment: Employers can be responsible for failing to prevent or responding inadequately to an employee’s claim of sexual harassment.
    • Discrimination: When it comes to hiring, firing, pay, shift assignments, promotions or access to training, you are prohibited from using race, color, gender, national origin, religion, disability, citizenship status or age as a criterion. In California, the additional criteria of ancestry, mental disability, medical condition, marital status, or sexual orientation are also protected.
    • Retaliation: If an employee has filed an action against your non-profit or has assisted someone else in doing so, you are prohibited from punishing them by denying them something they were otherwise qualified for.
    • Wage and hour claims: The laws that govern the worker/employer relationship are complex and may necessitate consultation with an attorney.
    • Defamation: The main context for a defamation claim is over an ex-employee’s reference.  Avoid issues by requiring a prospective employer to place a request for a reference in writing.

Personal injury suits

  • Personal injury claims can include physical injuries, property damage, emotional distress or damage to a person’s reputation.  There are many risk management strategies that can be utilized to minimize the risk of personal injury, including purchasing a general liability policy.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Common Non-Profit Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Video Friday: One Of the Biggest Lessons to Learn

Entrepreneur Lessons to Learn from The Startup Garage

Video Friday: One Of the Biggest Lessons to Learn

Happy Friday entrepreneurs!  Please watch this video as Tyler Jensen explains one of the biggest lessons you can learn when starting your business.  Enjoy!

If the link isn’t working, check out the video at: http://www.youtube.com/watch?v=sHPDWUihOGk&feature=player_embedded&noredirect=1

View our archived videos on our YouTube channel at http://www.youtube.com/user/thestartupgarage?feature=watch.
 

Whether you have a question about Biggest Lessons Learned, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Stage 6 of Non-Profit Incorporation: Dissolution

Non-Profit Dissolution from The Startup Garage

Stage 6 of Non-Profit Incorporation: Dissolution

If the time comes that your non-profit has accomplished its mission or you need to dissolve the non-profit for other reasons, consult your state’s Attorney General web page for detailed instructions on the steps to follow.  If your non-profit is incorporated in California, follow the steps outlined below.

Decision to Dissolve

  • Can be done by a vote of the board of directors or by a majority of the corporation.
  • Prepare a Certificate of Election to Wind Up and Dissolve and a Certificate of Dissolution.

File a final state tax return

  • Inform the state tax board of your status as dissolved.

Obtain Dissolution Waiver from the Attorney General for asset disposition

  • As the assets of a non-profit are held in public trust, there are specific rules that guide the distribution of the dissolved non-profit’s assets in accordance to the stated purpose.

Submit a Final Notice of Submission to the Secretary of State’s office and the Attorney General’s office

Find the California government’s detailed information page here for the Attorney General’s page or here for Secretary of State’s page.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Dissolution, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Stage 5 of Non-Profit Incorporation: Sustain

Sustain Legal Non-Profit from The Startup Garage

Stage 5 of Non-Profit Incorporation: Sustain

File Annual Registrations with the IRS

  • IRS Form 990, Return of Organizations Exempt from Income Tax, is the most detailed and misunderstood filing for non-profits.  It is a complete documentation of an organization’s financial history and is often used to hold the organization accountable for its past actions and future decisions.  Recent rulings by the IRS state that nonprofit organizations must make their Form 990 and applications for tax-exempt status widely accessible and available to anyone upon request.

File Periodic Registrations with your state of incorporation

  • In California, a biennial Statement of Information can be submitted on Form SI-100.
  • For all other states, search for your state’s Statement of Information form online.  The form can also be called the Biennial Statement or the Annual Report.
  • In California, charitable corporations with gross revenues of over $2 million must prepare annual financial statements and have them audited by an independent certified public accountant (CPA).
  • For financial reporting requirements in other states, please look at the National Association of State Charity Officials website.

Apply for bulk mail permit at your local post office

  • Non-profits can receive a discount on their outgoing mail expenses.

Understand and comply with your state’s ethics and accountability laws

  • In California, the Nonprofit Integrity Act is available here.  In other states, consult your state Attorney General’s web site.

 

Whether you have a question about Non-Profit Sustainability, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Video Friday: The Seed Stage

Seed Stage Video from The Startup Garage

Video Friday: The Seed Stage

This week, Tyler Jensen will break down the “seed stage” of business planning.  Enjoy!

If the link isn’t working, check out the video at: http://www.youtube.com/watch?v=sG5OorEd_A0&feature=plcp

View our archived videos on our YouTube channel at http://www.youtube.com/user/thestartupgarage?feature=watch.

 

Whether you have a question about The Seed Stage, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!