Legal Structure

legalStructure

Questions to Consider
  • What is our mission and vision? Do we need to be incorporated?
  • Is there an organization that can serve as our fiscal agent enabling the Network to get grants and donations?
  • Do we have resources to do reporting required under Incorporation?

Make sure you understand the rules for being an advocate. It is critical that you understand what 501(c)(3) and 501(c)(4) organizations can and cannot do. Even if you decide not to incorporate, you will be obligated to follow the same rules as your fiscal agent, or any church that supports you.

Structure Options

Not all State Action Networks are incorporated.  Below are some options for the organization of your SAN:

  • Independent Corporation
  • Part of an existing UU group- district, congregation, or other UU entity
  • Informal – Ad Hoc –email list, Yahoo or Facebook group, etc.
Independent Corporations

Independent corporations are created by states. The federal government determines the tax status. Your first step is to establish a corporation in your state. Generally the information as to how to do this is available from your Secretary of State. You should be able to get information online by going to your state website. Many states allow you to file for corporation status online for a small fee. You will be required to submit at a minimum:

  • Name of corporation
  • Names and addresses of a Board of Directors including President, Secretary and Treasurer
  • Articles of Incorporation – which are similar to by-laws
  • By-laws

Earlier we noted that you should identify secular organizations in your state to support your work. Some secular organizations will share information as to how to file for incorporation in your state. In some cases, it may be necessary to hire an attorney. In any case, your best resources for this information are resources in your own state.

Additional information can be found at these sites:
How to start a non-profit from About.com
Resources from the Foundation Center

The IRS - Tax-exempt options

The IRS requests that you file an application under section 501(c) of the Internal Revenue Code. Most organizations use Form 1023, Application for Recognition of Exemption.  Due to changing rules it is impossible for us to detail the process here. Generally it is recommended that you obtain legal assistance to, at a minimum, review your application and ensure that your By-laws and Articles of Incorporation are consistent with all the requirements. There are two types of IRS designations: 501(c)(3) Non-profit, tax exempt

  • Charitable, Educational Organization
  • Donations ARE tax deductible
  • Lobbying expense is limited to 20% of total expenditures and a 501(h) form needs to be filed

501(c)(4) Non-profit,

  • Social Welfare Organization
  • Donations ARE NOT tax deductible
  • Lobbying is unlimited

General IRS resources:

Tax-Exempt Status for Your Organization

Tax Information for Charitable Organizations

Process for obtaining 501(c)(3)

If you are seeking status as a 501(c)(4), you still must file with the IRS to ensure your revenues remain tax exempt. This IRS publication provides more details:

501(c)(4): Social Welfare Organizations

Lobbying Rules

Here are a few resources:

Alliance for Justice – The Nonprofit Advocacy Project (NAP) and Foundation Advocacy Initiative (FAI) work to strengthen the voice of the nonprofit and philanthropic sectors in important public policy debates by giving tax-exempt organizations a better understanding of the laws that govern their participation in the policy process.

Taking the 501(h) election at the National Council of Non-Profits website

UUA – The Real Rules

Rules for Church Lobbying can be found at these IRS sites:

Comprehensive guide from the IRS on Church activity

Tax Exempt Organizations and Political Activities

Charities, Churches and Politics

By-laws

By-laws are a legal document that establishes the rules for how your Network will operate. They serve as the contract between the corporation (the Network) and the owners. By-laws can be very simple, but should include:

  • Purpose of the organization
  • Membership – who the members are, how membership is granted and by whom
  • Meetings – when they are held, when and how notice is made
  • Board of Directors – role, size, composition, elections, quorum, terms, notice of meetings, officers and duties, resignations, special meetings
  • Executive Director or equivalent – role and responsibilities
  • Amendments to the By-laws and how they are made.
Articles of Incorporation

Articles of Incorporation are required by each state if you wish to incorporate. Note that you must be incorporated by the state before you can obtain tax-exempt status from the IRS. The Articles of Incorporation are a legal document that establishes you as a specific type of corporation within your state, provides a legal description of your organization, and assigns specific powers to the Board. Each state has its own rules which can generally be found in the Secretary of State section of each website.

IRS list of each state government’s website.