Forming a Nonprofit
Thinking of Forming a Nonprofit in New York? There’s a Lot to Consider, but the Law Firm of Vaughn, Weber & Prakope, PLLC is here to help.
With a little extra effort in the planning phase, nonprofits can avoid a lot of work and expense in the long run. The Law Firm of Vaughn and Weber can help new and established nonprofits decide what legal entity to chose, maintain tax exempt status, and much more.
Should You Incorporate?
Unincorporated associations can qualify for Federal tax exempt status, if they are engaged in exempt activities. This means that incorporation is not necessary for avoiding tax liability. Nevertheless, for most organizations, incorporation provides many advantages.
The Advantages of Incorporation
Limited Liability
Most often, nonprofit associations incorporate for the same reasons businesses and other groups incorporate – to avoid personal liability. Nonprofit corporations, like business corporations and other legal entities, have a legal existence independent of their directors and members. As long as nonprofit directors and members abide by the law when administering the affairs of the organization, they will not be personally liable if, for example, the nonprofit is sued or can’t pay a debt. This is especially important for organizations that promote athletic activity, serve food, gather large groups, or engage in other activities that seem likely to expose the organization to legal liability.
Legitimacy
Incorporation adds an air of legitimacy to an organization. Nonprofit corporations are required to adopt certain decision-making processes (by-laws), and are prevented from using assets in certain ways. New York law prevents nonprofit operators and board members from using nonprofit assets for their own financial gain, and requires nonprofits to adopt conflict-of-interest policies.
This element of formality and constraint gives donors confidence that their contributions will not be misused. Without these safeguards, individuals may be hesitant to contribute to an unincorporated association, even if they sympathize with the group’s goals and purposes.
Nonprofit Corporations and Tax Exemption
Nonprofit incorporation and tax exemption are not the same. The two designations (incorporation and tax exemption) are issued by two different governing bodies (New York State, and the Federal Government, respectively), and do not perfectly overlap. Just as it is possible to avoid tax obligations without incorporating as a nonprofit, it is also possible that the IRS would deny tax exempt status to an organization incorporated under New York’s nonprofit corporation law. When incorporating a nonprofit, it is very important that the nonprofit purposes are drafted with the IRS tax exempt categories in mind. If a New York nonprofit’s purposes do not satisfy the IRS, it may be denied tax exempt status, even though New York recognizes that the organization is nonprofit.
Tax Deductible Contributions
An organization may be exempt from Federal Taxes under several categories. Not all of those categories allow donors to write off contributions.
As a general rule, contributions to charitable organizations are deductible, while contributions to other types of nonprofits are not. However, it is not always immediately clear whether a nonprofit is charitable. Some organizations that may initially seem charitable may be denied tax deductible contributions, and some organizations that may not seem purely charitable may be approved.
Maintaining Tax Exempt Status
The IRS can always revoke tax exempt status if it believes that an organization’s activities deviate from its stated purpose. If this happens, a nonprofit may become liable for fees or penalties from the IRS. This can be very costly. When considering new activities, it is always important to research and review any potentially relevant revenue rulings. Revenue rulings can give nonprofits some idea of how the IRS might categorize a given activity, which will allow them to determine whether engaging in the activity jeopardizes their tax exempt status.
If you have questions about forming a nonprofit, run a nonprofit and have questions about particular activities, or have any other legal issues, call the Law Firm of Vaughn, Weber & Prakope, PLLC at (516) 858-2620 to schedule a free consultation.
Use Will to Appoint Guardian
Use will to appoint guardian for your minor children.
It’s hard to plan for the worst, but failing to do so may only make things harder. When drafting a will, it is all too easy to imagine that it will only be used when our children are grown, perhaps with families of their own. But thinking this way may cause us to focus too narrowly on deciding who gets our property. What if things don’t happen according to this timeline? What if you die before your children are able to take care of themselves? Who will care for them? Who would you like to make this decision – yourself or a court?
New York’s Domestic Relations Law allows parents to use wills to appoint guardians for their minor children. Guardians can be appointed to take physical custody of children, and to look after the finances and assets that are left to those children. Further, parents can choose a different guardian for each of these tasks – one to look after the child, one to administer the child’s finances. When a guardian is appointed, courts will generally respect the parent’s decision (although a court could find that the guardian is unfit). However, if a parent doesn’t appoint a guardian, the court will make this decision itself. If you feel uncomfortable about leaving such a decision in the hands of a court, The Law Firm of Vaughn and Weber can help you draft a will that appoints a guardian for your child.
If you have questions about this or other legal issues, call The Law Firm of Vaughn, Weber & Prakope, PLLC at (516) 858-2620 to schedule a free consultation.
Court Appearance Default
Did you attend a court appearance and the other side wasn’t there? Did you miss a court date and want to know what your options are? Vaughn and Weber can help you decide what to do next.
People miss appointments. It’s a fact of life. Accidents, illnesses, family emergencies, or any number of other events beyond our control may prevent people from attending meetings, even very important ones. Court appearances are just as likely to be interrupted by such events as anything else. Courts understand this, and missing a court date is not necessarily fatal to a case. When someone misses a court date, or “defaults,” every party involved – the appearing party, the absent or defaulting party, and the Court – has options.
Section 202.7 of the Uniform Court Rules, titled “Defaults,” provides:
At any scheduled call of a calendar or at any conference, if all parties do not appear and proceed or announce their readiness to proceed immediately or subject to the engagement of counsel, the judge may note the default on the record and enter an order as follows:
(a) If the plaintiff appears but the defendant does not, the judge may grant judgment by default or order an inquest.
(b) If the defendant appears but the plaintiff does not, the judge may dismiss the action and may order a severance of counterclaims or cross-claims.
(c) If no party appears, the judge may make such order as appears just.
This section gives Courts certain options, depending on the type of case, and whether the defaulting party is a defendant or plaintiff. Most importantly, this rule gives the Court the power to enter a Default Judgment against the absent party. When a Default Judgment is entered against the absent party, the present party wins the case. This is good news for the present party, but it is not the end of the story. Even if the Court enters a Default Judgment against the absent party, the present party – the “winner” – still has work to do. Section 2220 of the Civil Practice Law and Rules requires that the winner provide the defaulting party with notice of the Judgment. When the defaulting party receives notice of the Judgment, that party has a certain period of time to ask the Court for an opportunity to explain the absence. If the Court is satisfied that the absent party has good cause for missing the court date, the Court may re-open the case. If not, then the default judgment ends the case.
If you have questions about defaulting on court appearances, Vaughn, Weber & Prakope, PLLC is here to assist you. Call 516-858-2620 to schedule a free consultation. We are located in the heart of Long Island at 393 Jericho Turnpike, Suite 208, Mineola, NY 11501.
*Contributions to the research for this article have been made by Jason Mays, J.D.
Keep in Touch