FAQs About 501(c)(3) Attorneys and Nonprofit Law

Starting your nonprofit involves navigating a maze of legal intricacies that require guidance to ensure your organization stays compliant and has strategic plans for the future. Securing 501(c)(3) status not only brings tax-exempt benefits but also bolsters credibility and unlocks crucial funding opportunities for your nonprofit organization.

At Chisholm Law Firm, we practice in the areas of 501(c)(3) formation and nonprofit law, offering tailored legal support to help your organization lay a solid groundwork. Our deep experience allows us to address common client inquiries, providing clear answers that set the stage for you to build a resilient 501(c)(3) organization.

What is a 501(c)(3) Organization?

A 501(c)(3) organization refers to a specific category of nonprofit entities recognized by the IRS under section 501(c)(3) of the Internal Revenue Code. This status of income tax exemption is reserved for organizations that operate exclusively for religious, charitable, scientific, literary, or educational purposes as well as fundraising activities such as testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

Core Principles of 501(c)(3) Status

1. Public Benefit: Organizations must operate for the benefit of the public rather than private interests. This includes a public charity or providing services, activities, or resources to public charities that improve society as a whole.
2. Charitable Focus: Activities and resources of a 501(c)(3) organization must primarily serve charitable purposes, which may include relief of the poor, advancement of education or religion, promotion of health, social change, or social justice, and other activities that benefit the community.
3. No Private Gain: No part of the organization’s net earnings can benefit private shareholders’ or individuals’ profits. Instead, all earnings from a private foundation must be reinvested into furthering your nonprofit’s mission, purpose, and exempt status.

Obtaining 501(c)(3) status is highly beneficial as it exempts your organization from federal income taxes and also allows your donors to make tax-deductible contributions, enhancing your ability to attract funding and support from private foundations for your charitable activities.

Do I Need a 501(c)(3) Attorney?

Navigating the intricacies of obtaining 501(c)(3) status can be complex, making the guidance and general counsel of a nonprofit attorney highly advantageous. Here’s why:

Advantages of Having a 501(c)(3) Attorney:

1. Avoiding Errors: An attorney familiar with nonprofit and tax law can help you navigate the detailed IRS application process, minimizing errors that could delay or jeopardize your nonprofit status.
2. Ensuring Compliance: Knowledgeable legal counsel ensures your organization meets all federal and state requirements, from legal audits to drafting bylaws to structuring governance, safeguarding against potential legal issues and pitfalls.
3. Streamlining Procedures: An experienced attorney streamlines the process of obtaining 501(c)(3) status, saving you time and ensuring all necessary documentation is prepared accurately and promptly.

Choosing to work with a 501(c)(3) attorney provides peace of mind and also sets a solid foundation for your nonprofit’s success by delivering legal compliance and strategic planning tailored to your organization’s goals.

What are the Steps to Forming a 501(c)(3) Nonprofit?

Forming a 501(c)(3) nonprofit involves several key steps, each critical to establishing a strong foundation for your fundraising and your organization’s mission. These steps include:

1. Filing State-Level Paperwork: Draft and file a nonprofit charter with your state. In order to be approved, these documents must have specific language required for 501c3 nonprofits.
2. Bylaws: Develop bylaws that define your organization’s operating procedures, governance structure, membership guidelines, and decision-making processes. At Chisholm Law, we can create proprietary bylaws that also protect our clients from being voted off of their board, if this is a priority.
3. IRS Application: Complete and submit Form 1023 or Form 1023-EZ to the IRS, demonstrating your nonprofit’s eligibility and compliance with 501(c)(3) requirements. This may require financial projections, narratives, and addendums based on the specific activities your nonprofit will undergo
4. Fundraising Licenses – Some states require that a nonprofit organization register before it starts to raise money.
5. Local Licenses and Filings – Many states require local filings and licenses in addition to standard federal forms to legally operate a nonprofit.

Role of a 501(c)(3) Attorney

Here are a few things an attorney will do for your nonprofit organization during each stage of forming a 501(c)(3):

1. Articles of Incorporation: An attorney ensures the articles of your nonprofit incorporation accurately reflect your nonprofit’s charitable purpose and comply with state law, setting a strong legal framework.
2. Bylaws: Legal counsel helps draft comprehensive bylaws that align with IRS regulations and establish clear operational guidelines tailored to your nonprofit’s specific needs.
3. IRS Application: A 501(c)(3) attorney handles the entire IRS application process, navigating potential complexities and ensuring all of your required documentation gets prepared accurately and submitted in a timely manner. They may have existing relationships with IRS agents if they file frequently and are often able to expedite your paperwork if needed.

Working with a 501(c)(3) attorney throughout these steps ensures meticulous attention to legal details, compliance with regulatory requirements, and strategic planning that supports your nonprofit’s long-term success.

What are the Common Challenges Faced by Nonprofits?

Nonprofits often encounter challenges that require careful navigation to maintain operational success that differ from for-profit businesses. Some common challenges include:

• Governance Issues: Ensuring effective board governance, managing conflicts of interest, and maintaining transparency in decision-making processes. An experienced attorney can provide guidance on best practices for board governance, draft policies to mitigate conflicts of interest, and ensure your nonprofit’s compliance with state and federal governance laws.
• Fundraising Compliance: Adhering to complex regulations governing charitable solicitation, donor disclosures, and grant reporting requirements. Legal counsel can help you navigate state charitable solicitation laws, draft donor agreements and gift acceptance policies, and ensure transparency in fundraising practices to maintain compliance.
• Maintaining Tax-Exempt Status: Complying with IRS rules to retain 501(c)(3) tax exemption and status, including filing annual information returns (Form 990), avoiding prohibited transactions, and managing unrelated business income. A 501(c)(3) attorney assists in preparing and filing Form 990, advises on activities that may jeopardize your nonprofit and tax-exempt status, and provides ongoing compliance support to safeguard your organization’s nonprofit processes and tax exemption status.

By hiring a knowledgeable 501(c)(3) attorney, your nonprofit can proactively address these challenges, ensuring legal compliance, effective governance, and sustained mission impact.

How Much Does it Cost to Hire a 501(c)(3) Attorney?

The cost of hiring a 501(c)(3) attorney can vary based on the complexity of your organization’s needs and the specific services you require. Here are some factors to consider:

• Complexity of your Organization: The size and complexity of your nonprofit, as well as the scope of legal services needed, such as initial formation, IRS applications, and ongoing compliance, will impact costs.
• Specific Services Required: Fees can also depend on whether you need assistance with drafting bylaws, filing IRS forms, navigating governance issues, or addressing compliance challenges.

When you work with Chisholm Law, we prioritize transparent communication regarding costs and fees. There are no hidden charges, ensuring you’re fully informed about the costs associated with our services upfront.

Recognizing that each nonprofit is unique, we also never take a one-size-fits-all approach to pricing. Our attorneys offer tailored legal services designed to meet your organization’s specific needs and complexities.

For a clear understanding of costs or to discuss your nonprofit’s comprehensive legal services needs, consider scheduling a free consultation with Chisholm Law. You’ll receive a personalized quote and learn more about how our attorneys can support your nonprofit’s goals effectively.

What are the Benefits of Working with Chisholm Law? 

Choosing Chisholm Law for your nonprofit organization’s legal needs offers several distinct advantages:

• Proven Experience: Chisholm Law has a track record of successfully securing 501(c)(3) status for numerous clients, navigating the complexities of IRS applications with ease.
• Comprehensive Services: We have packages that include fundraising registration as well as grantwriting and fundraising support so your organization truly has everything it needs to be successful. We also help with maintenance with compliance packages that file your annual nonprofit taxes. 
• Additional Resources: Enjoy the benefit of a free consultation to discuss your nonprofit’s legal needs and receive a personalized assessment. Chisholm Law also provides informative content on our website to help educate and empower nonprofit leaders.

For quality legal guidance and support in achieving your nonprofit’s mission, contact Chisholm Law today to schedule your free consultation and explore how our dedicated team can assist you.

Secure Your Nonprofit’s Future with Professional Legal Guidance

Chisholm Law Firm offers comprehensive legal assistance to guide you through legal matters at every step of the process to achieve 501(c)(3) status.

In addition to securing 501(c)(3) status for nonprofit lawyers, we have a proven track record of providing a range of other beneficial services tailored to nonprofit organizations. Whether you need assistance with governance, compliance, or strategic planning, our dedicated team is committed to supporting your nonprofit organization’s mission.

Take the first step toward legal clarity and operational excellence. Contact Chisholm Law Firm today for a free consultation to discuss how our personalized legal solutions can empower your nonprofit’s journey. Together, let’s build a stronger future for your organization and the communities you serve.

*Past results do not determine future outcomes