Why You Should Involve a Nonprofit Lawyer in Your Strategic Planning 

Strategic planning is a foundational process for any nonprofit organization. Planning guides your organization’s mission, vision, and long-term goals and also involves setting priorities, strengthening operations, and ensuring that your organization remains on track to fulfill its mission. However, nonprofit organizations must navigate many complex laws and regulations alongside these strategic considerations. 

This is where the involvement of a nonprofit lawyer becomes valuable. Law firms that focus on nonprofit organizations can provide the legal services you need to address regulatory requirements, protect your organization’s tax-exempt status, and support sustainable growth. 

In this article, we’ll look into how involving legal counsel early in your organization’s strategic planning process can build a strong foundation that supports your nonprofit’s mission and long-term success.

Understanding Legal Requirements for Nonprofits

Navigating the complexities of federal and state regulations is no small task for nonprofit organizations. A nonprofit lawyer can help ensure that charitable entities and social welfare organizations meet various legal requirements, from filing obligations to operational guidelines, all of which vary widely across jurisdictions. 

Because they understand these regulations, a lawyer can give you clarity on rules that impact everything from fundraising to organizational governance, reducing potential risks that could jeopardize the organization’s tax-exempt status. 

Aligning your nonprofit’s mission with legal requirements is also essential during the planning stage. While your overall strategic vision of the organization might be clear, a lawyer can help translate that vision into a legally sound structure. This alignment supports smooth operations and long-term sustainability, particularly as the nonprofit grows and introduces new initiatives. 

They can also help you avoid common legal pitfalls that can arise during strategic planning. These may include failing to comply with state fundraising laws, not following the guidelines for maintaining tax-exempt status, or mismanaging contracts. A nonprofit lawyer can help identify these pitfalls before they become issues, allowing you to focus on your mission rather than potential legal challenges. 

Structuring Governance and Board Responsibilities 

A nonprofit lawyer plays a key role in advising on board structure and governance policies, as well as ensuring that bylaws and policies are established correctly from the tax exemption process onward. This also includes guidance on helping you establish a board of directors that fulfills your organization’s needs and complies with legal standards. 

Legally compliant bylaws and policies form the foundation of any well-governed nonprofit. Bylaws set out the rules by which the organization operates, covering everything from meeting procedures to board elections. 

A lawyer can ensure that these bylaws are not only comprehensive but also align with applicable laws, reducing risks associated with ambiguous or outdated policies. This legal alignment is particularly important as nonprofits face increased regulatory scrutiny, making compliant governance essential for maintaining credibility and tax-exempt status. 

In addition, a lawyer can assist in defining board roles and responsibilities, and clarifying duties such as fiduciary oversight, and strategic decision-making. A nonprofit lawyer can help create clear job descriptions and expectations for board members, which mitigates risks related to governance. This clear delineation helps prevent conflicts, reduces potential liabilities, and ensures that all board members understand their obligations.

Protecting Tax-Exempt Status

Maintaining 501(c)(3) tax-exempt status is fundamental to a nonprofit’s operations, allowing it to benefit from tax exemptions and attract donor support. As your organization grows or implements new strategies, preserving this status becomes especially important. Any shift in mission, programs, or financial practices must align with IRS regulations to avoid the risk of penalties—or worse, losing tax-exempt status altogether. 

A nonprofit lawyer plays a vital role in navigating these IRS regulations as the organization evolves. When strategic changes occur, such as expanding services, entering partnerships, or modifying funding sources, a lawyer can provide guidance to ensure compliance with 501(c)(3) requirements. This legal oversight is critical for understanding what is permissible under IRS rules, such as limits on lobbying, unrelated business income, and compensation structures. 

For example, legal counsel can help the organization avoid pitfalls like excessive lobbying, which could raise red flags with the IRS, or handling unrelated business income improperly, which might attract tax liabilities. Working with a nonprofit lawyer or managing attorney who oversees these areas helps protect your organization from potential issues that could jeopardize its tax-exempt status, ensuring it remains eligible for the benefits that drive its mission forward. 

Risk Management and Liability Protection 

Identifying and managing legal risks is a crucial component of strategic planning for any nonprofit. A nonprofit lawyer can help pinpoint potential liabilities, whether related to governance, fundraising, or program implementation. They can evaluate these risks early on and provide a proactive approach to safeguarding the organization against unforeseen challenges that could impact its operations or reputation. 

Say your nonprofit is planning to launch a new program that involves community outreach events and volunteer coordination. While the program aligns with the organization’s mission, it introduces potential risks in several areas: 

• Fundraising Compliance: If the program involves new fundraising efforts, such as public solicitations or crowdfunding, a lawyer can help ensure compliance with state fundraising regulations and reporting requirements. Oversight like this reduces the risk of penalties for non-compliance and protects your organization’s good standing with regulatory bodies. 
• Participant Liability: Community events often carry liability risks related to participant safety. A lawyer can help develop waiver forms, ensure proper insurance coverage, and advise on safety protocols, reducing the potential for lawsuits related to accidents or injuries during events. 

Liability protection is particularly important for both board members and the organization as a whole. Board members are entrusted with fiduciary responsibilities, and without adequate protection, they may face personal liability for decisions made on behalf of the organization. A nonprofit lawyer can advise on appropriate measures, such as indemnification policies and Directors and Officers (D&O) insurance, that protect board members while they fulfill their roles. 

Expanding and Diversifying Funding Sources 

As tax-exempt entities, public charities, and nonprofits seek to expand and diversify their revenue streams—whether through grants, donations, or earned income activities—legal guidance becomes crucial. Each type of funding brings specific regulatory considerations that can affect compliance and, ultimately, the organization’s tax-exempt status. A nonprofit lawyer helps navigate these legal nuances, ensuring that all revenue activities are structured to meet federal and state requirements. 

For example, when applying for grants or formalizing donor agreements, a lawyer can assist in drafting and reviewing contracts to ensure that funding terms are clear, legally sound, and aligned with the nonprofit’s mission. Compliance in grant applications, for instance, is not just about meeting funding criteria but also about adhering to reporting requirements and usage restrictions that, if breached, could lead to penalties or even the return of funds. 

In addition, a lawyer can provide guidance on integrating new revenue sources in a way that aligns with the organization’s tax-exempt status. Certain earned income activities or sponsorship arrangements may be permissible, but others could be considered unrelated business income, which may result in tax liabilities or scrutiny from the IRS. 

With legal insight, your nonprofit can confidently diversify funding while staying within the boundaries of tax regulations, enabling it to grow sustainably and support its mission without jeopardizing compliance. 

Planning for Organizational Longevity and Succession 

From the nonprofit incorporation phase through leadership transitions, having a legal framework for continuity supports the organization’s long-term mission. Ensuring that nonprofit founders, board members, and leadership roles are transitioned smoothly is not only important for maintaining operational stability but also for preserving the organization’s mission and values as new leaders step in. 

A nonprofit lawyer can help you develop a clear succession plan that can safeguard the continuity and adaptability of your organization, even during leadership changes. By providing legal guidance, a nonprofit lawyer can assist in drafting and refining succession policies, specifying the procedures for selecting and onboarding new leaders, and ensuring these processes align with state laws and the organization’s bylaws. 

This support can help your organization thrive through leadership changes, maintaining its focus on the mission while adapting to new circumstances. Additionally, a nonprofit lawyer can facilitate discussions among board members and founders about future leadership needs, ensuring that your organization is prepared to handle transitions smoothly. 

A nonprofit law firm can also help outline specific criteria for selecting new leaders, which is especially important for tax-exempt organizations to maintain compliance with IRS regulations. By involving a nonprofit lawyer in your succession planning, you can protect your organization’s legacy and enhance its ability to continue advancing social change and fulfilling its mission effectively. 

Lean on Chisholm Law for Your Strategic Planning 

Involving a nonprofit lawyer in your strategic planning offers several benefits. Legal support helps build a sustainable and compliant organization, from navigating complex legal landscapes to guiding the foundations, governance, and compliance. With the guidance of legal counsel, your nonprofit can confidently address legal requirements, avoid common pitfalls, and build a compliant foundation that supports long-term success. 

At Chisholm Law, we assist you in your entire strategic planning process. We understand the unique needs of nonprofit clients and are committed to providing the legal support that empowers your mission.

Consult with one of our nonprofit lawyers to gain practical solutions and legal insight for your strategic planning process. Let’s work together to ensure your organization thrives sustainably and remains aligned with its mission for years to come.

*Past results do not determine future outcomes