You would be amazed at the number of active not-for-profit organizations that aren’t properly structured or current with their State of Ohio and IRS filings. This is common in smaller organizations where well-intentioned individuals rotate through the various officer positions and then leave the organization. Other organizations fail to prioritize managerial aspects, such as organizational administration, that they believe take valuable time away from the organization’s mission.
What some not-for-profit officers fail to realize is that their well-intentioned volunteerism could subject them to personal liability as a result of failing to discharge one’s officer duties.
While I typically address issues of fraud, embezzlement and financial wrong-doings, it is imperative to understand the structure of an organization on the front end. If you are involved in any not-for-profit, there are five aspects you want to review:
- Is the organization incorporated? Incorporating the entity with the Ohio Secretary of State is the first step to properly establishing a tax-exempt entity.
- Is the organization tax-exempt in the eyes of the IRS? In order to be tax-exempt, the organization must file an application for tax-exempt status with the IRS (usually Form 1023). Upon approval, the IRS will mail a tax-exempt acceptance letter which should be permanently saved.
- Has the organization filed annual tax returns? If annual gross receipts are less than $50,000, filing the annual online income tax return (Form 990-N) takes about five minutes. If annual gross receipts exceed $50,000 but are less than $200,000 and the organization has less than $500,000 of assets, Form 990-EZ is required. If the organization has more than $200,000 of annual receipts and more than $500,000 of assets, the lengthier Form 990 is required.
- The fact that you are incorporated as a not-for-profit in the State of Ohio doesn’t preclude you from ever filing any other document with the State. Every six years, not-for profit entities are required to file a Statement of Continued Existence with the Ohio Secretary of State. If this is not performed, the corporate status can, and frequently is, revoked by the State.
- Finally, remember that you are a corporation. As such, you are required to have at minimum, written corporate minutes and an election of corporate officers. A corporate minute book should be maintained and passed from one corporate secretary to the next.
The last thing that any not-for-profit organization wants is negative and embarrassing publicity resulting from officers not fully performing their duties, nor do officers want is exposure to personal liability. If you are an officer of an Ohio tax-exempt entity, and want a free quick organizational assessment, I’m happy to help. Please leave a comment below or give me a call at 440-449-6800.
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