Consulting a Tax Lawyer
When combining ever-changing state and federal nonprofit tax laws with start-up nonprofit corporations, the need to develop a long-term relationship with a lawyer who understands your organization and stays up-to-date with changes in tax law is essential.
Be sure to evaluate your planning from a legal perspective so both your organization and the lawyer you choose make the best use of everyone's time. Unless you are in one of the American territories, where legal assistance when forming a nonprofit corporation is required by law, there is no such requirement in any of the 50 states or in the District of Columbia.
Not Just Any Lawyer Will Do
As with many professions, the practice of law has developed specialties over the years, allowing lawyers to refine their expertise and provide the most assistance in specific areas. Many law firms, particularly those with numerous lawyers sharing office facilities, will have a specialist in business and tax law on staff. A lawyer with that focus will be able to assist you at any stage of the process. Seek referrals from other small nonprofit organizations in your immediate area to find a tax lawyer you can trust.
Remember that lawyers are experts in matters of law. They are not accountants or social workers, although some may be comfortable in those fields as well. Keeping your questions and concerns to legal issues will lead to more productive sessions and less wasted time (and money) in the lawyer's office.
Working with a lawyer who understands the entire process yet is removed from your organization can be an excellent experience.
The Process
After locating a lawyer, make a preliminary phone call to ensure she is comfortable with nonprofit business law and to make an appointment to discuss your needs. Most lawyers working in this field offer a brief consultation visit for a minimal charge, which enables both parties to gauge if everyone's needs will be met.
Limit the attendees at the initial meeting to people who really need to be there. Bring any documents you have completed or anything still in development so you can refer to them during your initial meeting. Take careful notes so that you can give a detailed report to the rest of the board members or pertinent staff.
In all likelihood, the lawyer will ask for a summary of your plans, what your organization intends to do, where in the incorporation process you are, and where she can be of assistance.
Lawyers generally have set fees for services. Some attorneys may handle all elements of your incorporation with the state; others will stay with you to apply for tax-exempt status. Of course, the more you ask her to do, the more expensive it is going to be. The trick is to find a middle ground. Do as much of the basic work as you can, and then seek legal advice to review the final packages before they are submitted.
The job of a good lawyer is to keep you and your organization out of the courtroom. Once you have an agreement for legal services, her complete responsibility is to keep you in full compliance with the law. If she seems overly cautions, it is with good reason. You may accept or reject any advice you receive, but you do so at your own peril.
After your organization has become established, and the activities you undertake become more complex, check in with your lawyer to verify any tax issues long before they become problems. Normal legal issues are to be expected, and legal advice might prove helpful.
You may have questions about activities that are incidental to your mission that may involve a tax liability or about how to handle income from ticket sales for a fundraiser — or even questions about the fundraiser! These situations are hardly a cause for alarm, but you may rest easier knowing you can just call your lawyer to be certain everything is good to go.
It is entirely possible that you will never need to utilize the services of a lawyer until your organization enters into contracts or purchases property. Many tax questions can be handled by an accountant who is familiar with nonprofit filings, but knowing you have a lawyer you can call when something isn't looking right or you are faced with a real problem, will give you, your board, and your organization incredible peace of mind.
