After incorporating nonprofit’s 501(c)(3) status, the biggest regulatory concern is maintaining ongoing compliance. To do this well, good recordkeeping is essential. A nonprofit’s board of directors is legally accountable for ensuring that the nonprofit’s federal and state compliance records are up to date. Whether prepared by a professional or an employee, the important thing is for the records to be detailed and accurate.

At Ministry Ventures, we frequently receive questions about board compliance and best practices. Here’s a list of our top 5 most frequently asked questions with answers to help guide you in the right direction.

What is a nonprofit required to report?

Every year, all 501(c)(3) organizations are required to file some version of IRS Form 990 with the IRS. Small public charities, those with under $50,000 in gross revenue, can file a brief, electronic return called Form 990-N.  For all others, a much more detailed return is required (Form 990-EZ, 990, 990-PF, and/or 990-T). This form collects information about the nonprofit’s income and expenses, as well as program accomplishments, board members, and answers to numerous operational and board compliance questions. Failure to complete the form can result in revocation of the 501(c)(3) status. For more information click here.  Also, the majority of states require nonprofits to register with the Division of Charities prior to soliciting donations.

Can a nonprofit make a profit?

Yes, nonprofits can engage in revenue-generating activities that result in annual surpluses or profits. However, nonprofits must reinvest surpluses back into the organization and its tax-exempt purpose. Excess revenues may not be distributed to individuals affiliated with the organization.

What is a conflict of interest?

A conflict of interest is a transaction or arrangement that might benefit the private interest of an officer, board member, or employee. Conflicts of interest in a board of directors can take several forms. Related parties on the board, board members related to employees, certain transactions, and dual-capacity individuals all present a conflict of interest. For more information, visit the IRS website here.

Can board members be paid?

The overwhelming majority of board members of charitable nonprofits are unpaid volunteer members of their boards of directors. This is because of the conviction that board members serve voluntarily, and they should not benefit personally from their service. On the other hand, they should also not be asked to cover debts of the corporation, or suffer financially for their service. Board members, like any other volunteers, may deduct expenses they incur in connection with their volunteer service, including mileage to meetings using their own car.

What changes require us to amend our articles of incorporation?

The Articles of Incorporation should remain as general as possible within the framework of your state laws. The bylaws will provide further detail on the governance structure, and additional policies and procedures secure the rest of the necessary guidelines for the effective and ethical functioning of your organization. Sometimes, major changes in the organization’s status, activities, or structure force you to amend the Articles and to file an updated copy. These include:

  • changing the organization’s name or address
  • substantially changing the organization’s mission
  • altering the provision for the disposition of assets if the organization is dissolved
  • changing the organization’s membership structure

 

Do you need help with board development and best practices?

Our coaching program is a great place to start!

Learn more at www.MinistryVentures.org.

Questions? Contact me anytime!

Emily Fitchpatrick, Director of Client Services

emily@ministryventures.org