Drafting exercise

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Drafting exercise

  1. 1. Drafting Corporate Documents Nonprofit Organizations Prof. Mayo
  2. 2. Overview <ul><li>You (and the members of your team) will draft three documents on behalf of a fictional couple who wants to create a fictional nonprofit org: </li></ul><ul><li>Articles of incorporation </li></ul><ul><li>Bylaws </li></ul><ul><li>Application for tax-exempt status </li></ul><ul><li>This presentation will walk you through the steps. </li></ul>
  3. 3. Fact pattern <ul><li>Liz and Paul Smith want to start a nonprofit organization that will provide various forms of assistance for at-risk children. </li></ul><ul><li>Educational (tutoring, school materials, tuition, etc.) </li></ul><ul><li>Health care </li></ul><ul><li>Housing </li></ul><ul><li>Nutritional </li></ul><ul><li>Domestic violence </li></ul><ul><li>Career counseling </li></ul>
  4. 4. Fact pattern <ul><li>The Smiths expect to put some of their own savings into the organization, but they plan to do extensive fund-raising, as well, through direct-mail appeals to the public, charity events, private foundation grants, and federal and state program money. </li></ul><ul><li>They and some friends will organize and staff the proposed organization on a volunteer basis while the organization is getting established. </li></ul>
  5. 5. Fact pattern <ul><li>You may make up additional information in order to provide the details required by the Secretary of State or the IRS, e.g.: </li></ul><ul><li>Personal names and addresses </li></ul><ul><li>Budget numbers </li></ul><ul><li>Employer Identification Number </li></ul>
  6. 6. Your job <ul><li>Form a Texas nonprofit corporation (non-member) & apply to the IRS for tax-exempt status </li></ul><ul><li>Here’s the first of your three documents . . . </li></ul>
  7. 7. Articles of incorporation <ul><li>In Texas: “certificate of formation” </li></ul><ul><li>This can be done on-line, using an interactive Web document, which can be downloaded once it is filled out </li></ul><ul><li>The form is on the Texas Secretary of State’s website: http://www.sos.state.tx.us/corp/nonprofit_org.shtml </li></ul>This is a clickable link – go ahead and try it
  8. 11. Articles of incorporation <ul><li>You can click on either the Word or the Acrobat link. </li></ul><ul><li>Both will open up a document that looks like this: </li></ul>
  9. 12. Articles of incorporation <ul><li>And both documents will have forms with editable fields: </li></ul>
  10. 13. Articles of incorporation <ul><li>Tips: </li></ul><ul><ul><li>Save all of your work to your hard drive. It should be possible to go back and edit what you’ve saved, even the PDF. And you may need to revise after you’ve received my comments on your drafts. </li></ul></ul><ul><ul><li>Be sure you’ve familiarized yourself with the requirements and options provided in the Texas Nonprofit Corporation Law </li></ul></ul><ul><ul><li>Check out the IRS’s discussion of requirements and suggested language. </li></ul></ul>
  11. 14. Corporate by-laws <ul><li>Next, you will need to draft a set of by-laws. </li></ul><ul><li>This is not as easy as the articles, because there’s no standard form. </li></ul><ul><li>I can suggest a couple of starting places, but please don’t consider any of the suggested formats to be written in stone . . . </li></ul>
  12. 15. Corporate by-laws <ul><li>Nonprofitlaw.com </li></ul><ul><li>Foundation Center </li></ul><ul><li>Suite101.com </li></ul><ul><li>aristotle.net </li></ul><ul><li>Minnesota Council of Nonprofits </li></ul><ul><li>Vermont Secretary of State </li></ul><ul><li>Greenlight for NonProfit Success </li></ul>
  13. 16. Tax-exempt status <ul><li>Once you’ve created your by-laws, it’s time to take the final step: apply for recognition of tax-exempt status. . . . </li></ul><ul><li>I recommend that you start by reviewing the IRS’s posted materials on the “Life Cycle of a Public Charity.” </li></ul>
  14. 17. Tax-exempt status <ul><li>Like the Texas certificate of formation, the application can be prepared with an on-line version of IRS Form 1023. </li></ul><ul><li>Start here: http://www.irs.gov/app/picklist/list/formsInstructions.html </li></ul>
  15. 18. Tax-exempt status <ul><li>That link will take you to this page: </li></ul>
  16. 19. Tax-exempt status <ul><li>Type “1023” in the “Find” field and click on the “Find” button. </li></ul><ul><li>That should bring up “Application for Recognition of Exemption,” and the Instructions for completing the form immediately below. </li></ul><ul><li>Click on both files to retrieve the PDF files. </li></ul>
  17. 21. Final words <ul><li>There are a couple of goals with this exercise: </li></ul><ul><ul><li>Make your writing clear and succinct. </li></ul></ul><ul><ul><li>Make all the parts hang together. For example, if the IRS form requires certain information from your articles of incorporation (i.e., Certificate of Formation), make sure it’s there. </li></ul></ul><ul><ul><li>Be sure you have complied with applicable federal and state laws. </li></ul></ul><ul><ul><li>Take advantage of options provided by law. </li></ul></ul>
  18. 22. Really final words Good luck!!

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