By G. Timothy Leighton

January 11, 2022 — So, you have a cause that is near and dear to your heart. Maybe it is a result of something you have gone through personally or a situation you witnessed another person experience that deeply affected you. You think to yourself, “What can I do to help?” Then one day, despite your busy everyday life, you decide selflessly to take action.

The thing is, you cannot spontaneously decide to go stand in front of the grocery store and start asking people for donations to a charity that is not recognized by the proper government agencies. Even starting a Facebook page or a website that solicits donations can get you into trouble. Just like everything else these days, there is red tape and a somewhat complicated process that is necessary legally to run your new charitable organization.

Incorporate Your Charitable Organization. All charities originating in the State of Illinois must file articles of incorporation with Secretary of State. There are certain provisions that must be included in your articles of incorporation in order to comply with state and federal laws. For qualification as “tax exempt” you must also include certain “magic” language.

Formalize the Organization’s Internal Structure.  Illinois law requires not-for-profit organizations to have bylaws and other internal documents that outline the organization’s policies. As with the articles of incorporation, there is specific language that needs to be in your internal organization documents in order to avoid noncompliance issues. Bylaws are also mandatory for the next step in the process: Obtaining tax exemption determination from the Internal Revenue Service.

Ask the IRS for Approval.  As we all know, the IRS can be quite difficult to deal with. However, the legal requirement for not-for-profit organizations to submit an application to the IRS does come with a huge benefit: Income Tax exemption, including tax deductions for donors.  We can help you put the application together properly to increase significantly your chances of fairly prompt determination of for tax exemption.

Obtain Approval from the State of IllinoisOnce you receive the IRS tax exemption status, your organization will need to register with the Illinois Attorney General Charitable Trust Bureau. One of the main objectives of the Bureau is to prevent fraud occasionally committed by organizations claiming to be not-for-profit charities. By registering with the Bureau, donors can verify that your organization is legitimate and view information online such as income, expenditures, programs and administration. If a person searches for your charity on the Bureau website and learns that you have not registered, then they could report you to the Bureau which would likely initiate an investigation. Then once the Bureau discovers that you have not completed your registration and mandatory annual requirements, you may incur significant fees including retroactive and current annual registration fees, late fees and attorney’s fees.

Manage Your Organization.  Not-for-profit corporations are obligated to attend to certain formalities on a regular basis. These include, but are not limited to, tax filings, Secretary of State annual reports, Illinois Attorney General annual reports, annual minutes and compiling income/expenditure information. Just like for-profit businesses, not-for-profit organizations must designate a registered agent with Secretary of State. We can serve as your registered agent and advise you on other requirements to keep your organization in good standing.

Hundreds of ambitious not-for-profit organizers like you are turned down by the IRS and Illinois Attorney General’s office every year, often times simply due to a technicality that could have been prevented by consulting with the right attorney. I have over 30 years of experience helping Clients defeat such roadblocks by using his knowledge of the procedures to obtain approval from government agencies. Do yourself and your cause a favor: Don’t try to do this alone. Once your organization has been denied by the IRS or Illinois Attorney General, it can be difficult to dig yourself out of the hole. Let us help you start from scratch to avoid the headache and begin helping others as quickly as possible. Click here for ways to contact us to schedule your appointment.

Important note: This information is designed to provide a general overview with regard to the subject matter covered. The author and publisher and host are not providing legal, accounting, or specific advice to your situation. You should consult with the professional advisors of your choice for specific advice.