 Thank you all for being here at this special TechSoup webinar. This is the nonprofit Law 101. It's a legal office for Black Lit nonprofits and we're going to tell you why in just a moment. But before we do that, I want to say I'm Aretha Simons. I'm the webinar producer here. You're in some good hands today. Before we get started, I'm going to go on the next slide and show you how you can engage. I know some of you already said you're a member, so you're probably familiar with the webinars, but if you have a question, we would love for you to type it in the Q&A. We do have lots of members here. So if you type it in the chat, we'll probably be able to grab it as well. We're going to email you the recording and the slides within 48 hours. You probably get it tomorrow. And if you need the closed caption, go ahead and locate the CC button at the bottom of your Zoom menu and turn on that closed caption. I'm excited because like I said, this is the first. See, somebody's already told me the post that this is the first of hopefully many that will have here. And our legal counsel here at Martha, she's just amazing. I'm going to turn this over to her because I mean, I could say a lot more about her, but Martha, I'm going to turn it over to you. You guys have a great webinar. And you're on mute, Martha. Thank you so much, Aretha. So honored to be here with all of you today. Briefly, I am Martha Lackritz-Peltier. I'm general counsel at TechSoup. My background is in non-profit actors and law. And I am here with my amazing colleague, Jasmine, and I will pass it over to you, Jasmine. Hi, yes, I am Jasmine Martin and I am also a legal counsel here at NTO Source. So I will set the stage for who we are and just give a short overview of TechSoup. So what you'll see on the screen is our mission statement. And every day TechSoup helps hundreds of thousands of civil society organizations grow. Our technology platform, our resources, and our connections. Those organizations in turn build a brighter future for millions of people. TechSoup facilitates all kinds of exchanges that benefit civil society from technology solutions to educational tools and resources. Hi everyone. I'm not legal counsel for TechSoup at all. My name is Lashika Phillips, and I am the Director of Equity, Inclusion, Diversity, and Culture here at TechSoup. And I just want to briefly share with you the motivation for this event. Why is this happening specifically for Black-led non-profits? And you should know that at TechSoup, we recognize that Black-led non-profits, despite their historic contributions to community development and societal progress, often face significant challenges of securing funding, leveraging networking opportunities to name a few. And reports by Candid and the Center for Disaster Philanthropy revealed that these organizations frequently receive less funding compared to other groups. And so in light of this, TechSoup's Black affinity group called TechSoul in collaboration with the TechSoup Legal Team that you just met. And there are some of our attorneys here in chat as well. But they're hosting this, especially curated for Black-led non-profits. And so I'm going to share in the chat where this stems from because a few years ago, TechSoup made some commitments and some pledges around communities that have been most impacted by systemic injustices. And so I'll share that link now, and I'm going to pass it over to the attorneys so we can dive into this legal office hours. Thank you all so much for doing this. Okay, so here is an overview of what we'll be discussing today. Martha's going to give us an overview of the U.S. non-profit landscape. She'll talk about primary filing and reporting requirements. And then she'll touch on both boards and bylaws. And I'll bring us home with tips and traps for the unwary and we'll have time for a little Q&A at the end. Awesome. Well, oops. Thank you so much. Thank you, Jessica, Aretha, and my apologies, wrong slide. I missed the slide, rather, for taking us this far throughout. And Jasmine, I'll pass the legal disclaimer back to you as well. Thank you. I would say that it's super important to consult competent legal counsel to learn how relevant laws apply to your specific organization. There are a few reasons for this. The first is that laws can vary depending on your location. And the second is that your specific legal counsel is going to be in the best position to help you and your business situation. So we always say that you are in the best position to help your legal counsel by highlighting what is important to you. And we will cover what those might be today. All right, great. Apologies for skipping around the slides a little bit there. Amazing intros from colleagues. I'll add to that that this is a very high level overview as I'm sure you all know, since you're a nonprofit organization, it's a really complex network of regulations and laws and things that nonprofits should look out for. And so sort of deciding which of those that we can distill as the most important takeaways and that might be most helpful to this group is what we chose to focus on today. I'm not going to answer every question, but you have our contact information and we would love to hear from you would love to hear what topics you want to hear more about in the future so that we can conduct further presentations that that meet your needs. So without further ado, we're going to start with a high level overview of the US nonprofit law landscape and a warning that this slide is very tech heavy and I apologize and one of the reasons is that we will share this slide with a group afterwards and so I hope that this can be a useful reference for all of you. The other piece of this visually that I like to think about is, these are the primary regulators that regulate the not any nonprofit organization within the United States. Now on the right side of the screen you're seeing the state, the state regulates. There are three primary regulators that regulate nonprofits within each state. There's a secretary of state that certifies and maintains filings for all corporations companies LLCs and that includes nonprofit corporations. There is the attorney general who regulates nonprofits that hold assets for charitable purposes. So that is essentially most nonprofits, if not all, and then in many states so not all there's the revenue department and this is basically the state version of the IRS. So there are some states that actually simply do not require that nonprofit or tax exempt organizations even file an application for recognition of tax exemption if they're already recognized as a federal level. Others have an independent filing that is required some of them require return some of them don't. Most states do have some sort of filing even if it's just an initial filing to declare your exempt status that that you don't need to pay state taxes. Now on the right side, the other side is the federal side. So as with all things in the United States were governed by our state laws and by our federal laws, same with nonprofits. The primary regulator of tax exempt organizations is the IRS. And so the IRS actually regulates not only charitable nonprofits like 501c3 but also 501c4 social welfare organizations 501c5 labor unions 501c6 trade unions 501c7 recreational clubs tax which are section 527 organizations. For the purposes of this presentation we're really going to be focusing primarily on the most common nonprofit entity type in the US, which is a charity, a public charity or which files for exempt status under section 501c3 of the income tax code. So I suspect that many of you in particular if you are a TechSoup members are probably nonprofit you're all nonprofits organized at the state level and also probably all if not most of you have also received recognition from the IRS as a 501c3 public charity. So knowing that these are your primary regulators is helps a little bit to put in place who you need to be thinking about and the requirements that you need to be keeping in mind. So again, we will share the slide afterwards and hopefully this will be a helpful visual guideline for you as well as it dives into some of the details about what each regulator covers and what their principal filings are. There's some examples in here of specific states. So for example in the revenue department there, this may have a very different name. It's the division of revenue and Delaware it's the Department of Taxation and Finance in New York it's the franchise tax board in California. You probably pay taxes for yourself so you probably know that entity already that's the same entity that regulates your organization for state law purposes. I'll also say that you might be a nonprofit organization that didn't apply for tax exemption in your state level, because maybe you weren't required to because your state will automatically exempt you if you're exempt with the IRS. Or maybe your income threshold is low enough that it doesn't make enough of a difference that it's not with your time, or maybe you didn't know that it was possible to do so. So often just remember that when you apply for 501c3 exempt status, you're doing that at the federal level but there is also a state version of that, which enables you to also be exempt from state income taxes. So now I'm going to drill down on some of the primary filings themselves that you will actually be subject to this is not every single potential filing but these are the primary filings that will apply to all 501c3 nonprofit organizations in the US. So you all probably know there's the annual form 990. It is a tax return technically in IRS language it's an information return since public charities do not owe taxes, but it's an annual form that all organizations have to file with some exemptions as you may know, churches which is which is a specific kind of defined term under the income tax code it actually refers to any kind of religious congregation that has a regular body of participants and a form of worship. So 501c3 churches are actually not required to file form 990s. There are certain other entities that are not required to file them that's the primary one another example is organizations that never earn more than $5,000 annually in income. So it's a pretty narrow exception for most of us that are in charities we do have to file a annual form 990 private foundations file a form 990 pf. There are several versions of the form 990 as you probably know that depend on your asset size. So if you have every year $50,000 or less in annual income, then all you file is a 990 e postcard, which is also known as a 990 in is extremely short and fast. So if you are a small organization you go online, you enter, you certify that you had less than $5,000 in income for the year, you enter your name your EIN and you're basically done. Super easy. The next level is the 990 easy. I'm blanking on the names. The next level is the short form 990 is what I should say, which is for organizations typically with $250,000 or less in assets. And that 990 is not as complete as the full 990. But again, more comprehensive than the 990 in. And then there's the full 990 for all other organizations that have more than $250,000 in assets annually, an income in a day. Something really important to note about the 990 is that you, unless you are exempt and you should know if you're exempt from filing, you have to file. Yes, we will absolutely email a copy of these slides to all participants. You have to file that every single year with a 990. Often organizations forget or they don't realize that they have that obligation. And actually, three years, if you file, if you fail to file your form 990 for three years in a row, you will automatically lose your tax exam status. And I am paying because you have to go through the process of reinstating it. So it's really important to remember to file that every year. Moving on to that. So that's the primary federal federal filing that has to be maintained. That's the biggest one. Then on the state level. Again, there are typically three state agencies that govern nonprofits in the state. The first one is the secretary of state and like all companies corporations and LLCs. Typically you have to file a short form every year or every other year, certifying who your officers are, what your current address is, and typically a small filing fee, sometimes no filing fee. If you don't file your statement of information with your secretary of state, you can also lose your status as well as lose your right to use your name because one of the reasons that organizations incorporate is that they reserve that name and prevent other organizations from operating under the same name within that state. So there are some real penalties, as you can see from failing to complete these filings. Then with the attorney general, there is almost every state has an annual charitable registration renewal. This is how the attorney general acts as the charity regulator within all states. Each year you typically file something relatively short. It might only be one page. It may be a copy of your form 990. This allows the attorney general to ensure that you are applying your assets for charitable purposes and asks questions like, do you engage fundraisers? If you do, professional fundraisers, and if you do, do you speak transparently about who you're fundraising to and, you know, they basically, they're there to represent the public to protect the public. And because nonprofit organizations hold charitable assets in the name of the public, they have that extra level of regulation. And then finally, in some states there is the annual state information return. Again, it's like the form 990, but it is in, but it's on a state by state basis. Now, those are the primary filings that you have to sort of keep in your mind. Every year in some cases is in every other year, but most of these are an annual filing. If you work with a CPA or a tax preparer, often they will handle these for you as well, but it's important to double check confirm that that is the case. Just to throw out a few examples of other filings that may apply depending on your activities. Federal and state employment filings. If a tax-exempt organization has employees, it is still responsible for income tax withholding social security and Medicare taxes. So labor and employment law applies equally to nonprofit organizations as it does to for-profit corporations. The forms to 999, again, for contractors. This is again an employment law requirement. And then the IRS requires unrelated business income tax filings. If you are carrying on a trader business that operates on a consistent basis, regularly carries on a trader business that is entirely unrelated to your exempt purpose. So say, for example, you are a veteran's organization and on the side, the organization also sells iPhones because why not? It has a bunch of iPhones. It sells them just as a means to make money. And let's say it does that on a regular basis. That would constitute an unrelated business. It's unrelated to the nonprofit's exempt purpose, the purpose for which it has its 501c3 status. And it would have to file an unrelated business income tax filing every year along with a 990. It's called the 990T. And that form is a short form that actually requires you to pay income just on the activity that generates that income. It's a larger, more complicated issue. I would say the majority of nonprofit organizations are not required to do those filings because they're not engaged in that kind of activity on a regular basis. Again, it has to be on a regular basis. If you do one commercial activity that's unrelated, but you're not doing it repeatedly, then you're not engaged in unrelated business income activity. And then with the attorney general, there are strict rules around fundraisers, commercial co-venturers, fundraising council and professional fundraisers. Typically, if you're engaging a professional fundraiser, they should be aware of those and will handle those filings. But it's just something to be aware of that, again, charitable assets held by 501c3 charities are considered sort of property of the public and must be safeguarded. And so when fundraising activities occur, there is a heightened awareness by attorney generals to try to understand and regulate and ensure that funds are being solicited for appropriate purposes and not, for example, a fundraiser is not keeping 90% of the profits and then returning 10% to charities. These kind of scams do occur and that's something that the attorney generals look out for, which is why there are filings related to fundraising. All right, I'm going to touch on a couple of high level topics now about boards of directors and about bylaws. So let's start with nonprofit boards. If you're all the nonprofits, you know that boards can get political, they can get, you have, there are two, there are all sides of the spectrum of a board can be. There are boards that don't care and don't do anything. There are boards that are way too involved and don't let the officers and the employees do what they want and everything in between. It's hard to manage a board. I'm not going to get into that in great detail. We're just going to talk a little bit about the minimum legal requirements. So the most important thing to understand is that directors and officers have what are known as fiduciary duties. By becoming a director and officer of an organization, those individuals are taking supervisory responsibility over a nonprofit organizations activities. And that doesn't mean that they have to be paying attention every day, engaging with the organization more regularly than the board meetings. There's a lot of variation here. But what they can't do is just be asleep at the wheel. They can't just say, yeah, yeah, I don't even need to see the finances. I trust you're doing everything fine. Their job is actually to be that highest level authority that is reviewing the financials at least on an annual basis that is reviewing those major decisions and expenditures and saying we agree this is good. This isn't the best interest of the organization. So a board of directors, if it failed to do that and something goes terribly wrong, those directors and officers could actually be held liable. So that's why it's important to protect your, your directors, keep them informed and for them to express interest in what the organization is doing in order to protect the organization's assets and themselves ultimately. All states require a minimum number of directors. What most people don't realize is it's often as few as one. So I'll take California, for example, which is where TechSoup's primary office is. The California nonprofit corporation code says that each nonprofit organization incorporated in the state only needs to have one director. You could actually have one director. It does require more than one officers. Now this is a common point of confusion. An officer and a director are not the same thing. So you could have one director and you could have three officers and they're all different people. The director is the only one with voting powers and the officers are the only ones that have fiduciary powers over, not powers, but fiduciary duties with respect to the area that they are delegated to cover. So for example, you might have a director, a president, a treasurer and a secretary. Technically, the president, treasurer and secretary don't have to be directors. Now, that's a technicality because as we all know the vast majority of nonprofits actually appoint their directors to also serve as officers. So, again, minimum requirement is one, this is very rare. Best practices is to have at least three members of directors on your board. A few reasons for this. One is there's greater oversight if there's only one person who knows that person has an inordinate amount of control and no one can check that so there's a question of checks and balances. Another reason that we choose the number three is that odd numbers can help with tie breaking decisions. So if you have an organization with four directors and to always vote one way and to always vote another way then you're going to have a problem coming to a decision. So minimum of three is best odd number is also typically preferred. As I mentioned before, there are additional requirements with officers. Most states do require at least a president or a chair, and at least a secretary and a treasurer. Some states say you only have to have a president and a treasurer and a secretary is optional. Most states actually don't permit the treasurer to also serve as the president, for example, and these are things you have to look into your specific state laws and we have some good links for resources for where you can learn more about what those state laws are. But the idea there is that the financial activities of the organization which are overseeing or delegated to the treasurer should have some separation between the president sort of the highest authority of the organization. That's why typically those should be two different people and in most states that is a legal requirement. Number four of my top five things to know about nonprofit boards is that there are state and federal rules governing conflicts of interest. This is an important issue because if something goes wrong, say the organization ends up entering into a contract with an interested party and they get paid a ton of money and that person funnels funds away from the organization. That organization is an audited by say the attorney general in their state or the IRS. The first thing they're going to look at is, how did this happen did you have a conflict of interest policy in place where you following the rules that would have protected you from having conflicts of interest in which an insider might have ended up with with assets that they shouldn't have had. And so it's really important to add a baseline have a policy that describes how you define a conflict of interest, and what the organization does to prevent those from happening. So the most the basic part of every of these rules at both the state and federal level is that directors and officers, but particularly directors because they are participants because they are actually voting shouldn't be participating in decisions that may entail a conflict of interest. And boards must document such decisions before entering into the transactions in which a director or officer may have a financial interest. And so what that means is, if you're about to enter into a contract and maybe that contract is actually just compensation for one of your directors or officers, then you should be having the board meet, review the terms of that contract and say we approve we believe this isn't the best interest of the organization. This is not an inappropriate conflict of interest. That person doesn't vote on it and you have that document to approve it. That is actually a requirement in most states and under IRS rules as well. Number five of the top five things to know about nonprofit boards is that boards have two ways of making binding resolutions are only two ways one is a board meeting at which a quorum is present and is properly called. And the second way which applies in almost all states if not all states I believe is boards can actually make decisions if they put it in writing and every single director sign. That's known as unanimous written consent. So say you have a board with three people shoot no one's available to meet we need to make this decision we all agree you circulate an email with a document that says we vote this way and everyone signs off on it and that is the same thing as the board meeting in person but it has to be unanimous is the sort of key key point of voting without calling a meeting. All right, five things to know about nonprofit bylaws. So all nonprofit organizations as you all know because you would have done this when you incorporated the state level and you would have had to submit your bylaws, or possibly known as the articles of Association or the bylaws to the IRS when you applied for 503 tax exempt status bylaws are governed by state nonprofit law. So even though you do have to submit a copy of your bylaws with the IRS, when you apply for tax exempt status. The IRS after that doesn't is not really concerned with your bylaws this is a state nonprofit law issue. The actual purpose of bylaws is to just explain how you govern your organization. How many board members do we have how many officers do we have how often do we elect them. Can they serve from multiple terms how long are their terms, what is how do we address conflicts of interest. What do we do if the board is at a stalemate what do we do these kind of situations it's really about board governance. And for this reason, many times it is advisable not to include a mission statement in your bylaws. It's totally fine to include a mission statement in your bylaws. But one of the reasons nonprofit council often advise against it is because the primary location where you have your organization mission statement is public facing it might be on your website. And legally it's filed with your articles or certificate of incorporation which is on file with the state. Sometimes an organization may file articles with the state they have one mission statement, and then they adopt bylaws that have a mission statement that's a little bit different. And then on their website they have a mission statement that's a little bit different, and then every time they update their mission statement or change it they don't necessarily remember to update each of those places so because it can cause conflicts sometimes and confusion and because the bylaws are primarily there to advise on how you govern your organization. Sometimes it doesn't make sense to include it again this is very an organization specific situation and sometimes it doesn't make sense to include it because those are just something that's something to keep into consideration. Your bylaws should be flexible enough to allow for change over time as needed, while binding the organization to basic principles of governance. So, try not to put things in your bylaws that you might want to change in a year or two. This is, you want to put language in there that is going to be, you're pretty sure that this is what the organization wants to stick with. I think in six months we hope to have more directors right now we have three. We hope maybe to have five then don't put in your bylaws that the maximum number of directors is three because once you recruit more directors you have to amend the bylaws to make that change effective. Amending the bylaws is often a little bit more complicated than amending than voting on other board resolutions because most state nonprofit laws require a super majority so a higher number of board members have to vote in favor of an amendment of the bylaws in order to make them pass. And this is another reason why we often don't advise adding things like mission statement or goals or things that might change over time because again, you want to set of bylaws that you can rely on for as long a period of time as possible before you need to amend them. Bylaws are not normally followed with any state agency, as I said, so when you amend them you don't have to file them you can amend them they become the governing rules for the organization no one is necessarily checking that although if you're ever audited they will be checked so you should keep them up to date and follow them. But again, you do have to follow board voting requirements to be amended as I noted there's often a higher threshold to amend your bylaws. As I noted earlier you should never have terms in your bylaws that conflict with your articles or certificate of incorporation, which are what is on file with the applicable state agency. So I think people often file articles of incorporation and then they kind of forget about them because you don't necessarily refer to them. But technically that's your binding purpose statement is to put in your articles which is why many articles of incorporation typically say we will do everything within the meaning of section 501c3 essentially everything we can legally do as a charity that's what we will do. That's often very helpful because then you don't have to amend your articles of incorporation, refile them with the state and you know that you'll always be within that mission. Finally, conflict of interest policies and conflict of interest policies are often embedded in the bylaws there might be an article within your bylaws that explains what a conflict of interest is and how the board it is a governance issue often so often that makes a lot of sense. And sometimes it's advisable to keep them as a separate policy because as I noted earlier bylaws require a higher threshold threshold to be amended. And so if you expect to, if you anticipate changing your conflict of interest policy over time, it would be faster and easier to amend it outside of the bylaws if it is a separate policy. But it's not a big deal. I've seen it work really well both ways. And ideally you don't have to change your conflict of interest policy that often either these laws have not changed for a very, very long time. So you're not going to have to be constantly maintaining updating your bylaws really or your conflict of interest policies to comply with changes in federal or state nonprofit law because these stay relatively static. All right, Jasmine I'm going to pass it back over to you for some tips and traps for the unwary. Thank you. So I think I'll start with traps so we can end on a high note. And the first is that just to reiterate what Martha mentioned before is that it's so important to not forget by all your 990. Every year, because as she said that if you fail to do this for three years in a row, then it could result in an automatic revocation of your tax exempt status. The second is that you should maintain your annual state filings in order to remain exempt from state taxes. You want to stay in good standing and maintain the right to use your organization's name. Again, just reiterating. It's important to know your state's rules around raffles and fundraisers. And lastly, it's important. So sorry, Jasmine I forgot to move to the next slide and you were charged with my apologies everyone. And lastly, it's important to remember that employment and most other laws apply to nonprofits just the same as they would apply to any other kind of organization. It's important for tips. Just, again, it's so important to adopt a straightforward conflict of interest policy. And it's important to document the organization's compliance with it. It is also important to maintain impermanence, your articles bylaws that conflict of interest policy, your form 1023 and meeting minutes. It's also important to keep your board small enough so that you can ensure a quorum and engagement. And it's important to know the director term limits and links and be sure to conduct reelection according to those links and limits. And lastly, it's important to keep a checklist of regular filing requirements, especially if you don't have a CPA or a filing agency to do it on your behalf. And so I think the next slide is just a list of a few great places to start for pro bono support. The first two links are legal core and pro bono partner. And those are pro bono law firms, and they organize volunteer lawyers to support nonprofits. The third link. Council nonprofits is a list of support for things like HR it and marketing. And then the last two links are just additional places that you might go to find more pro bono resources in your specific area. Thank you, Jasmine, we're going to open it up for questions. We got some good questions in the. Yes, we will put the links in the chat and we will also be sharing the slides that has the links in them. Yes, we did mention the 990 in postcard early on and there was a question earlier about the thresholds for 990 filings. And thank you, Sarah, one of our excellent attorneys here who provided that response. The 990 in postcard you can 990 in or the postcard as often called you can look by the excellent thank you Jasmine for putting those links in there. The IRS is a great website for answering a lot of questions actually, they're a fantastic resource that also actually has resources in multiple languages. If you for non native English speakers, for most of their pages, including their pages about charities. And, and there is where you can also find the 990 filing threshold. So if you put something like what 990 do I need to file or, you know, you'll find pretty quickly the IRS page and it's very helpful and clear. So where can you go to find if you have filed previous 990 that's a great question. There are two primary places. One is the IRS website. There is a tool. It used to be called IRS select check. But if you look up IRS find my 990. You can typically find your organization you can enter in your employment identification number your EIN or the organization's name. Another place is a nonprofit called guide star it's actually run by a nonprofit called candid the service is guide star you may be familiar with it guide star.org. Very easy to locate an organization and that is where they will also show whether an organization has filed 990s, and they will also show copies of those 990s they have our that information directly from the IRS. And one of those says is it best practices for the founder of a nonprofit to be a director. This is a great question. I, some people may say a founder should not be a director because there should be a separation of interest. I would say it's very common for the founder to be a director. In terms of best practices, I don't think best practices goes either way. I would say it very much depends on your organization. I will say, one of the pros of having the founder on the board is the founder is going to have some unique insights about that organization having found it. It is a way to respect that person, particularly if that person is perhaps moving into retirement or no longer has a staff role that they can still have an advisory capacity with the organization. On the other hand, you may all be familiar with what we used to call when I was in private practice practice founder it is, which is, it's often a founder. The organization may sort of grow apart from the founder and the founder wants an organization to do one thing, but that founder, no longer or never owned that organization is a nonprofit organization governed by its board it makes decisions independent of the founder. I love founders with Lisa. But my point there is I think sometimes it can be difficult to then get a founder off of a board if it becomes a difficult personality now that those are some situations I will tell you with Lisa. My personal perspective is it's great to have the founder on the board because of their unique perspective and the value they can add. And there's no, I wouldn't say it's best practices to have or not to have founder serving as executive director live on a great question. Similar, not, I would say not good not bad not best practices nothing wrong with it. It's very common. I would say often it's a small organization and by necessity the founder is the executive director I think often the founder is the person who has the vision who has the drive it was dedicated who was decided to give their, you know, their, their life and their blood and their sweat and their tears to this organization so they probably should be the executive director. And there was a question from Brian if a nonprofit fails to file their 990 and loses our nonprofit status status is there a limit of time before they can no longer reinstate their nonprofit status. Great question. No, there's no limit of time you can you can always go back and reinstate your, your status. And there is a specific reinstatement process that you can if you go to the IRS website and you look up you know reinstatement for failure to file 990 there's a process that you can go through to to get it reinstated. Some helpful links in here also great to have Sarah Sarah our deputy general counsel is also advises on employment law issues so handy to have her here for some of the employment law questions that have come out come up. Martha are you able to see the Q&A section. Oh you know what I was just looking at the chat thank you. Okay. I am going to open the Q&A now thank you for asking really quickly before I forget can an executive officer serve on the board of directors. Absolutely. And it's very, that's somewhat common. Could you recommend a resource for drafting a conflict of interest policy I have so many great resources to recommend Clarissa. Please reach out to us afterwards. But also I can tell you I would I would love to hear what state you're in there are state specific resources if you actually Google conflict of interest template. There will be some great ones. The IRS has a template policy. There's also many state state nonprofit associations that will have great nonprofit by law. I'm sorry conflict of interest policies to use I mean that there's a wealth of resources and conflict of interest policies for nonprofits specifically. Okay. Now, okay Valerie asks many grantors asked for the full 990 versus the postcard filing would apply for grants. Would you recommend the postcard for small nonprofits initial filing but moving to completing the full nine ideas the organization grows. That is such an interesting question I have actually advised an organization on that issue before and normally they will say if you fill out the full 990 we will accept financial statements. They might not all accept that but most will. As an organization grows, you know, I think once you have more than $50,000 of income you can no longer file the form 990 the postcard anyway so you're necessarily going to sort of grow out of that. If you remain under $50,000. It seems like a shame to have to fill out the 990 easy the mid version, just for grant makers but again if it's going to if it's going to get you there, probably worth the trouble. On the other hand, I think, you know, it's most most donors will accept in that place of that your financial statements. What if you do a regular fundraising like relay do you need to file separately if you raise less than $50,000. This actually depends on what your fun lazy fundraising like relay is but let's say it's let's assume it's an first of all, the threshold amount this I assume this question has to do with unrelated business income so if you're running and a something that is commercial in nature, like a fundraising relay, potentially could be seen as unrelated business. The amount raised is actually not relevant, but how often you're doing it and how commercial it is might require you to do the separate filing so if it's an annual event only that is actually not typically considered a regular conduct of a trader business, but also if it's significantly related to what you're fundraising about let's say it's a relay where everybody is raising wearing t-shirts and raising awareness about, you know cancer. It's probably related enough to your business that it wouldn't be an unrelated business anyway so there's a good chance you wouldn't have to file unrelated business income taxes for that that fundraising relay. Oh, great question from Kenny what dictates the amount of liability insurance we should have. Wow, this is this really depends on a few things I would say how much income your organization has overall you know if you're if you have $5,000 a year income. I don't think you need to be paying for high like interns premiums it just wouldn't make sense. What I recommend at a baseline is directors and officers liability, you can typically there used to be a great service it was NYAC nonprofit insurance Association of California and they have now merged into a larger entity if you search NYAC in AIC I think it will direct you to a national national version of that. They're a charity themselves they actually are set up as a charitable insurance provider they have great providers and brokers to speak with. I know that they used to have $1,000 annual directors and officers liability insurance policy at a baseline that's what's typically recommended. And beyond that it really depends heavily on your activities. So if you are working with children or with vulnerable populations, such as seniors or individuals with with disabilities. Or if you're working in an area where there's a lot of physical activity or injury could occur right. I think these kind of activities that could have a lot of liability you're going to want to look into more insurance. There's also cybersecurity insurance which is becoming more and more relevant. If you're handling a lot of sensitive data, and that and maybe you're worried your systems aren't robust enough to protect it then that's the kind of thing that you might want to think about cybersecurity insurance because that's something that can come with a lot of high penalties and limits. Is there any website with a list of people who may want to be on a board of directors. Great question I'm not aware of one yet one place where I have seen organizations post requests for for board members is idealist.org. It is a place where people post volunteer opportunities or job openings and I have seen people put things a LinkedIn is a great idea charisma LinkedIn is another great place to say you know this is our organization. We are looking for a director we're seeking these qualities if you're interested it's a great opportunity. Is there a link for resources for liability insurance. Great question I was Sean I want to say I wish I could remember the name of this not this national nonprofit insurance agency that it's very uncommon for an insurance agency to itself be a charity which is one of the reasons I think it's so great is that they actually have a duty to put the needs of their members before their their profits, which is why I'm very comfortable sort of promoting it only I just cannot remember the name of their national arm again I think if you search in IAC National Insurance Association of California it should essentially take you to the umbrella that that they merged with. Carla asks. Is there a problem for your organization if you incorporated later than when your organization became a 501 C3 all documents have been filed with the state of Texas and we received the certificate of filing. That's a fascinating question because actually normally you could only receive your 501 C3 if you were formally incorporated it is actually a requirement with the IRS. So, you had to have been incorporated in some way in order to receive the 501 C3 status. So there's something interesting going on there and I'm happy to look into that with you separately. Maybe you were incorporated but you hadn't. Yes, I'm not I'm not sure what's happening there typically an unincorporated association is not eligible to receive tax exempt status. So Regina's gone she wanted she had a question just for the recording. If you want to dissolve your organization, what would be the process. Thank you Arita I had skipped over when I saw I look forward to email and I didn't see there was still a question in there. What if you want to dissolve the organization this is a great question. There are rules about what you can do with the assets once you dissolve your organization and you have to do a filing you dissolve on the state level because you just you dissolve your corporate entity. And then you also have to file your final 990 form 990 with the IRS reporting that you are dissolving and ensuring that any assets remaining are still used for charitable purposes. It's a requirement of every 501c3 nonprofit organization. It has to be stated in its binding articles of incorporation. So if you're a 501c3 charity you are already bound to dedicate your assets to charitable purposes. So, even if your assets are IP rights, if it's an office furniture, or if it's cash, you cannot just keep those you can you can use it to pay off any liabilities you have. But if you have anything remaining at the end that has to go to another charity or apply for charitable purposes it is permanently dedicated to charitable purposes. On dissolution. And rolling up. There's a program in Atlanta called the VIP program organized by the United Way that trains board members and matches. That's that's a fantastic resource. Thank you for sharing that Nora. The tech soup offer training for boards of directors or how a training on how to be an effective board member. We absolutely could. I think that's an excellent, you know, another good place for those kind of trainings is candid. I mentioned them earlier. They're a nonprofit themselves that provide. They run the the the website guide star that I mentioned earlier where you can access form 990 form 990s. They also have some great training. Your state nonprofit associations will also have training and it's something that we would be thrilled to do and I think would be a really interesting one. Should we always be listed as a holder on vendor contract or insurance. That's a great question. I think it can't hurt if it's an easy enough thing to ask for. I don't necessarily advise my my pro bono clients to do that in all cases unless there's a specific concern. On the other hand, if it's easy enough to do it's certainly not going to hurt you. MOU is good when partnering with other nonprofits. Agreed. Where can you find their reporting rules requirements when a nonprofit acts as a fiscal agent for another nonprofit. So first, this isn't person listed as admin. Never use the term fiscal agent. We should have a separate session. I think on fiscal sponsorships. It's a fiscal sponsorship. And the reason you can't use the term fiscal agent is because an agent means you're just acting as a pass through. So those funds are earmarked the project. The complicated concept, but you should you could Google fiscal agent versus fiscal sponsorship. But reporting rules requirements when a nonprofit acts as a fiscal sponsor. There's a great website called fiscal sponsorship directory net, I believe, or you can look up. Fiscal sponsorship six ways to do it right. That was actually the by Greg Colvin who was the attorney who actually came up with the name fiscal sponsorship and the concept. That's now a book it's a seminal publication you can find anywhere and there are also lots of articles that he and others have written about being a fiscal sponsor but that's another great topic that we could offer. Can the assets of an organization being dissolved go to a charity of a board member by Deborah fabulous question absolutely if it's a charity absolutely it can be a related charity as long as it's as long as it's a charity. Are the attorneys on this call available for consult or to answer questions. Shoot us an email and we can. Well, we can't. We can't provide you with legal advice because we are not your attorneys we can provide some general guidelines that might be helpful to your needs. Insurance resource backed by the Packard Foundation insurance for nonprofits and that may be the one I was thinking of Jasmine. Thank you. Can you ask us to chair of a board member. Yes, answer that thank you. She can put in the candid website if a vendor steals from us. Can we submit a claim directly to their insurance or do we have to file a lawsuit. Do we have to have an attorney to sue them. First of all it depends on how much money we're talking about I mean there is small claims court is always an option that doesn't require an attorney and isn't overly expensive. Great idea to submit a claim to their insurance but frankly that's probably going to be an uphill battle because that the person who the vendor who stole it is not going to want to respond and their insurance is going to have no interest in responding either so that may be a little bit of a rabbit hole. You know if a vendor steals from you one thing you might want to do is is look at it if the vendor is actually incorporated is to essentially report that entity for fraud you could report the entity or the individual to the IRS or to your state attorney general as well. It dissolving an LLC done the same way as a nonprofit. Typically the same rules apply. You know an LLC versus a nonprofit corporation is structured a little bit differently but otherwise it would be the same rules particularly if it's also a 501 C3 public charity. Then the same dissolution rules are going to apply you do also have to report with your state agency and with the federal agency. How do you know what portion of your donations to earmark for administrative costs were a small nonprofit starting out and most of the funds come out of my pocket. Bless you with Tisa. Every nonprofit founder and small nonprofit knows this dilemma. First of all, you should pay however much you want for administrative costs because nonprofits are heavily administrative costs. Not sure if you are all familiar with the overhead myth, but there is funders are coming around to the fact that nonprofit organizations have lots of overhead and admin and that doesn't mean that it's not good charitable work. Fortunately, there are no federal or state rules that tell you how much of your funds have to be applied for salaries or office supplies or Internet costs versus scholarships or grants or whatever might be defined as direct charitable activities. There are many organizations say a research organization and all of their costs are paying their researchers theoretically that's an admin cost but that doesn't mean it's not a direct charitable activity. Now I'm getting a little bit on my soapbox but the important thing here is there is no federal or state rule that says you have to spend a certain amount on admin versus not admin. Can the founders serve as the executive director the sole member and the board chair. This is a startup nonprofit. It's not ideal. It doesn't look great. It could be a red flag to the IRS because so much control is consolidated in a single person. Having said that, in most states, it is legal. And often it may be what you have to do just to get started. I would say though one of your primary tasks as a founder of an organization should be to recruit a board because donors are not going to want to get to an organization that only has one director where all the power and authority is validated and it's a potential red flag to the IRS and state authorities so that kind of separation of power and oversight is really critical both from under sort of potential red flags even if it's legal but also from for the public. This is something you know often large foundations will not fund an organization that only has a single individual serving in those roles because of the checks and balances issue. I think that that it's hard to find directors, I absolutely know. And so it, I think sometimes that's what you got to do to get started but you should probably probably try to make it one of your earliest tasks is to recruit that board. And even if it's just one other person and ideally you can get to the minimum of three. Thank you for all of the excellent questions. I think that's it. Someone else have another question. Alicia, are you still here. Yes, I'm still here. I think there was a question about the this being for black led nonprofits, can you explain that verbally for the people who may be hearing the replay, why we decided to do this webinar. Yes, absolutely always happy to let me come off camera actually. Hey, everyone. Yeah, so when we got started. We shared the motivation behind this. And that is mainly. In Texas we recognize that black nonprofit black led nonprofits have contributed a lot. The histories, the sector social impact. And yet, based on recent research. The numbers show and the data show that the black community, in terms of the nonprofit sector, they get less funding, less exposure, less access, which means less opportunity. And so a few, what a couple of years ago. We produced a blog post with our CEO, Rebecca and Marnie, both put a blog post I'll share here in chat again. Just emphasizing that we are tech soup is committed to providing resources and opportunities for communities, most impacted by systemic injustice. So this is a collaboration from our black affinity group tech soul, and our legal team, it just so happens that Martha is a part she's an ally of our tech soul she attends our tech so affinity group she's a part of that community, and she just so happens to be legal and so in one of our tech soul sessions. It came up that hey, this could be a great opportunity to provide legal resources to nonprofits in this community, especially knowing the gaps there. So we thought that this would be a great way to bridge gap right if we can provide some legal insight, some resources, some guidance to nonprofits that could better position them for some of these opportunities right. So looking at the chat and going through the questions, I imagine that there are a lot of nonprofits here they got a wealth of information that they didn't have to pay an attorney for right just show up at this webinar we want to continue to produce content and opportunities and so thank you for giving me the opportunity, aretha to come back and share the motivation here is something that is dear to all of us here tech soup and it looks like we're going to do this again just based on the feedback from this session alone so Thank you, Martha, thank you Jasmine and the entire legal team and also shout out to tech soul for making this happen so thanks to Rita. Thank you. Martha, did you want to close us out thank you Sarah, we've been in the background and Jasmine and Martha again wish you could thank you Martha, Martha I want to give you closer in March. Thank you so much everyone and I do want to make sure we answer any other questions so why don't you. I will. I'm going to type my email in the chat. My email is in L Peltier at tech soup.org. I will try to get back to answer any outstanding questions that you have and mostly want to say thank you for everything that you do for your communities and and we want to support you and help you and hope to. Thank you Lashika for putting your email in there as well. Hope to continue this conversation and offer more resources and opportunities like this.