The Law Office of Gene Takagi :: Forming a Nonprofit

Starting a Nonprofit

We believe that nonprofits designed carefully and properly from the start are more effective at furthering their missions. If you're starting a nonprofit, we can help you make the critical decisions necessary to build a strong organization. Because one size does not fit all, get the specific expert counsel you need to increase your ability to operate, recruit, and fundraise with confidence.

We can help you -

Choose the right startup strategy
Build a governance structure that works for your group
Avoid mistakes that may create major problems in the future
Prepare and file a persuasive exemption application to avoid long delays

10 basic issues for which legal advice may be helpful:

Should you form a new legal entity or consider an alternative like fiscal sponsorship, which will allow you to focus more on programs?
Will the startup costs be funded by a gift or loan?
Is your mission and are your activities consistent with tax-exempt status? What tax-exempt status is most appropriate (501(c)(3), (c)(4), (c)(6), other)? What can be changed?
Who will be on the board? How many board members will you have to start? How many do you want?
What are the board members' legal duties?
Do you have board member compensation issues?
Will your articles of incorporation give you greater flexibility or create stronger restrictions?
Should you have a voting membership structure?
What should you include and exclude in your bylaws?
What should you include and exclude in your exemption application? How will those decisions affect how you operate in the future?

How are we different?

Our practice is focused on providing legal counsel to nonprofits, and we work closely with our clients to help them design strong, well thought-out structures that will be durable and flexible. As your organization grows, a strong foundation based on legal compliance and key best practices will serve you well. Go beyond the adoption of template documents. Know and understand how you can customize documents to meet your specific needs while avoiding future problems. And put together an exemption application that has the best chance of being accepted in a timely manner while accurately setting forth your organization's plans. Our experience and expertise with nonprofits and social enterprises will guide you through this process and give you a great start.

How much will this cost?

While total fees may vary widely between clients for comprehensive services related to the startup (depending in part on the complexity of the planned activities and structures and the amount of desired counsel), typical fees and costs for small public charities run between $5,000 and $7,000. We also can work on a limited scope basis and hourly rate to help meet clients' budgets while still providing key legal advice.

Read below and contact us to learn more.

Should I Start a Nonprofit?

A great idea and a committed individual are key ingredients for starting a nonprofit public charity, but you should have more than that before you actually form an organization. Read the article written by Gene and Emily Chan on Alternatives to Forming a Charitable Nonprofit.

The 10 Questions You Must Answer First

1. What is the mission of your contemplated organization?

2. What are its core activities?

3. Who are the beneficiaries of your activities?

4. Is there another organization out there with the same or similar mission and/or engaging in the same or similar activities?

5. Would your mission be furthered more effectively and efficiently by an existing organization?

6. Can you attract sufficient resources (human, financial, and other) to start and operate your organization?

7. Have you drafted a business plan (including a budget)?

8. Have you educated yourself with what it takes to start and run an organization in compliance with the laws and best practices?

9. Have you considered fiscal sponsorship?

10. Whose help will you need in order to get the organization up and running?

How Do I Figure This Stuff Out?

If you are having trouble answering the 10 Questions or the answers indicate that you are not yet ready to proceed, there’s more work to do.

Go out into the community and learn more about the people who make up your targeted charitable class and the organizations that are currently serving them. Talk with them, read about them, volunteer in the community, and participate in forums where their critical issues are being discussed. Find out who the key players are: charity leaders, citizen activists, public agencies, major donors, and institutional funders. If you’re going to do something differently, figure out who are your allies, who are your competitors, and who is your opposition.

Get educated on the requirements of a nonprofit entity and 501(c)(3) tax-exempt public charity, whether it is actually operating or not, the duties and responsibilities of its directors and officers, and the types of activities in which the organization is allowed and not allowed to engage. Make sure you understand financial management, and have sufficient expertise on the board (and staff, if you plan to have a staff) to properly operate the organization and effectively and efficiently further its mission. In order to recruit a top notch board, you should consider incorporating and obtaining adequate insurance in light of the organization’s activities.

What are My Next Steps?

If you’ve done your homework and determined that you will be able to form and operate a viable nonprofit that will further its specific charitable mission more effectively and efficiently than an existing organization, here are the mechanical steps for starting a California nonprofit public benefit corporation:

1. Determine the name of the corporation.

2. Draft and file articles of incorporation with the Secretary of State.

3. Obtain a federal employer identification number.

4. Appoint the board of directors.

5. Draft nonprofit bylaws and a conflict of interest policy.

6. Hold and document the first board meeting (make sure you elect officers and adopt the bylaws and conflict of interest policy).

7. File the initial registration with the California Registry of Charitable Trusts and registrations with other states’ charities authorities, as required.

8. File the Statement of Information with the Secretary of State.

9. Prepare and file Form 1023 with the IRS; receive a determination letter of exempt status under Section 501(c)(3) from the IRS.

10. Prepare and file Form 3500A with the California Franchise Tax Board (FTB); receive a determination letter of exempt status under 23701d from the FTB.