Friday, September 1, 2017

4 Reasons Why Your Charity Should Register

4 Reasons Why Your Charity Should Register
1. Internal Revenue Service (IRS):

In financial reporting to the IRS, CPAs, Accountants, and Auditors are aware of the various states' registration requirements. They may require that your nonprofit register or mention that it has not done so in their audit reports for their own credibility and legal responsibility.

2. State Laws:

Thirty nine states and the District of Columbia have laws that require non-profit organizations to register before solicitating funds/monies in their states. Failure to register (which is clearly breaking and defying the state's law) can result in substantial fines and/or other penalties. For example, in Pennyslvania there is a minimum fine of $ 1000 and the state can order the organization to 'Cease and Desist' soliciting funds until registered. Many states have become more aggresive and diligent going after non-profits for failure to register. A state can discover the organization through a number of ways; from as benign as an inquiry from the public to obtain information, tv and other media ads, to an active complaint. With state budgets as strapped as they are these days, going after, exposing, and making an example of unregisterd non-profits can be an effective and popular activity demonstating the state's responsibility to Protect the Public as well as a lucrative stategy to replenish state coffers.

3. Donors:

There's an old and honored expression: "There's no Second Chance at a First Impression". If one of the first questions a potential donor asks of a solicitor for a non-profit is "Are you registered with the state?" and the answer is "I don't know" or "No we are not" then the image immediately created is one of a non-compliant, perhaps amateurish, even illegal organization certainly not worthy of funding. Its a matter of TRUST. Saavy funders are aware of their state's requirements. Laws are in place to Protect the Public from unscrupulous and dishonest organizations scheming to steal and defraud. Some states even provide a listing on the internet of non-profits who fail to register. That can mean an immediate loss of income as well as perhaps an order preventing further solicitation as well as a unrecoverable loss of trustworthiness.

4. A Non-Profit's Board of Directors:

Liability. Board members can be held personally liable. Separate from many other debts and liabilities of a nonprofit, if a non-profit is fined and penalized for failure to register with a state, the board of directors can be held personally liable for those fines. In addition, several state solicitation laws and regulations provide that a nonprofit cannot reimburse its directors, officers, or employees for such penalites and fines. By Registering the organization, such fear of financial liabilites can be aleviated. Many potential board members may want to know that the non-profit has registered in each state where funds are being solicitated before they join the board. This is for their own protection.

By law, a nonprofit does not have the right to solicit contributions in any of the states that require registration. Therefore, funds solicitated before registering are in legal limbo or in legal jeopardy meaning that a court can order the non-profit to make full restitution for any and all monies or contributions obtained during the period of violation. If a donor leaves a gift to a non-profit in a Will and an heir discovers the organization was not registered at the time of the solicitation, action could be taken to recover the gift or get it set aside. Such a case is now precedent.

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