What are laws and what are good practices for nonprofits?

I’m trying to figure out what is actual “law” vs. what is normal or suggested practice for nonprofits.

I know someone whose CC group is a nonprofit. She and her husband make up the board and fill the roles of President, Secretary, and Treasurer. She is the executive director and gets paid for that role. She fills out a 1099 as do her teachers.

B.C.

B.C.,

That is an excellent question!

A nonprofit should have a board of at least 3 unpaid, unrelated people. They set the mission, purpose, vision. They sign all agreements with the church host and the CC licensing agreement. The board decides who to hire and fire. Directors or tutors are employees under the direction and control of this board. This board should not be paid. Being paid for serving on a nonprofit board creates a conflict of interest.

Some of the things I mentioned are laws, mostly driven by state laws about number of board members, their duties, etc.


You can learn what your state laws regarding nonprofit board governance are by visiting :
Nonprofit Governance by State


Some are laws driven by the IRS for 501c3 status such as conflict of interest, inurement, etc.

All the things I mentioned are good practices for nonprofit board members to be in compliance with their fiduciary duties of care, loyalty and compliance.


To learn more about your fiduciary duties as a board member read:  Serving on a nonprofit board: What is required?


 

I look at it like parenting. There is no law that says you must be a good parent, but there are certainly good, sound practices that any responsible parent should follow.

The same is true with operating a nonprofit. Good, responsible board members will avoid conflicts of interest, will have independent board members, will execute their fiduciary duties of loyalty, care and compliance, etc.

The example of the CC nonprofit that you shared is so far from a good example of a well run nonprofit on so many levels that they could be out of compliance with the IRS and state laws. Just like some parents are so neglectful that they violate the law.

But I hope the leaders of the group you mentioned are motivated by a true desire to serve their community of homeschooling families in a good and responsible manner and not just complying with the bare minimum of the law.

We don’t want that for the CC group nor for homeschooling in general. Poorly run homeschool nonprofits reflect badly on all homeschool organizations.

 

 

For help in training your board purchase my  Homeschool Organization Board Manual. It is a combination of a template for your board to create binders to keep important documents and a board training manual to explain the board’s duties and responsibilities.

 

Carol Topp, CPA
HomeschoolCPA.com

Tips for Starting a Tiny Homeschool Group

 

Carol,

What are the absolute essential things a small growing co-op needs to do to organize and avoid future headaches? We are entirely run by volunteers, and moms are required to remain on site, either teaching or assisting in some way. Right now we have 13 families and 35 kids ranging from infant to 10th grade.

-C Wilson

 

Dear C,

While the bigger homeschool groups get most of the attention on this website, tiny homeschool groups are abundant.

You asked an excellent question. I created a 4-part podcast series to help answer your question.

 

And here’s a blog post that sounds very similar to your group:

12 moms want to start a homeschool co-op. How to get started

 

My ebook Homeschool Board Member Manual may be very helpful. It’s a way to organize your group’s important paperwork and a board training guide.

 

Finally, tiny homeschool leaders are encouraged to join the Facebook group for homeschool leaders I am a Homeschool Group Leader. Join over 1,000 other leaders for support and information.

 

That’s a lot to help you get started! Divvy up the jobs. Don’t start even a tiny homeschool group on your own. Gather a board  and start learning together!

 

Carol Topp, CPA

Helping Homeschool Leaders

Top 10 Tips for Homeschool Leaders: Bylaws

“Are bylaws and a board really necessary or is that only for homeschool groups that are 501c3 nonprofits?” was a great question asked by a homeschool leader at a workshop given to homeschool leaders in Wichita, Kansas.

In this second part of a 5-part series on Top 10 Tips for Running a Homeschool Group, Carol Topp, CPA, will answer that question and discuss bylaws and boards. She even explains IRS 501c3 tax exempt status too!

 

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5 part podcast series Carol will cover:

Episode # 180 Board duties

Episode # 181 Bylaws

Episode # 182 Preventing fraud

Episode # 183 Paying Workers

I Episode # 184 Insurance and Record keeping

 

In the podcast Carol mentions how a tiny homeschool group should maintain its tax exempt status by filing and annual IRS Form 990-N. Here’s how to do that:

How to get added to the IRS database and file the Form 990N

 

You might find Carol’s podcast series for Tiny Homeschool groups helpful

Tiny Homeschool Groups: Are We a Nonprofit?

 

Featured Resource:

 

Start a Nonprofit and Get Tax Exempt 3-webinar set

Webinars are a great way to learn!

This 3-webinar set will help your homeschool group get established as a nonprofit, apply for IRS 501c3 tax exempt status and maintain it with IRS and state annual reports!

Everything you need to know in an easy-to-understand video format. This set includes the 3 videos (90 minutes each), an ebook The IRS and Your Homeschool Organization by Carol Topp, CPA, the slide handouts, IRS forms, and templates to help you apply for 501c3 status on your own!

Learn more.

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Homeschool groups and fundraisers. Do you know what your state requires?

Michelle asked a question about fund raisers in a homeschool group:

Hi Carol,
We have had fund raisers in the past (Butterbraids, a frozen pastry) and have made approx. $1,500 doing that fund raiser. We had a cooking class that prepared hot lunches and the co-op made money on those. We will have less than $100 left in the check book. We have a Fed ID #. What do we do? What about next year? Is fund raising not a good idea for us as you say in your website? We thought about charging more for membership (we charge $35/ yr now) and if people wanted to do individual fund raisers that would be up to each family. What do you think? Thank you so much for your help to the homeschool community and for whatever answers you can give us.
Sincerely,
Michelle P

Dear Michelle,

Did I say fund raising is not a good idea? I didn’t mean to. Hopefully, I just warned groups that fund raising can be a lot of work.

Charitable Solicitation filings 
If you hold fundraisers by selling products to the public (outside your own membership) you may need to report your “solicitation” to your state, typically the Attorney General’s office.

In my home state of Ohio, nonprofits have to file a Charity Registration form if they do fund raising to the public. One year my homeschool co-op sold candles door to door and had to file a seven-page financial report with Ohio’s Attorney General Office. That report was such a nuisance (and the fund raiser was so much work) that the co-op no longer does sales to the public.

Investigate what your state requires from groups doing fund raisers. These websites have information on nonprofit reporting requirements by state:

https://www.hurwitasociates.com/

https://www.harborcompliance.com/fundraising-registration

In general I encourage groups to get most of their income from membership fees and not depend too much on fund raising. Fund raising can be very successful or turn out very poorly. It is also a lot of work with sometimes only a few people doing all the work.

Individual fundraisers

I’m not sure what you mean by “individual fund raisers.” I do know that it is not proper to “award” a family for raising more money than another family, nor is it proper to set up individual accounts. It’s not right because it is not in keeping with the nonprofit motive or with the idea of a group benefit. In short, individuals are not supposed to benefit; the group is supposed to benefit.

 

My book Money Management in a Homeschool Organization covers fundraising and offers some ideas for easy fundraisers.

 

Are you up to date on your state filing requirements for your homeschool nonprofit organization? Do you even know that your state may require annual reports?

Most states require some reporting from nonprofit organizations on an annual basis. My webinar on IRS and State Filings for Homeschool Nonprofits will explain the state reports and help you research your state’s requirements.

 

 

Carol Topp, CPA

HomeschoolCPA.com

Tiny Homeschool Groups: Do We Need a Bank Account?

Tiny Homeschool Groups: Do We Need a Bank Account?

Tiny homeschool groups have different challenges than large programs. They are limited on resources, volunteers, and activities. But they still have questions about legal status, money and taxes that the large homeschool organizations have.

In this 4-part podcast series, Carol Topp, CPA answers the common questions that tiny homeschool groups face. All podcasts are available at HomeschoolCPA.com/Podcast

  • Episode #175 Are We a Nonprofit?
  • Episode #176 Do We Need to File Anything?
  • Episode #177 Do We Need to Pay Taxes?
  • Episode #178 Do We Need a Bank Account?

In this episode Carol Topp will explain when a tiny homeschool group might need to open a checking account.

  • The pros and cons of operating in cash and without a checking account
  • Warning against using a personal checking account
  • Steps to take before opening a checking account

Join the Facebook group for homeschool leaders: I am a Homeschool Group Leader. 600+ homeschool leaders offer ideas, encouragement and respectful exchange of ideas. https://www.facebook.com/groups/72534255742/

 

Featured Product

Money Management in a Homeschool Organization

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

Click here for more information

 

Still time to join the IRS and State Filings for Homeschool Nonprofits webinar

 

Carol Topp, the Homeschool CPA, will help you understand the IRS and state reports and file them yourself! In her webinar IRS and State Filings for Homeschool Nonprofits, Carol will explain the IRS annual returns and how to determine what your state may require as well.

You will learn:

  • The importance of maintaining 501c3 tax exempt status
  • The IRS Form 990 series. What form your group needs to file.
  • How to know if you’ve missed filing IRS returns
  • How to see Form 990-EZs and 990s from other nonprofits.
  • An explanation of the IRS Form 990-N.
  • What filings may be required by your state with examples

The live webinar will be TOMORROW evening Wednesday August 21, 2019 at 8 pm ET/7 pm CT/6 pm MT/5 pm PT

The webinar will last approximately one hour. There will be time for your questions. It will be recorded for viewing later.

The cost is $10 and you will receive:

  • Access to the live webinar on Wednesday August 21, 2019
  • An opportunity to ask questions via the live chat room
  • Handout of the slides
  • Recording to the webinar
  • IRS Forms, Instructions and samples
  • Template to summarize your state and IRS filing requirements for your board

 

I hope you can join me TOMORROW evening Wednesday August 21, 2019 at 8 pm ET.

 

Carol Topp, CPA

HomeschoolCPA.com

What do you do after your homeschool group has tax exempt status?

Getting 501c3 tax exempt status is a great accomplishment! If you’ve done it, congratulations!

But you’re not finished with government forms just yet! Your state and the IRS have several reports that must be filed regularly to maintain that precious tax exempt stats.

Almost every homeschool group will have some reporting with the IRS and their state.

Carol Topp, the Homeschool CPA, will help you understand the IRS and state reports and file them yourself! In her webinar IRS and State Filings for Homeschool Nonprofits, Carol will explain the IRS annual returns and how to determine what your state may require as well.

You will learn:

  • The importance of maintaining 501c3 tax exempt status
  • The IRS Form 990 series. What form your group needs to file.
  • How to know if you’ve missed filing IRS returns
  • How to see Form 990-EZs and 990s from other nonprofits.
  • An explanation of the IRS Form 990-N.
  • What filings may be required by your state with examples

The live webinar will be on Wednesday August 21, 2019 at 8 pm ET/7 pm CT/6 pm MT/5 pm PT

The webinar will last approximately one hour. There will be time for your questions. It will be recorded for viewing later.

The cost is $10 and you will receive:

  • Access to the live webinar on Wednesday August 21, 2019
  • An opportunity to ask questions via the live chat room
  • Handout of the slides
  • Recording to the webinar
  • IRS Forms, Instructions and samples
  • Template to summarize your state and IRS filing requirements for your board

 

More information at HomeschoolCPA.com/Filings

 

Carol Topp, CPA

Tiny Homeschool Groups: Do We Need to Pay Taxes?

Tiny Homeschool Groups: Do We Need to Pay Taxes?

Tiny homeschool groups have different challenges than large programs. They are limited on resources, volunteers, and activities. But they still have questions about legal status, money and taxes that the large homeschool organizations have.

In this 4-part podcast series, Carol Topp, CPA answers the common questions that tiny homeschool groups face. All podcasts are available at HomeschoolCPA.com/Podcast

  • Episode #175 Are We a Nonprofit?
  • Episode #176 Do We Need to File Anything?
  • Episode #177 Do We Need to Pay Taxes?
  • Episode #178 Do We Need a Bank Account?

In this episode Carol Topp will explain taxes for tiny homeschool groups:

  • How a tiny homeschool group can be tax exempt without applying.
  • How tiny groups can self-declare tax exempt status with the IRS.
  • State income tax exemption.
  • The IRS annual report Form 990-N.
  • Sales tax for small nonprofit organizations.

 

Join the Facebook group for homeschool leaders: I am a Homeschool Group Leader. 1,000+ homeschool leaders offer ideas, encouragement and respectful exchange of ideas. https://www.facebook.com/groups/72534255742/

 

Featured Product

The IRS and Your Homeschool Organization

Does your homeschool group need to pay taxes? Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

 

 

 

Webinar: IRS and State Filings for Homeschool Groups

Getting 501c3 tax exempt status is a great accomplishment! If you’ve done that, congratulations!

But don’t think you are done with government forms just yet! Your state and the IRS have several reports that must be filed regularly to maintain your precious tax exempt stats.

Carol Topp, CPA the HomeschoolCPA has helped over 100 homeschool organizations apply for tax exempt status. She has prepared a webinar on IRS and State Filings for Homeschool Nonprofits. Carol explains the IRS annual reports for tax exempt nonprofits and how you can know what your state requires.

You will learn:

  • The importance of maintaining 501c3 tax exempt status
  • The IRS Form 990 series. What form your group needs to file.
  • How to know if you’ve missed filing IRS returns
  • How to see Form 990-EZs and 990s from other nonprofits.
  • An explanation of the IRS Form 990-N.
  • What filings may be required by your state with examples

After the webinar you will be equipped to file on your own the IRS Form 990-N and state forms saving you hundreds of dollars in professional fees.

 


This webinar is the third in a series of 3 webinar to teach homeschool nonprofit leaders how to create a nonprofit, get and maintain tax exempt status. The other two webinars are:

I highly recommend you watch the first two webinars on Create a Nonprofit for Your Homeschool Community and 501c3 Application for Homeschool Nonprofits. They are both a precursor to this webinar and tells you what to do to create a nonprofit and apply for 501c3 tax exempt status.


 

This third webinar on IRS and State Filings is for Homeschool Nonprofits if for groups that have received (or applied for) for tax exempt status with the IRS and:

  • Are unsure about IRS annual returns
  • Don’t know what forms their state requires from nonprofit organizations
  • Do fundraisers or ask for donations
  • Received a letter from the IRS or their state about missed reports
  • Need to know what to do to maintain their tax exempt status
  • Want to know what it takes to run a compliant nonprofit organization
  • People who want to DIY the IRS and state flings but need an experienced expert to teach them how.

The webinar will last approximately one hour.

The cost is only $10 and you will receive:

  • A recording of the webinar
  • Handout of the slides
  • IRS Users Guide for Form 990-N
  • Blank IRS Form 990-EZ and Instructions
  • Template to summarize your state and IRS filing requirements

 

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders maintain tax exempt status.

Should our bylaws include an indemnification clause?

I’m reading your amazing ebook The IRS and Your Homeschool Organization, and I noted a difference in the bylaws example in your ebook vs your website.

There is an Article 7 Indemnification on the website sample bylaws.

Is an Indemnification section necessary to have in our bylaws?

Thank you,
Nicole

 

Nicole,

I’m glad the book is helpful!

You asked, “Is an Indemnification section necessary?”

 

What:

Let’s start by explaining what indemnification is. It means ‘to indemnify’:

indemnify

to compensate for damage, loss sustained, expense incurred, etc.
to guard, secure against anticipated loss; give security against (future damage or liability).

 

How does it work?
A nonprofit organization might include in their bylaws a clause such as this:

Indemnification
“The Organization agrees to indemnify, defend and hold harmless the board members, its officers, directors and employees, from and against all liability, loss, cost or expense (including attorney’s fees) by reason of liability imposed upon the Organization, arising out of or related to organization’s activities, whether caused by or contributed to by the members or any other party indemnified herein, unless caused by the sole negligence of the member or any other party indemnified herein. Organization may maintain insurance, at its expense, to protect itself and any such person against any such liability, cost or expense.”

Why have an indemnity clause:
It assures nonprofit board members that the nonprofit organization will pay any legal fees related to the organization’s activities or their board service (unless caused by the sole negligence of the board member). Typically, the nonprofit purchases Directors and Officer (D&O) insurance to pay for the legal bills when and if they arise.

Some people will not serve on a nonprofit board without an indemnity clause and without Directors and Officer insurance. So having this clause in the bylaws and a D&O policy helps attract and retain board members.

 

Why not have an indemnity clause:
Some nonprofits are small and they do not have the financial means to pay legal bills of board members or purchase Directors and Officer insurance.

True Story: I am on the board of a local charity (not a homeschool group) and we were reading over the bylaws word-by-word and updating them (a great idea to do that every few years!). The bylaws had an indemnification clause much like the one above. We were all a bit confused by the language and unclear what it meant.
One of the long-time, experienced board members said that the last sentence was the most important. It said: “The organization may purchase insurance for such indemnification as determined by the board.” This is a tiny charity, all volunteer, and we do not carry insurance to cover Directors and Officers. We decided to delete the indemnification clause since we had no resources to pay for attorney fees or D&O insurance. The indemnification clause was a promise we could not keep.

 

What should we do?

It’s best to research indemnification and talk it over with your board. Your board can decide to include it in your bylaws or not.

This is not legal advice. I recommend you contact an attorney if you need additional assistance.

 

Carol Topp, CPA

Helping Homeschool Leaders