New York
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Nonprofit Incorporation and Tax Exemption

Working with community based not-for-profit corporations can be a rewarding and exciting pro bono experience for attorneys. Not-for-profit corporations are providing desperately needed services throughout the City of New York. Not-for-profit corporations need the assistance of an attorney at the very first stage of their lives, during the incorporation and tax exemption process.

Like business corporations, not-for-profit corporations are creatures of state law. In New York State, nonprofit corporations are governed by the Not-for-Profit Corporation Law (the "N-PCL"), which is patterned on the Business Corporation Law (BCL), although there are substantial differences. Perhaps the most significant difference is that a not-for-profit corporation does not have any shareholders and in fact, no part of the earnings of the organization may inure to the benefit of any individual. The primary purpose of the corporation must be non-pecuniary, i.e. not formed for commercial purposes. It takes from 10 to 50 hours to incorporate a not-for-profit corporation in New York State. This estimate includes time devoted to meeting and counseling the client, drafting and filing the certificate of incorporation and drafting the by-laws.

Most not-for-profit corporations also choose to seek recognition of their exemption from federal taxation pursuant to section 501(c) of the Internal Revenue Code. Those organizations which are formed for exclusively charitable purposes can seek exemption pursuant to section 501(c)(3) of the Internal Revenue Code so that they can solicit tax deductible donations. Organizations seek federal tax exemption under section 501(c)(3) by filing a form 1023 with the Internal Revenue Service. The Internal Revenue Service estimates that it takes up to 100 hours to understand the relevant law and complete the form 1023. Our experience has been that most of this time will have to be devoted by the client and not the attorney, because the form 1023 requires detailed financial information from the organization seeking tax exemption.

Lawyers Alliance provides ongoing support to the attorneys who accept incorporation and tax exemption cases. Each case placed with a pro bono attorney is also assigned to one of our in-house legal staff who co-counsel on the case and are always available to answer your questions and to assist in any way possible. Additionally, as a service to the legal community we have included in our "Library" a number of model documents which can be used to assist organizations during the incorporation and tax exemption process.

We are confident that if you choose to assist a not-for-profit corporation in the incorporation and tax exemption process that it will not only add to your own legal knowledge but also enable you to give something back to your community.

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