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Texas Non-Profit Law

Home » Texas Non-Profit Law

2:55 pm By Kristin Tynski

How a Texas Non-Profit Lawyer Can Provide Effective Advocacy Enabling Non-Profits to Survive to Serve the Common Good

Despite having the reputation as an epicenter of growth and marginal taxes, a surprising statistic exists in the US today: In 20022, according to Texas Non-Profits.org the Secretary of State of Texas reports there to be 106,764 nonprofit corporations organized in the State of Texas—about a quarter religious organizations, a quarter health-related, and a quarter military and public charities.

Not only is nonprofit law organized in such a way to foster growth in the Lone Star state, but with the right legal help, nonprofits can quickly and efficiently meet their objectives of providing for the relief of poverty, the advancement of religion and promotion of access to healthcare—in contrast to their rival for-profit counterparts.

Knowing how to form a non-profit, the bylaws and regulations associated with such common non-profit forms—is imperative if one is seeking to relocate a non-profit to Texas, or create one from scratch.

It is worthwhile to learn more about the various kinds of certificate of formation issues and non-profit disputes that arise in Texas under corporation law and involving the Internal Revenue Service (IRS), requires spending a few minutes to read further below.  

What Forms the Bulk of Non-Profit Lawsuits Brought in Texas?

According to Txnonprofits.org, in the US today, non-profits—including public charities and private foundations—importantly improve quality of life for residents of Texas. As opposed to traditional profit organizations organized under the Business Organizations Code designed to profit, often at the expense of the common good, non-profits can promote non-secular values, peace and tolerance, selfless service to marginalized communities, and needed advocacy for equality for the protection of the environment, among countless others.

For instance, many non-profits can exist to address issues that for-profit corporations would not address, especially those concerning matters that have no incentive to do so due to there being no profit margin involved:

  • Religious matters and themes.
  • Campaigns to teach tolerance.
  • Educational programs to promote mutual respect among cultures and socio-economic groups.

According to Localprofile.com, numerous non-profits exist in the northern parts of the state of Texas aimed to provide for what is called “situational homelessness,” defined as suffering by mothers who are rendered homeless due to lack of income who have dependents to provide for. In theory, just about any person, who creates a non-profit can achieve these same benevolent ends so long as the right procedures are followed, and organization requirements are met, making them extremely popular as outlets for freedom of expression. 

In particular, Texas’ Business Organizations Code provides for a shelter of protection for non-profits that observe the corporate formalities of incorporation including filing with the Secretary of the State of Texas the address of the corporate office, the name of the non-profit, the name of the registered agent for service; and any other such identifying information required by promoters of corporations. Texas Business Organizations Code Section 22.001.

Whichever non-profit a non-profit attorney is called to represent, issues commonly pertain to the nature of the corporation in the eyes of the IRS, usually involving the conveyance of real estate. Specifically, lawsuits may claim that certain changes in form or actions taken remove the non-profit is nominally listed as such, but whose actual activities cause the nonprofit to lose its exemption privileges. In such cases what is required is a skilled non-profit lawyer to advocate in civil and tax court to minimize liability for the non-profit, and thereby allow the non-profit to continue to serve the community’s vulnerable.

How to Ensure Nonprofit Corporations, Charities or Private foundations Texas Retain Their Tax-Exempt Status with the IRS

According to Propertytaxfunding.com, there are perks for a non-profit’s choice of being an organization whose main objective is not the pursuit of profit. One such perk is having property tax-exempt status. This right to not be taxed applies to:

  • Certain charitable organizations
  • Youth development organizations
  • Religious organizations
  • Non-profit private schools
  • Cemeteries
  • Veterans’ organizations

According to the well-respected legal services guide Nolo.com, when a non-profit begins to make money, there are new issues that a non-profit lawyer would excel at in allowing the non-profit to maintain its “tax-free” status.

Based on a technical distinction between the purpose and source of money, the IRS will tax the non-profit. 

There are two categories of taxation for a non-profit:

  • Related income of the non-profit
  • Unrelated income of the non-profit.

Generally speaking, if the non-profit earns income as a result of its activities in managing the non-profit and for the purpose of the non-profit, the corporation will not be subject to federal and state taxes. However, based on several legal factors, there could be tax liability created even if the board of directors of the non-profit did not or does not intend its activities to be taxed.  Typically, a non-profit fundraising for the profit may unintentionally find itself in the business of buying and selling donated goods, which become taxable. 

When in doubt, a skilled Texas non-profit corporate attorney would be a reliable resource to use to be advised on these topics that non-profit executive confront when managing the day-to-day of their organization, and are not trained nor have the time to consider all of the legal risks created when making snap business judgments. 

Common Non-Profit Defenses Helpful in Non-Profit Legal Disputes

According to the reputable central Texas firm of Johnson Hobbs Squires, LLP, non-profits are often desperately needing legal counsel upon formation and organization after incorporated as well as day-to-day governance. 

The main practice areas that Texas non-profit lawyers advice their clients on include these legal needs:

  • Formation and filing of the proper nonprofit corporation IRS form, and filing required documents.
  • Name reservation disputes.
  • Donation solicitation disputes.
  • Purchase or lease of real estate, or intellectual property.
  • Disputes involving corporate law.
  • Mergers.

All the more reason Texas non-profit law requires a skilled advocate who can accurately assess your corporation’s needs, understand the governing IRS tax law that will operate in your favor, and propose targeted solutions mindful of the consequences on the organization as a whole, including its maintaining its tax-exempt status.

Legal Advice: A Texas Non-Profit Lawyer’s Value to Non-Profit Executive, Staff and Others Doing Business with the Non-Profit

As many lawyers in Texas have valuable services to offer at high prices, there are some concerns likely how much a non-profit lawyer is worth as your personal advocate. Based on the nuances of non-profit corporation law in Texas, understanding IRS tax court decisions, drafting articles of incorporation documents and advising executive directors of their rights and responsibilities under the laws of Texas—are undoubtedly priceless in terms of notwithstanding the incredibly high average rate of non-profit lawyers and firms which can charge between reportedly $130 to $450 per hour, per Clio.com’s most up to date statistics.

Based on the skill and years of experience of the Texas non-profit lawyer handling the organization or other involved party’s case, a client can recover greater amounts if the lawyer stays up to date with the everchanging landscape of not only non-profit corporate law, but business law, tax, and probate law, including the many nuances and subtleties involved in an area that is typically not thought to be considered easily grasped by a lay member of the public. 

Without having a valued and trusted legal advocate, you may end up needlessly being exposed to risk and liability for actions that you aren’t responsible for, or else lose out on money to the non-profit’s operating budget, further limiting and depriving it of serving the public good.

The Importance of Hiring a Skilled Texas Non-Profit Lawyer?

Due there being hundreds of business decisions being conducted daily, dealing with the tax-exempt organizations’ assets, employees and mission to serve the public, it is important to have a skilled lawyer who can distinguish him or herself from others in the field. 

Whereas a many business and corporate lawyers may be generally knowledgeable about how to represent a business entity, a particularly skilled and remarkably talented non-profit attorney will be intimately familiar with the most recent decisions in non-profit law, government, banking, tax, and probate law—seeing them as intertwined and working together to positively affect their client’s needs.  

Many top-rated law firms specialize in these cases, including Grapevine-based non-profit firm Brewer Lang, APC, among others in the Dallas, Austin area and surrounding areas, offer a free initial consultation to help strategize your best course of action during a time of uncertainty and “rush to close.”

For such a Texas law firm competent in Texas non-profit law, a good lawyer in Texas will be a specialist will ask you, the client, questions to maximize the value of your case or minimize liability in exploring your legal options—whether you are a relatively inexperienced owner of a non-profit, or larger corporation with greater experience in making decisions affecting large numbers of employees. Such representation often necessitates employing novel legal arguments and arguments for fundamentally changing the law to benefit you, the client.  

In any case, you should be prepared to create a narrative of facts detailing everything that you remembered before, during and after the incident leading up to the dispute, including keeping meticulous records of expenses made during the litigation, or in the case of the responsible merchant, the costs to defend. 

As a client whether for the organization or another party to a dispute, it is also imperative to share any business malpractice or personal insurance company policy maintained and investigate other potential actors responsible for the wrongful act. Also important is it that your attorney test the strength and validity of the rival claims made against the non-profit.

Forming an Attorney-Client Relationship: Call a Houston Non-Profit Lawyer Today to Discuss Your Case and Odds of Victory for the Non-Profit!

Whether you are a pursuing or defending against a non-profit claim, having the right attorney on your side can navigate the vast and ever-changing landscape of non-profit law, mandatory tax reporting and ever evolving case precedent. The attorney-client relationship forms upon consultation when you consider hiring the attorney. Once formed, this relationship helps prepare the client to bring a winning case to receive compensation where there is clearly established liability and avoid tax liability for non profit transactions that are not intended by the tax code to be included as taxable. 

Whether you are looking for a Houston, Dallas or San Antonio-based non-profit lawyer, Lawsuit.org will help you pinpoint the right one by offering a free consultation to obtain the just results that a spiritual leader or educator needs.

Filed Under: Texas Law

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