5 Legal Mistakes Not-for-Profit Organisations Make
Not-for-Profit or charitable organisations all across the world have done excellent work to reach out to the people in need. From refugee rehabilitation to cancer awareness, charities provide a medium for people to go beyond their means and help others stricken by a crisis. However, despite their noble intentions, sometimes it is these charitable organisations that end up in serious legal conflicts and litigations.
Canada Revenue Agency provides a detailed framework about registration, tax filing and maintenance that not-for-profit organisations can refer to. You can refer an experienced business lawyer to review these guidelines in accordance with your charity.
Meanwhile, here are the most common legal mistakes that not-for-profits make:
1) Lack of a Business Strategy
Most not-for-profit groups start with a great vision but seldom with a business plan in place. A charitable organisation, though audited and managed differently, is still a business that needs appropriate funding and planning.
This lack of strategy can prove to be cumbersome in the future, leading to mismanagement of donors and employees and unnecessary litigations. Consulting a skilled business attorney can help you develop a business strategy for your charity and make its management simpler.
2) Lack of a Funding Model
Most charitable organisations initially are funded by the resources of their founders. However, to sustain your charity in the long term, it’s necessary to have a sound funding model. There are several ways through which a charity can raise resources like organising fundraising events, planning charity drives, charging fees for your services and investing in other business ventures.
To collect and utilise these funds, you need a clear and transparent legal framework, lack of which could lead to lawsuits and payment of damages.
3) Ill-structured Board
This is the most common legal problem that not-for-profits face. Lack of a well-structured board can cause serious governance issues in the future. It’s important for board members to realise their fiduciary and administrative duties towards the organisation. Lack of proper oversight, poor management of conflict of interests and lack of legal expertise can lead to the total disbandment of your organisation. Employing the services of a legal counsel can help you solve these issues at an early stage.
4) Lack of Legal Compliance
Canada Revenue Agency provides a complete checklist of protocols and regulations that charities need to adhere to. Review these guidelines regarding establishment, maintenance and restrictions that not-for-profits need to exercise with your lawyer to avoid their violations in the future.
5) Imperfect Bylaws
Flawlessly drafted bylaws are necessary for internal as well as external compliance of your organisation with the laws of the state. These Bylaws determine the structure of your charity and all its operative procedures. Hence, they need to be flexible, be consistent with all the legal regulations of your province and provide coherent policy outline for your organisation. Always consult a lawyer to draft strong bylaws for your charity.
Most legal mistakes that not-for-profits make are the ones they make at a nascent stage, during the establishment of the organisation. Consulting a practised business lawyer while starting your charity can help you root out these issues and avoid complications later. Book a consultation with our firm today to learn more about these legal matters.