San Francisco, CA asked in Banking, Business Formation and Business Law for California

Q: I just started a non-profit LLC company so what are the next steps in legally keeping my company in good standing?

Beginning of this month I filed my articles of incorporation and today the Secretary of State of California approved the articles of incorporation and I am unsure what to do next?

2 Lawyer Answers
James R. Dickinson
James R. Dickinson
Answered
  • Business Law Lawyer
  • San Bernardino, CA
  • Licensed in California

A: There are transactional attorneys who help set-up businesses. I have a friend who I refer people to, as I'm a litigator. [I litigate cases. Anything posted here must not be construed as legal advice, nor as grounds for forming an attorney-client relationship. You should seek an attorney for formal legal advice and representation.]

Matthew Morris
Matthew Morris
Answered
  • Business Law Lawyer
  • Indianapolis, IN

A: Congratulations on starting your nonprofit. You have chosen an unusual path by using the LLC formation method. One of the first things you will likely want to do is to file a "statement of information" with the Secretary of State -- usually within about 90 days from when you filed your organizing document. You can check the due date of the statement on the secretary's website. After that first SOI, you will need to file a statement of information every year to stay current with the state.

Other than that, the question of what to do next really depends on what you want to accomplish. You mentioned that this LLC is going to operate as a nonprofit, so one thing that you might want to do is to apply for tax exemption from the federal and state governments. Doing that as an LLC is very tricky because LLCs as nonprofits are unusual. You will want to be sure that your articles of organization and your operating agreement both contain language that clearly limit the activities of the organization to comply with the IRS's guidance on obtaining tax exempt status. The activities must be limited to one of the purposes in Section 501(c) of the tax code, the articles and operating agreement have to prohibit the payment of any benefit to any individuals, and the assets of the LLC have be distributed to other tax exempt organizations when you dissolve.

Once you have received tax exemption, if that is what you want, might need to register with the Attorney General's registry of charitable trusts (if you are a charity), or with the Secretary of State's political reform division (if you are a lobbying organization).

You should talk to an attorney who advises nonprofits to get individualized advice, (which this is not.)

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