Matthews, NC asked in Business Law and Business Formation for North Carolina

Q: Are there other options for starting an animal shelter/rescue besides 501c3? I don’t have 3 unrelated board members

2 Lawyer Answers
Will Blackton
Will Blackton
  • Raleigh, NC
  • Licensed in North Carolina

A: While 501(c)(3) status is a common and often preferred option for starting an animal shelter or rescue organization, there are other ways to establish a nonprofit entity in North Carolina. Here are a couple of alternative options:

(1) Fiscal Sponsorship: Another option is to seek fiscal sponsorship from an existing 501(c)(3) nonprofit organization. Under a fiscal sponsorship arrangement, the sponsoring organization agrees to provide administrative and financial support to the sponsored organization, which can help the sponsored organization to qualify for grants and other funding opportunities.


(2) Unincorporated Association: An unincorporated association is a group of individuals who come together for a common purpose, but do not establish a formal legal entity. While an unincorporated association does not have the same legal protections and benefits as a nonprofit corporation or 501(c)(3) organization, it can be a simple and flexible option for starting a small animal shelter or rescue.

It's important to note that each of these options has its own advantages and disadvantages, and you should carefully consider the legal and financial implications of each before making a decision. You may also want to consult with a lawyer or nonprofit expert to help you navigate the process of starting your animal shelter or rescue organization.

A: The requirement for three unrelated directors is not a hard and fast rule. It is true that the IRS's Technical Guidance (the internal document that IRS uses to guide its revenue agents if they find themselves auditing a 501(c)(3)) teaches their agents that a small board of related people might be a sign that a charity is not truly dedicated to a public benefit, but it is not a legal requirement. Your initial filing with the IRS (called a Form 1023) and your annual filings with the IRS (called a Form 990) will ask you to explain any relationships between directors, but the only thing that the IRS cares about is making sure that the organization is "organized and operated exclusively for" the public and charitable purposes of Section 501(c)(3). So, for the purposes of Section 501(c)(3) of the Revenue Code, there is nothing that prevents an animal rescue or shelter from obtaining 501(c)(3) status if it has a board of three related people, or a board of less than three people. In addition, North Carolina's nonprofit corporation act requires only requires that the board "shall consist of one or more" people.

That said, a board of directors that draws from more than just a few related people will often help the nonprofit to have a wider base of donors, a wider variety of insights and perspectives, and a wider impact when looking for volunteers or getting your message out. Balanced against that is the fact that large and unrelated board often makes founders of nonprofits worry about losing "control" of the organization that they built. That's a fair concern, and finding the right people to flesh out the board is as much an art as anything else.

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