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June 5, 2017
Scenario: you are invited to give your time to a worthy cause by serving on the board of directors of a local not-for-profit organization. At the first board meeting you attend, you start to ask some questions and begin to uncover that the organization is very loosely run in the business sense. They are doing amazing work in the community, but no one is paying too much attention to the business affairs of the organization. What do you do?
A basic understanding of the requirements for not-for-profit organizations is a must if you are planning to serve on the board of directors. The directors of such an organization are charged with a fiduciary responsibility to manage the affairs of the organization in the best interests of the public. In some cases, there can be penalties imposed on the directors for failing to carry out this duty. These can be penalties that not even director’s and officer’s liability insurance is even able to reimburse for.
Not-for-profit organizations are subject to many of the same filing requirements as any other business entity. For example, if a not-for-profit organization pays an individual for services greater than $600, the organization should provide that individual with a Form 1099 to report the amounts paid. Not-for-profit organizations are required to file the equivalent of a tax return every year with the IRS and often times with the State of IL as well. The entity won’t pay tax on exempt purpose income, but it still must file an informational return.
If you are involved with a not-for-profit organization, your organization may be required to or should be doing/filing the following:
This is not a comprehensive list but as you can see, there are many financial and business responsibilities that all entities, including not-for-profit organizations, need to pay attention to.
If you have questions or concerns or need help with any of these filings, call us at 217-351-2000!