Welcome to my Business Law Q&A page where I answer the most common questions about creating and maintaining a business, including nonprofits. If you don’t see an answer to a business question you have, then chances are we need to talk about your specific situation. Contact me, and we can set up a consultation about your business matter.
What kind of protection do I get if I form an LLC?
A limited liability corporation provides you some protection if you get sued for work that you have done. The importance there that most people don’t realize is that when you are sued in civil court and a decision is made against you, the court will issue a monetary judgment against you. If you are sued personally, you may have to sell your personal assets, such as your house, to pay that judgment. If you have an LLC, then any lawsuits concerning your work will be filed against your LLC and not you. If the court enters a judgment against your LLC, you may have to sell the business’s assets but it protects things like your home and personal assets. The one big caveat to this situation is that you must actually use your LLC like a business. That means you must have a business account, not mix your personal and professional funds, and have the LLC own your business assets.
I am in business with my best friend. Do I really need to have a written contract with her?
Yes because we never know what may happen down the line. A written contract with anyone you are in business with is really the best way to make sure that you are all coming into the business with the same ideas, goals, and perspectives. I always tell my clients that contracts don’t have to be viewed as something full of legalese. A lot of people assume that a contract is only there to enforce an agreement when the parties wind up going to court. A contract actually can be a document that all parties work on together and that spells out everyone’s hopes and dreams for the company. It can include how you want to resolve disputes that naturally arise because that’s just what happens in every relationship. Look at a contract with you best friend as a living document that you can agree on and change as your business and your relationship grows.
Do I have to form a non-profit to accept donations?
Anyone can make a donation to any kind of business. It does not have to be a non-profit. For the donor to receive a tax deduction, the business must be a federally-recognized non-profit.
Once I form a federal non-profit, what do I have to do to keep my non-profit status?
You must file a Form 990 with the IRS in order to keep your non-profit status. If you fail to file that form for three consecutive years, then the IRS will revoke your non-profit status.
I didn’t know I had to file the Form 990. Is there anyway to revive my non-profit status?
Yes, the IRS has a mechanism to revive your nonprofit without having to file entirely new paperwork. You will get a new determination letter after your application is approved.
What problems may I have if I download a free contract online to use in my business?
There are several problems with free contracts that you download online or even ones you buy online from an online store. First, you must make sure that the contract is valid in your state. Different state laws may require different terms in a contract for it to be valid. Second, a contract you buy online or download for free may not have all of the terms that your specific transaction requires. Third, you must execute a contract correctly under your state law for it to be valid. That requirement means you need to make sure all of the necessary information is completed – no blank lines in the document – and that the document is witnessed and notarized correctly. A business attorney can help with all of these requirements and make sure that the contract you have will do what you want it to do.
Contact me to discuss how to create your business, including a non-profit, and to protect it.