Are You Protecting Your “Good Standing”?
While not-for-profits are certainly answerable to the IRS, they also have distinct reporting responsibilities at the state level. In fact, most states require not-for-profits that are organized as corporations to file annual reports or updates, including:
- Corporate filings,
- Financial reports,
- Reports on fundraising activities, and
- Filings for state sales/use or property tax exemptions.
Piercing the Corporate Veil
Allowing your annual reports or tax obligations to lapse could result in your organization losing its certificate of “good standing” with the state(s) in which you are incorporated. Depending on the state, your organization could then be classified as “delinquent,” “suspended” or “dissolved.”
Substantial restrictions may be imposed on your not-for-profit. These include not being permitted to make major changes like amending your articles of incorporation, changing your organization’s name, or merging/dissolving the corporation. Just as important, once the “corporate veil” is pierced, your not-for-profit may lose the limited liability protection that shields your officers and directors.
File Your Forms
Of course, each state’s law is slightly different, so you’ll need to work directly with your secretary of state or attorney general’s office. Summaries of filing requirements may also be available from your state’s association of not-for-profits.
In practice, maintaining these annual filings doesn't require much effort. It might be as simple as confirming or updating your organization’s mailing address and the names of responsible parties. It might also include filing employment forms with the state Department of Labor if you have employees.
As year-end approaches, take the time to ensure that all state-level filings are up to date. Also check to see if you are “doing business” in any additional jurisdictions that may require registration and reporting.