Legal Question in Business Law in California

Fundraising

I am involved in a business (TSR) that is not registered as a non-profit but we act as one because we are basically an organization that provides free sex educational services.

We were having a lot of issues with money and another private club (not registered as a non-profit or a business) decided to throw a fundraiser for us because they believe in our free speech and educational outlook.

They through us the fundraiser and did a silent auction for tangible items and a live auction for services. People who donated their money were told that the money was going to my business (TSR) to buy new equipment and to help grow my business.

After the fundraiser was over the organization that through the fundraiser for me told me that they were not going to give me the money from the fundraiser and that if I wanted the money I was going to have to give them all receipts for every item I buy for my business.

My questions are:

In CA, is a business that is not registered as a non-profit act as a non-profit and be seen as a non-profit under the law?

In CA, can someone fund raise money under the name of another organization and then control the funds?


Asked on 2/08/09, 7:54 pm

3 Answers from Attorneys
Bryan C. Becker Your Lawyer for Life.

Re: Fundraising

Your (non)status as a non-profit aside, the more immediate question is how do you ensure the fundraiser releases the money to your business. Based just on your brief question, I would argue you have a third party beneficiary claim. Depending upon the amount at issue, seeking the advice and representation of counsel is highly recommended. Give me a call and i would be happy to discuss further.

Yours truly,

Bryan

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Answered on 2/13/09, 12:20 am
Daniel Bakondi The Law Office of Daniel Bakondi

Re: Fundraising

If you want to invest in an attorney to form a nonprofit, let me know.

Best,

Daniel Bakondi, Esq.

IMPORTANT:

No attorney-client nor confidential relationship is created through this communication. You may not rely in any way on this communication, and nothing herein constitutes legal advice nor legal opinion. Your issue may be time sensitive and may result in loss of rights if you do not obtain an attorney immediately.

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Answered on 2/08/09, 10:17 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Fundraising

The first thing you need to be clear about is that there are two distinct aspects or concepts of being a non-profit entity.

The first of these involves the creation of the entity itself - for example, when a corporation is created by filing incorporation papers with the Secretary of State, the entity is, from the moment of its birth, either a regular corporation, or a not-for-profit corporation.

The second concept is the entity's status in the eyes of the Internal Revenue Service. In order to be recognized as a non-profit or tax exempt under IRS rules, the entity must (after its creation) apply for and receive tax-exempt status under Internal Revenue Code section 501(c).

The IRS tax-exempt approval process is more difficulr, demanding and time-consuming to achieve, and has a different purpose and effect than the State of California nonprofit status.

The main benefit of being a nonprofit under state law is exemption from state franchise and income taxes. The main benefit of being a Federal 501(c) nonprofit is ability to solicit donations which the donor will be able to deduct as charitable donations, or otherwise.

Your organization needs a top-to-bottom review to determine how it is set up and whether it could qualify under the Internal Revenue Code for 501(c)(3) or a related 501(c) exempt status.

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Answered on 2/08/09, 11:53 pm


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