Legal Question in Business Law in California

we are an IRS 501C3 tax exempt charitable corporation in the state of CA (county of Orange). In our Articles of Incorporation we have a clause which states"...no part of the net income or assets of this corporation shall ever inure to the benefit of any director, officer or member thereof or to the benefit of any private person." yearly we have an installation breakfast/luncheon to install new officers and thank outgoing officers. We have paid for this from the corporation funds for all invited members/special guests. A member has raised the issue that as stated in the above clause from the Articles of Incorporation, the installation breakfast/luncheon, when paid for our of corporation funds, is not a legal expense. Additionally, the corporation provides, at its expense, drinks and snacks to our volunteer members who support our related charity events. Again, this member believes it is not a legal expense.

Could you please provide a legal opinion - is the breakfast/luncheon installation of officers and providing snacks at charity events a legal expense and can be paid for out of our corporation funds?


Asked on 12/13/12, 10:11 am

2 Answers from Attorneys
Terry A. Nelson Nelson & Lawless

No one is going to provide you a 'legal opinion' without an Attorney-Client relationship being established. However, what would make this person think that companies [profit or non] can't incur costs of operation that include advertizing, marketing, promotion, employee rewards, charity donations, etc, etc. Think! Who else would pay the cost of such functions?? Would he have the company charge employees to attend?? Nonsense. Have you never been to a company social event in your lives??

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Answered on 12/13/12, 10:57 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

In my humble opinion, the expenditures you describe sound much more like normal costs of doing business than like impermissible "inurements to the benefit of" officers, directors, private persons, etc.

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Answered on 12/13/12, 12:26 pm


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