Legal Question in Business Law in New York

Not-for-Profit dissolution

I am with a not-for-profit that is in danger of going out of business because, by our charter, we are prevented from doing business for for-profit firms and the non-profits we used to serve have all gone pretty much out of business. Before 2001, we were doing well and we bought a building on a mortgage. Now, with our business drying up and prevented from chasing for-profit revenues, we are in danger of loosing the building and everything because we can't afford to service the debt--our staff is already working 100% volunteer!

We have received an offer from a investment group that is willing to continue our low-cost work for the few non-profits we still serve and give them good service, etc. while also going after more lucrative for-profit customers. To do this, they want us to merge with them and transfer the building to them and they will assume the mortgage. This way, our mission is preserved and the assets are preserved in the community.

Can this be done legally under NYS law? Both the not-for-profit and the for-profit merger partner are NYS entities.

Please advize.


Asked on 8/13/03, 2:42 pm

3 Answers from Attorneys
Norman Nadel Norman Nadel, Esq.

Re: Not-for-Profit dissolution

It is possible, but you really need competent legal guidance.

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Answered on 8/14/03, 8:37 am
Neil Quartaro Lyons, Skoufalos, Proios & Flood

Re: Not-for-Profit dissolution

There are a anumnber of ways to achieve your goal, but choosing an appropriate one requires some analysis of your corporate documents. You need someone to review them and tell you what you are allowed to do and how changes can be made (for example, if the prohibition is actually in the by-laws, you may be able to change them fairly easily). You can call me to discuss further.

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Answered on 8/14/03, 9:17 am
Walter LeVine Walter D. LeVine, Esq.

Re: Not-for-Profit dissolution

What prohibits the "for profit" solicitation? Your charter, by-laws, IRS opinion? Most non-profits can conduct a "for profit" business, but will be subject to income taxes on any profit, without loss of charter. Perhaps your corporate documents can be amended. Or, perhaps, you could create a new entity to handle the profit clients and have the entity become a conduit of net profits to your corporation. It appears more may be possible, but you have not given sufficient information to provide a better answer. I suggest checking with local counsel who is familiar with tax exempt entities to review the documents and then give you alternative opinions. I do not know if a merger with a "for profit" will resolve the problem.

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Answered on 8/14/03, 12:20 pm


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