Establishing a Tax Deductible Charity – 501(c)(3)

Partnerships are formed when individuals collaborate without a formal agreement.  They are commonly formed on accident and lead to negative outcomes.  The 501(c)(3) tax deductible organization, which we will simply refer to as a charity here, is quite the opposite in formation.  The process involves numerous steps, regulatory agencies, and formalities.  There are many legal and practical considerations that must be involved when you embark on forming a charity.  If the cost of complying with the stringent guidelines is higher than the gain you receive from the tax deductible status, you may want to consider an alternate entity.  Here we will assume that you decided to form a charity, and we will walk through some of the steps for establishing one in Arkansas.
 
To be tax-deductible you need to form a 501(c)(3) Nonprofit Corporation.  You cannot just follow the barebones requirements for Arkansas Domestic Nonprofit Corporations when you are seeking the tax exempt status, you must comply with the enhancedIRS requirements.
 
The first step is to fill out the appropriate Arkansas Articles of Incorporation with the filing fee.  The stock purposes are generally sufficient from a legal standpoint, and as long as they correlate to your organization they can be used.  One of the early considerations is whether there should be “members.”  Members in a 501(c)(3) hold only votes; whereas, members in a for profit corporation may hold both votes and stock.  Members can elect the Board of Directors, or you can just determine the Board of Directors prior to filing.  Simple charities can often be formed without members, but one way of raising contributions is by charging a dues fee for members.  Keep in mind that if you have members that vote, the quorum required to vote (as specified in the by-laws) comes into play.  If your Board of Directors is determined, it is advisable to attach this list to your Articles of Incorporation.
 
The second step is to write the by-laws that govern the organization.  The “Purpose” in the by-laws should be identical to that on the Articles of Incorporation.  Whether or not you have members, there are many details are must be in the by-laws.  This non-exhaustive list includes:
  • Members: qualifications, dues, meetings, resignation, duties, etc
  • Board of Directors: qualifications, duties, term, dissolution, nomination committee, etc
  • Officers:  positions, authority, scope, amendment, termination, etc
  • Money Management:  trustee, reimbursement, expenses, deposits, account management, etc
Quorum and Meetings may sound like simple concepts, but what exactly constitutes a Meeting?  Can someone participate by conference telephone?  If you state a 50% Quorum is required and you have 5,000 members, then you need 2,500 to show up to make a material decision.  This is why people often choose a low quorum number such as 10%.
 
The third step is to apply with the IRS.  The IRS website walks you through the checklist which includes form 1023, 1024, and SS-4 to acquire an EIN.  Other forms may apply to your unique situation.  The IRS will either send you an acceptance letter, or request even more paperwork.
 
The fourth step is getting the IRS issued acceptance letter to the appropriate department of the Arkansas Office of the Attorney General.  
 
Remember, charities are highly regulated.  Annual reports are required by August 1st.  No lobbying can be conducted.  No profits can accrue to any member.  If they do not need to seek the tax deductible aspect of the 501(c)(3) a variety of other more flexible arrangements and entities are available.  
 
Please remember that this is only a partial list of information that needs to be taken under consideration when forming a charity, and none of the above constitutes legal advice.
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When Local Crimes Happen

Dear Readers,

Various street crimes are a common occurrence in my neighborhood during night hours.  The Arkansas State Capitol is less than 2 miles from my office. The Arkansas Governor’s Mansion is a block from my office.

Most street crimes are nonviolent and unreported.  Call me if you want to get a feel for those.  Right now, I am concerned with violent street crimes.  

On over a dozen confirmed occasions in the past six months, just that I personally heard, gunshots rang out.  Several months ago I began writing down the time of these shootings.  Most of these shootings are reported, but that is not true for all.  Furthermore, details such as timing are not always accurate.  Inaccurate details could lead to someone getting convicted when they do not deserve it.  If someone is wrongly convicted, then the actual criminal is free and clear to commit more crimes. 

I am going to start using social media to establish when gun shot times occur.  I hope to network with other neighborhood activists and expand to reporting more than shootings.

Sincerely,

Seth L. Bowman

Attorney at Law

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To Criminal Defense Clients

Brief Explanation of Client Duties

Many criminal defense attorneys are quite dogmatic with their directions to clients in the event the police stop their vehicle, attempt to detain them, or visit their residence.   There are many reasons for this advice.  For example, over 90% of all searches are authorized by the consent of the defendant.  That means the police were only allowed to search because the defendant said they could.  While I do not advocate a complete refusal to speak to the police, a savvy client will know when it is time to cease conversations with police officers.  This decision depends on many factors.  If you are officially arrested and on your way to being booked, simply cease conversations with the police and assert your right to have an attorney present.  On the other side of the spectrum, if police have a reasonable suspicion (which is defined broadly) of what an individual is doing, they may request identification.  This is not considered an arrest by itself, but if you are walking and the police use their cars to block you in this case be considered an arrest.  The difference between you serving jail time or not can be determined by something as seemingly trivial as when exactly you were placed under arrest.  All of the details of the arrest are important to the diligent criminal defense attorney.    Remember to always try and show respect for people, unless they give you no options to continue doing so.  Also, never lie to the police officers, instead cease speaking.

Note that whether you are actually guilty or innocent is irrelevant as far as the above advice is concerned.   The police have a job of putting holes in your story, and even if you are telling the truth you may say something that contradicts someone else who is lying and makes you look guilty.   There are many other reasons why even innocent people should cease conversations with the police once arrested, despite what the officers may say.  Think of it like this, whatever you say can and will be held against you, but it will absolutely not help you.

Brief Explanation of the AR Court System

The practice of criminal defense is unique in Arkansas.  If you are charged with a misdemeanor without any felonies, you first go to the district court.  The district court is not a typical court.  For example, there is no written record.

If the prosecutor does not offer an acceptable plea in district court, you can still bring the case before the judge in district court.  However, most attorneys move the case up to circuit court if an acceptable plea is not offered in district court.  If you have a felony, you automatically start in circuit court.  Circuit court is a typical court, and a written record of all motions and pleadings is kept.  The circuit court has less traffic than district court.  The cases in circuit court are typically more serious.

A circuit court holding can be appealed at the court of appeals.  Typically, the agreement between the client and the attorney will specifically exclude appeals.  If your case is not successful in circuit court, you will need to consider whether you can justify the cost of an appeal or, alternatively, qualify as an indigent for appeals purposes.

Sincerely,

Seth Layton Bowman, Attorney at Law

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To Personal Injury Clients

Having now had the privilege of assisting some folks in recovering payments, such as for their medical bills, resulting from injuries caused by automobile accidents or negligent business practices, I can provide some advice to folks that are injured. There are many different ways that someone can be injured, but generally clients have similar responsibilities.

If you are seriously injured in an accident, you need to make sure to do a few things. Do these even if the person who injured you has promised to pay for your medical bills, because these promises are not always followed through on (as at least one of my clients can attest to.)

1) Visit a doctor as soon as possible. If you need an ambulance to get to the hospital, have one called for you.  Sometimes people do not realize their arm is broken until several hours or even days after the accident.  It is better to be safe than sorry, so get checked out early.
2) Get an injury report filed for wherever you are. If you are driving, a police officer will file a damage report. If you are injured at a business such as a hotel or restaurant, make sure the management files an accident report.
3) Do not accept a “settlement” from the person who injured you, or their insurance provider, without consulting an attorney.  (I would be glad to review any settlement you have been offered for free, this is part of the consultation process.)  Sometimes people try to “settle” with injured folks for a very small amount, because this can extinguish the injured person’s right to sue. Remember, the insurance company’s job is to pay out as little as possible to injured people.  These are not “bad people.”  They are just doing their job, but do not forget what their job is.
4) Contact an attorney as soon as possible.  Delay can diminish or even make your case un-winnable.  For example, while many businesses have video cameras, the footage is commonly deleted in as few as 7 days or less. Your attorney’s job is to protect these videotapes, and we can file papers with the courts to do so.  There are many other time sensitive factors to keep in mind.
5) True for all cases, always be honest with your attorney. I can finish work on your behalf cheaper and faster when my clients are honest with me. My job is not to judge, it is to protect the rights of my clients.

Sincerely,
Seth Layton Bowman, Attorney at Law

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After a Long Journey Finally Closing on Building 4/27

I first found 1719 Broadway over a year ago.  It is in a great spot.  There are about half a dozen law firms within a few blocks of mine, and that is because our area is adjacent to downtown as well as close to the courts of Little Rock.   When I first looked at it, the building needed a lot of work.  I estimated 20-30k minimum based on what all needed to be replaced.  I could not figure out how to get the financing to both buy the building and do the upgrades.

Well, I checked in periodically and eventually another person bought it at a very nice price.  The seller actually went to the same law school as me and runs his own law firm.  He was doing the same repairs I wanted done.  I figured if I offered to buy it I would save them the trouble of finding a buyer and maybe be able to work out a deal that put a fair amount of money in their pocket while keeping the costs down on me.  Looks like it worked out.

I am set to close on April 27th, 2011.  I cannot wait to move in and start representing people.

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Phones, VOIP, and Faxes – Toktumi Service is a Great Deal

I searched through service provider options for phones for several hours trying to select the perfect system. I have basic networking skills, but I did not know about office phones so I had to start with the basics. I researched business setups and learned about PBX systems. They are on-site hardware based phone systems that allow programming and routing within a business. There are also virtual PBX systems where the “hardware” is at a provider’s server. I also researched traditional and VOIP technology and then providers.

Providers like Windstream offer user friendly packages of internet and voice. They are slickly marketed and offer the same. The systems come setup for you, and the support is great from what I hear. The cost might be better with Windstream for you, but for me I get a little more value doing my internet separately from the VOIP. There are advantages for going with Windstream or a similar provider though.

Of the VOIP providers that do not provide internet, I started with the basics like Vonage. I found what appeared to be a decent deal with several companies, including 8×8 – which was probably who I would have gone with but for Toktumi. Eventually when researching Google Voice and number forwarding I ran across Toktumi, which has the perfect package for a small firm like mine.

The number forwarding in Toktumi can be setup easily from any computer. That means no programming phones manually when someone switches offices. You can also forward off the premises. I have my office number forwarded to my cell. I can program times when it goes directly to voicemail. There is also auto-attendant features (press 1 for x…). You can use computer voices or record your own. Toktumi offers unlimited minutes incoming and outgoing, subject to their fair use policy. This is only $15 a month. A fax number costs another $10 a month. I can easily add a phone line with an increased $15 a month. Since there are no contracts, I can pay for exactly the amount of phone I need. If I need more than 3-4 phone lines, or I have reliability issues I will look elsewhere and simply take my number with me. So far, so good, though. Note that some readers may wish to keep a landline for safety.

There are other features, but I need to run.

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