How to legalize the activities of non-profit organizations?

Let’s imagine a standard situation: two founders set up a public organization or charitable foundation, but have vague idea of what they should do next. That is, the goals and main areas of activities of the organization are, of course, clear, but it is not clear what exactly needs to be done to get the organization to work, and most importantly - how to legalize its activities correctly.

We wrote this publication based on our experience and knowledge of working with such non-governmental organizations and charitable foundations. 

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Legal and accounting support of the start of a non-profit organization

1. Director’s salary.

The first thing worth talking about is the payment of wages to the director of the NGO. Is it necessary to pay a salary if the NGO or charitable foundation does not conduct economic activity and does not receive money? 

The answer is no. If a non-profit organization is not engaged in any activities, then respectively, the salary to the director of the organization can not be paid until there are no turnovers. In case of regular turnovers, it is necessary to draw up all personnel documentation: orders, internal regulations, staff resources register, etc. 

At this stage, you can find a full-time accountant and a lawyer, but if you don’t have enough money for this, you can take advantage of legal and accounting services from those who have already done it. After all, no one wants to risk the reputation of the organization by taking attempts to properly prepare the documents, so it is better to attract an experienced specialist. In addition, in the future you need to be sure that the personnel documents are made correctly, and do not be afraid of any inspections.

2. After the primary accounting and personnel documentation has been properly prepared, it is time to start signing agreements with counterparties. 

For example: 

  • Premises Lease Agreements; 
  • Equipment Supply Agreements;
  • Procurement Agreements. 

In the case of charitable foundations and non-governmental organizations that help other people, it can be an immediate acceptance of money on the account for the purpose of assistance. Accordingly, you always want to know how to receive the money correctly so that the regulatory authorities do not have any questions later. Or, you want to know which agreements are better to sign in this area in order to minimize your tax burden and not to get penalties from the tax authorities.

In Ukraine there are organizations that can help with accepting money, for example, the Ukrainian Charity Exchange. This is a whole system of accumulation and use of money, but in order to use this platform correctly, you may need a knowledgeable specialist - preferably the lawyer or accountant who is familiar with the system.

Initially, founders can do most of the work themselves, but there is of course also the work that is better to entrust the performer, for example - the development of the website, the design of brandbooks, shooting videos and so on. In this case, non-profit organizations usually try to sign civil contracts for the provision of services, because, as a rule, there is no need to employ such people on a full-time basis. 

This raises the question of the correct design of these civil contracts and prescribing of all necessary conditions to avoid court proceedings with these specialists, in case they do not do their job. 

3. Separately, it’s worth talking about working with volunteers

From a legal standpoint, these people also need to be properly identified in your organization. In order for volunteers to be able to help your organization, you need an appropriate acceptance order, specifying the selection criteria. 

There is an immediate question of protecting the information of your organization, because in the process of work, volunteers have to disclose some details and features of the organization. Accordingly, here it is better to attract a lawyer, because in case of violation of the abovementioned procedures of execution of documents, you can attract the attention of the State Labor Service and the National Police, which in the future will lead to fines.

4. Donation Agreement.

In the course of further work, as a rule, if an organization has contacts with some charity providers\donors, the latter can offer their help. For example, they may sign various agreements for the supply of goods and products, which are then used as assistance provided by the charitable organization. 

In these situations, you need to be attentive to the terms and conditions of the agreement, because you can agree with the organizers of charity events, and then the supplier will not meet its conditions and the charity event will fail.  It is important to pay full attention to such agreements. Sometimes you have to amend them, assess risks and take responsibility. 

If you are planning to start a non-profit organization and want its work to be properly executed in both legal and accounting terms, don’t hesitate to call us.

Publication date: 12/06/2020

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