Overall, the New York Nonprofit Revitalization Act of 2013 has simplified and streamlined the incorporation process for nonprofits. There are, however, some issues that still arise when drafting documents in regard to names, purposes, category (charitable or non-charitable) and language regarding consent.
Name and Category Issues
The name of a proposed not-for-profit corporation must support the category chosen. For example, the incorporation of a homeowners association as a charitable corporation will not be acceptable.
A name that does not contain a corporate indicator is permitted only if the charitable category is chosen and only if the actual purposes, which must be stated in the document, are strictly charitable. Acceptance will be determined upon review by the Department of State.
The stated purposes notwithstanding, the mere use of the words “school,” “college,” “university,” “museum” or “arboretum” in the name of a not-for-profit corporation would require consent from the Commissioner of Education.
The incorporation must set forth the purpose or purposes for which a corporation is formed by choosing one of the following:
- Any purpose for which a corporation may be organized as a charitable corporation;
- Any purpose for which a corporation may be organized as a non-charitable corporation;
- Any specific purpose.
Only one of the above options may be chosen.
If the incorporation contains specific purposes, it must include sufficient information for a reader of the document to understand why the corporation is being formed.
An incorporation must state either that it is not formed to engage in any activity or purpose for which a consent is necessary and that no consent is required, or that it is formed to engage in an activity or purpose for which a consent is necessary and that such consent is attached.
The certificate may include a general disclaimer stating that the corporation will not engage in, or solicit funds for, any of the purposes contained in Section 404 of the New York Not-For-Profit Corporation Law, however, the inclusion of this statement cannot be used in lieu of one of the two options previously mentioned.
Common errors to be avoided:
- Do not use IRS tax exempt language as purposes.
- Do not use “including, but not limited to” as this implies there are other purposes not stated.
- Do not provide vague and general purposes.
- Do not assume the name of the corporation adequately describes the purposes.
- If the corporation is being formed to benefit a specific geographic community or a specific group or its members, the location, group and membership must be clearly identified.
Forming a not-for-profit corporation in New York has definitely been made easier with the Nonprofit Revitalization Act of 2013. Filers, however, can get tripped up by not being familiar with the requirements related to names, categories and purposes. By keeping in mind the tips discussed in this post, you can greatly reduce the chances of your New York not-for-profit filing being rejected or delayed.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.