Dr. Adrienne B. Haynes, Esq.
Contributor

The decision to start a not for profit corporation is most often inspired by charitable purpose and public benefit. A nonprofit entity focuses on business activities that are centered on religious, charitable, scientific, testing for public safety, literary, educational or other specified purposes. Formalizing these efforts by filing an entity and scheduling regular reviews to ensure compliance is a responsible step for a nonprofit leader and Board. When this is not prioritized, it can result in an administrative dissolution, which results in no longer being able to legally conduct business in the State.

To remain in good standing, a nonprofit leadership team must prioritize timely responses to required State and Federal filings, including annual registration reports and the IRS annual information report on Form 990. The entity’s attorney and the registered agent on file with the State or IRS will receive the notice and reminders, and these dates should also be calendared so that the necessary information is on hand to prepare a response. Maintaining up to date contact information for these notices is especially important for nonprofit organizations such as neighborhood associations that frequently have leadership changes. If a for profit or nonprofit corporation is or has been administratively dissolved, this can result in personal liability for organizers who continue without an entity, reputational damage, and loss of funding. 

To seek reinstatement of the entity, an application package must be compiled and accepted by the Missouri Secretary of State. This will often require the submission of any outstanding annual reports and a certificate of tax clearance. A certificate of tax clearance is issued by the Department of Revenue upon written request, and must state that the corporation has no taxes due and owing. If a corporation has outstanding tax obligations, the balances must be resolved before a clearance letter can be issued.

If a nonprofit entity has been administratively dissolved, the limited liability shield and indemnification protections for its Board members will be at risk. If the administrative dissolution is not rescinded, the organization will need to take the additional steps necessary to wind down. According to Missouri law, a dissolved corporation must carry on only to handle liability mitigation and asset disposition. These activities may include tasks such as notices to funders, clients, and community members; facilitated disposition of assets; and the appropriate winding down notices filed with the Secretary of State. 

Running an organization or a business does not mean you have to have it all figured out. If you’re doing it well, it means you have a network of advisors that can help you with compliance, foresight, and governance. This article is only an overview of nonprofit legal considerations and is not intended to cover every legal right or obligation, consideration, exception, or restriction. These strategies and decisions are complex and should be well researched and discussed with a legal professional before being made.

The next business law workshop, Startup Law- Preparing to Open Your Business, will be hosted on Wednesday, June 10th from 12-1 pm on Zoom. Almost all business decisions have legal consequences. Understanding where the laws apply to your business operations can help you make confident decisions, protect your rights, minimize risk and save money. This workshop will offer an overview of business law hot topics, including choice of entity, managing contractual obligations, and compliance. To register for free and see the full list of virtual and in person events, please visit https://showmenetwork.org/calendar/

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Thanks for reading!

My name is Dr. Adrienne B. Haynes and I’m an entrepreneur and attorney based here in Kansas City. My law firm, SEED Law, has been partnering with business owners across the Northeast and the city for almost 11 years. I loved living in the Northeast and I was fortunate to serve as an Entrepreneur in Residence for the Kauffman Foundation in 2017. Together with a dedicated group of Northeast residents and leaders, we explored a community designed innovation district pilot program. I was able to present this work during a TEDxUMKC Talk on Community Innovation Design in 2020.

Over the next few weeks, I’ll be contributing articles and resources on small business and estate planning legal considerations. If you have questions, please reach out directly at adrienne@seed.legal.