Legal and Taxes

Business regulations regarding law and taxes are an important function of developing and sustaining a social enterprise. This section offers several resources and important information regarding state and federal regulation requirements for those interested in creating a social enterprise. Incorporating in Arizona provides information on Arizona’s laws regarding the filing of articles of incorporation needed to create a business name and become published. Tax Stuff provides information and guidance at the Federal and state levels on tax regulation and exemption requirements. Where to Go For Further Assistance provides links to legal consultants and experts for those who have questions or seek further advice on both legal and tax regulations.

Incorporating in Arizona

Laws and regulations regarding incorporation vary from state to state.  This section offers resources on how to form an organization and the requirements necessary to do so.

Filing the articles of incorporation for a company is a fundamental step in creating a social enterprise or non-profit organization as it defines its purpose and what type of organization it will be.  There are several requirements and forms needed to file these correctly (See links below). Once your articles of incorporation are approved by the Arizona Corporate Commission, the company must publish a legal notice of its formation in a publication within 60 days. This must be done three consecutive times in general circulation newspapers or the company may become forfeit.

In addition there are many ways to incorporate in the state of Arizona. For a list of various possibilities, and key differences between them, see the following url Arizona Forms Of Organization produced by LawforChange.

Also see: http://www.myusacorporation.com/state-specific/arizona/publication.html for more detail.

Usually, filing articles of incorporation requires the following:

  • Cover sheet
  • Articles
  • Certificate of Disclosure
  • Proof of Corporate Name
  • Filing fees

There are several good resources you will want to check out to get a sense of how things work in Arizona

For Help with articles of organization/incorporation as a nonprofit go to:

http://lodestar.asu.edu/organizational_assistance/ask-the-nonprofit-specialists/frequently-asked-questions/how-to-start-a-nonprofit

Here you will find a wealth of information regarding how and where you file and how to determine which type of forms to use

To access the specific forms you will need and all the necessary requirements (fees, process, etc.) to file Articles of Incorporation in Arizona, go to the Arizona Corporation Commission website: http:///www.cc.state.az.us

Another important step in forming an organization is reserving/registering the intended name for its creation. The following link allows you to check through the Arizona Corporation Commission’s database to see if a name is already in use and allow for reservation of desired name:

http://www.azcc.gov

To register with the state go to http://www.azsos.gov/business_services/filings.htm

Additional Resources You May Find Helpful

How to Form a Nonprofit Corporation (book by Anthony Mancuso). Please visit the following link for more details:
http://www.amazon.com/How-Form-Nonprofit-Corporation-National/dp/0873374517

National Council of Nonprofits section titled “How to Start a Nonprofit” provides more information on the basic steps on getting started and where to go for assistance:
http://www.councilofnonprofits.org/howtostartanonprofit

Tax Stuff

This section offers resources on both the federal and state level in regards to tax information and compliance. The federal section offers important and necessary information from the IRS in regards to federal tax exemption laws and obtaining an Employer Identification number. The Arizona section offers important information that relates specifically to Arizona state laws on taxes and regulations.

At the Federal Level

The IRS website www.irs.gov offers guidance on important regulations to be aware of at various points in the start-up and development of SEs.  You will also have to go to this site to obtain an Employer Identification Number (EIN).

http://www.irs.gov/businesses/small/article/0,,id=102767,00.html

Another important reason to consult the site is to get a list of the required provisions that need to be included in organizing documents (i.e. what is needed to achieve tax-exempt status at the federal level).

Lodestar (http://lodestar.asu.edu/) provides important information on tax exemption laws as enacted by the federal government through the Treasury Department and the IRS. They recommend downloading Publication 557 and Form 1023 that explain these laws and can be found through the following link along with other information:

http://lodestar.asu.edu/organizational_assistance/ask-the-nonprofit-specialists/frequently-asked-questions/what-are-tax-exempt-organizations/

They also provide virtual workshops for nonprofit associations on how to help you maintain your tax exempt status. See http://stayexempt.org for more details on these workshops.

Special note on ESOPS

Employee Stock Ownership Plans (ESOPS) are businesses where the employees own a significant stock in the company they work for. Section 1042 of the U.S. tax code provides tax incentives to owners of businesses that sell their companies to the workers in the form of a co-op or an ESOP. Since the mid-1980s, this measure led to the creation of thousands of ESOPs, but it has been little applied to co-ops.

New research by the Ohio Employee Ownership Center suggests that Section 1042 provides new succession and retirement options to small business owners who cannot afford to convert their business to an ESOP. By selling to their workers as a co-op, the business owner can defer capital gains made from the sale of the company.

Read more about Section1042

Within Arizona

In the United States nonprofit organization statutes are enacted by the state, not federal or local government. Normally statutes regulating nonprofits are separate sections. In Arizona, where the ASU Lodestar Center is located, the statute is Title 10, Chapter 19 and it can be found at the following Web site: http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=10

The Arizona Department of Revenue website, www.azdor.gov, offers important publications and research relating to tax information in Arizona. For other information regarding which non-profits are exempt from sales tax in Arizona, go to the website link on Publication 501: http://www.azdor.gov/Portals/0/Brochure/501.pdf

The Arizona Department of Economic Security offers resources on employer tax information and unemployment insurance information: https://www.azdes.gov/landing.aspx?id=4214

See also the Financial Accounting Standards Board (FASB) http://www.fasb.org for information on basic accounting principles and statements on general accounting guidelines

Where to Go For Further Assistance

Legal resources provide an outlet for aspiring entrepreneurs, small businesses and non-profits that may not have all the resources upon the initial development of social enterprises. In order to further expand within the community and increase sustainability, owners must integrate resources specific to non-profits that may often require legal advice. The sources provided have specific knowledge geared toward non-profit legal, tax and business information.

It is important to seek out guidance and talk to an attorney familiar with the laws and regulatory environment you will be operating in before you draw up your legal documents.

The following websites are great resources for seeking answers to your initial questions and helping you to find legal consultation.

http://www.cdi.coop/legalstructurequestions.html

http://www.lawforchange.org/lfc/default.asp

https://www.lawdingo.com

Arizona Foundation for Legal Services & Education

4201 N. 24th Street Suite 210
Phoenix, Arizona 85016-6288
Phone: 602-340-7366 Fax: 602-773-3105
http://www.azflse.org/
The Arizona Foundation for Legal Services & Education is organized and operated exclusively for charitable and educational purposes through fostering and maintaining the honor and integrity of the profession of the law; studying, improving and facilitating the administration of justice; promoting the study of the law and research therein; and supporting programs designed to assist in the delivery of legal services or for law-related education

Ellis Carter, Founder
Carter Law Group, P.C.
Non-profit Legal Services

Phone: (602) 456-0071
http://carternonprofitlaw.com/about/ellis-carter/
The Carter Law Group, P.C. provides advice and council to non-profit and tax exempt organizations. Ms. Carter has expertise in economic development, grant-making foundations and the movement of social enterprise. Through the Carter Law Group, P.C. website you can contact full-service representation and resources to online legal services.

Michelle Roddy
Sandra Day O’Connor College of Law
Arizona State University

1100 S. McAllister Avenue | P.O. Box 877906 | Tempe, AZ  85287
Telephone: 480.965.4151 | Fax: 480.727.8955
http://carternonprofitlaw.com/about/ellis-carter/
The Pro Bono Program links ASU law students and pro bono lawyers to Arizonans in need of legal assistance. Michelle works with a number of student-run pro bono programs including the Business Legal Assistance Program, Consumer Advocacy Protection Program, and Volunteer Legal Assistance for Artists.  Resources are limited, but Michelle may be able to connect you to a pro bono program or direct you to legal resources available in the community.

Center for Community Based Enterprise, Inc., (C2BE) is an organization dedicated to connecting communities and entrepreneurs to resources to inspire and grow “community-based enterprises” (CBEs).  One of their chief legal advisers is Deborah Groban Olson who has over 30 years experience in creating and advising employee-owned companies.
Deborah Groban Olson

1021 Nottingham Road
Grosse Pointe Park, Michigan 48230
www.esoplaw.com
dgo@esoplaw.com

313.3331.7821

For more National Resources see Consultants and Advisory Services

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