Like any business, nonprofit organizations face a wide array of risks. Some risks are organizational, while others are legal. One of the best ways to protect your nonprofit from risks is understand what these risks are and how to manage them. To help, Daic Law offers a brief discussion of 5 legal risks for nonprofit boards and how to get help.
5 Legal Risks for Nonprofit Boards
1. Social Media
For nonprofits, social media can be a great asset for networking, exposure, and communication. Unfortunately, naivety or misuse can strip the value from social media leaving your business vulnerable to a variety of risks. Some examples of these risks include:
- Copyright or trademark infringement when sharing presentations or materials.
- Privacy violations when researching potential or current employees.
- Backlash from posts or comments shared by employees that could negatively impact the business.
That’s right – bullying is a definite risk when hiring new employees. According to the Workplace Bullying Institute, as much as 38 percent of employees report being bullied at some point. Most states have implemented the Healthy Workplace Bill designed to make bullying unlawful. The bottom line is that nonprofit officials and boards are often held responsible for unlawful actions by their employees.
3. Tax Status
Section 501(c)(3) tax-exempt status is important for nonprofits. It does, nonetheless, have some drawbacks and risks. For example, tax-exempt status often has restrictions for income, meetings, educational programs, fundraising, and political activities. If your nonprofit doesn’t comply with applicable restrictions, your business could lose its tax-exempt status or face other penalties.
4. Synchronicity of Policy and Practice
It is important for nonprofit boards and all parties employed by the nonprofit embrace the mission and goals of the organization and reflect them in their practices. Any nonprofit is placed at risk when the governance operations and practices do not align. To avoid these risks, conduct periodic reviews of governance documents, requirements, and regulations, and ensure that all parties are behaving accordingly.
5. Relying on Others
It is perfectly normal for nonprofits to utilize partnerships, and in many cases is necessary. However, the risk here lies in when the nonprofit relies too much on the goodwill, nature, and insurance of partners and does not stand confidently on their own. Nonprofit boards should be careful to draft and review contracts or partnership agreements that do not put them at risk for partnerships and reliance gone awry.
Getting Help with Risks for Nonprofit Boards
If you have questions about these or other risks facing nonprofits, contact Daic Law today for a consultation with our nonprofit law attorney. Send us an email at firstname.lastname@example.org or call our office at 877-893-6040.