Existing user? Sign in
Share your needs with us, get contacted by law firms.
Free. Takes 2 min.
Or refine your search by selecting a city:
Refine your search by selecting a city.
Nonprofit and charitable organizations play a vital role in Illinois, serving public needs in areas such as education, healthcare, arts, social services, and advocacy. These organizations are structured and governed by both state and federal laws to ensure that they operate ethically, transparently, and in line with their chosen missions. In Illinois, nonprofit law covers the establishment, governance, tax status, fundraising activities, regulatory compliance, reporting, and dissolution of nonprofits and charities. Navigating these legal requirements is essential for organizations to enjoy the benefits of nonprofit status, including eligibility for tax exemptions and the ability to solicit charitable donations.
Working with a knowledgeable attorney can be critical for nonprofit and charitable organizations for many reasons. Common situations where legal help may be needed include incorporating the nonprofit, applying for tax exempt 501(c)(3) status, complying with state fundraising registration rules, drafting or revising bylaws and governance policies, handling employment law matters, managing donor relations, addressing conflicts of interest, and responding to investigations or audits by government agencies. An attorney can also assist with mergers, dissolutions, changes to Articles of Incorporation, or complex transactions involving grants, contracts, or property. Legal advice early in the process can help prevent costly errors, maintain compliance, and protect the organization's leadership and assets.
Illinois nonprofit and charitable organizations are governed primarily by the Illinois General Not For Profit Corporation Act of 1986. This law sets the foundation for forming, operating, and dissolving nonprofit corporations in the state. Some key legal considerations in Illinois include:
Failure to comply with Illinois and federal regulation can result in penalties, loss of tax exempt status, or even dissolution of the organization, so understanding local laws and securing professional advice when needed is crucial.
Organizations set up for religious, charitable, educational, literary, scientific, or other public benefit purposes can generally form as nonprofits under Illinois law. Examples include charities, private foundations, associations, advocacy groups, and certain clubs.
You must file Articles of Incorporation with the Illinois Secretary of State, develop bylaws, appoint a board of directors, apply for an Employer Identification Number (EIN), and take other organizational steps. Charitable organizations that solicit donations must also register with the Illinois Attorney General.
No, state incorporation does not grant federal tax-exempt status. Separate application must be made to the IRS, typically for 501(c)(3) status, to receive federal income tax exemption and eligibility for tax-deductible donations.
After securing federal tax exemption, nonprofits can apply for state income tax exemption and, if eligible, property or sales tax exemptions through the Illinois Department of Revenue. Each exemption has its own application process.
Yes. Most Illinois nonprofits must file an annual report with the Secretary of State and, if they solicit donations, an annual charitable organization registration report with the Attorney General's office. Additional federal filings, such as IRS Form 990, are also required.
Illinois law allows for reasonable compensation for services actually rendered. However, nonprofit boards must avoid excessive compensation, and best practices recommend clear policies and transparency to prevent conflicts of interest.
Organizations soliciting donations in Illinois must register with the Attorney General's Charitable Trust Bureau, renew registration annually, and provide financial disclosures. There are also rules about raffle licensing, gaming events, and commercial fundraisers.
A conflict of interest policy protects a nonprofit by addressing how potential conflicts by board members or officers are disclosed and managed. While Illinois law encourages this policy, it is a federal requirement for 501(c)(3) organizations.
Penalties can include fines, loss of tax-exempt status, liability for taxes or penalties, administrative dissolution, and, in severe cases, civil or criminal liability for officers and directors.
The organization must follow dissolution procedures outlined in its bylaws and state law, which include votes by the board, settling debts, distributing remaining assets for a lawful purpose, and filing articles of dissolution with the Secretary of State.
For individuals and organizations seeking more information or assistance, the following resources can be helpful:
If you are planning to start a nonprofit in Illinois or need legal advice for an existing organization, consider taking the following steps:
Legal guidance from a qualified attorney is often the best investment you can make in protecting your nonprofit’s mission and ensuring its long-term success in Illinois.
