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Nonprofit and charitable organizations play an important role in Maryland, serving a wide variety of community, social, educational, and religious needs. Nonprofits in Maryland are regulated at both the state and federal levels, and must comply with specific legal requirements to secure and maintain their nonprofit status. In Maryland, these organizations typically form as nonprofit corporations under state law, and many also seek recognition as 501(c)(3) organizations from the Internal Revenue Service, allowing them to receive tax-deductible contributions. Maryland law covers regulations around formation, governance, tax exemptions, charitable registrations, and ongoing reporting to ensure accountability and transparency in the sector.
A lawyer can provide vital assistance in various situations involving Maryland nonprofit and charitable organizations. Common reasons to seek legal help include:
- Forming a new nonprofit organization and choosing the appropriate legal structure. - Applying for federal tax-exempt status and state-level exemptions. - Drafting or reviewing bylaws, conflict of interest policies, and organizational documents. - Advising on board governance and fiduciary duties. - Navigating annual reporting requirements and legal compliance. - Handling mergers, dissolutions, or reorganizations. - Addressing disputes among board members, staff, or with donors. - Responding to state or federal investigations, audits, or enforcement actions. - Advising about fundraising laws, charitable solicitation, and registration requirements. - Ensuring proper handling of grants, donations, and restricted funds. A lawyer can help nonprofits operate within the law and reduce the risk of costly mistakes or penalties.
Key aspects of Maryland law relevant to nonprofit and charitable organizations include:
- Nonprofits are formed under the Maryland Corporations and Associations Article. - To solicit charitable donations in Maryland, organizations must register with the Office of the Secretary of State, Charitable Organizations Division. - Maryland provides certain tax exemptions for qualifying nonprofits via the Maryland Department of Assessments and Taxation. - Nonprofits must file articles of incorporation, bylaws, and obtain necessary licenses or permits depending on activities. - There are strict reporting and renewal requirements for charitable registration and annual reports. - Board members must comply with fiduciary duties of care, loyalty, and obedience. - Maryland law requires specific conflict of interest policies and accurate record-keeping. - Charitable gaming, fundraising events, and raffles may require additional approvals. - Employment laws apply to nonprofit organizations regarding staff and volunteers. The regulatory environment is complex, making legal guidance valuable at all stages of a nonprofit's life cycle.
To start a nonprofit in Maryland, you typically incorporate as a nonprofit corporation with the Maryland Department of Assessments and Taxation, draft bylaws, appoint a board of directors, and apply for federal and state tax-exempt status. You may also need to register for charitable solicitation before fundraising.
Yes, most charitable organizations must register with the Charitable Organizations Division of the Maryland Secretary of State before soliciting donations in the state. Some exemptions exist for religious or educational institutions.
To maintain good standing, nonprofits must file annual reports and pay fees to the state, update charitable registration annually, and comply with all local, state, and federal laws, including proper governance and record-keeping.
No. Board members (directors and officers) have legal fiduciary duties to the nonprofit, while general volunteers do not. However, volunteers should still act in accordance with the organization’s mission and policies.
Generally, board members are not personally liable as long as they act in good faith and fulfill their duties. However, they can be held liable for acts of gross negligence, willful misconduct, or fraud.
No. After obtaining IRS determination as a tax-exempt organization, you must also apply separately for Maryland state income tax exemption and may need to apply for sales and property tax exemptions.
Directors may be paid reasonable compensation for services, but not merely for serving as board members. Overcompensation or conflicts of interest must be avoided to retain tax-exempt status and comply with Maryland law.
Maryland nonprofits must keep articles of incorporation, bylaws, meeting minutes, financial statements, a record of board actions, and documents related to fundraising and compliance. These should be readily accessible for inspection.
Dissolution involves board and membership approvals, filing articles of dissolution with the state, notifying creditors and the IRS, transferring or distributing remaining assets according to law, and submitting final filings and reports.
Failure to register or file reports can result in state fines, loss of the ability to solicit donations, revocation of tax-exempt status, or even dissolution of the organization.
- Maryland Office of the Secretary of State, Charitable Organizations Division - Maryland Department of Assessments and Taxation - Maryland Nonprofits (statewide association offering support and training) - Internal Revenue Service (IRS) Exempt Organizations Division - Maryland Legal Aid organizations and pro bono legal service providers - National Council of Nonprofits These resources can offer guidance, applications, forms, and additional information for your nonprofit or charitable organization.
If you need legal advice or representation for a nonprofit or charitable organization in Maryland, start by gathering your organization’s foundational documents, such as your articles of incorporation, bylaws, and tax-exempt status determination. Outline your questions or concerns. Then, consider consulting an attorney with experience in Maryland nonprofit law or reaching out to nonprofit support networks like Maryland Nonprofits. Remember, legal issues can arise at any stage of an organization’s development, so seeking professional advice early can prevent costly mistakes and help your nonprofit fulfill its mission effectively.
