Washington Nonprofit Handbook 2018 Edition

1 Washington Nonprofit Handbook : How to Form and Maintain a Nonprofit Corporation in Washington State July 2018 Edition Published by Wayfind In Partnership with Washington Nonprofits and Washington State Office of the Secretary of State Acknowledgements We wish to express our gratitude to the Advisory Committee, authors and editors of the July 2018 Edition of the Washington Nonprofit Handbook . This book was a collaborative project that could not have been accomplished without the good work of all its contributors. Advisory Committee Judith Andrews Willa Osborn Nancy Bacon Laura Pierce Putnam Barber Tony Ramsey Joanna Plichta Boisen Cory Sbarbaro Lorri Dunsmore Brenda Tausch Lapora Jodi Nishioka Authors Judith Andrews Jaimie Lanier Nancy Bacon David Lawson Putnam Barber Danny Lisa Joanna Plichta Boisen Lindsay McAleer Jeff Brennan Anthony (Tony)

2 McCormick Howard Donkin Jodi Nishioka Lorri Dunsmore Willa Osborn Scott Galloway Cory Sbarbaro Bruce Goto Lisa Schaures Mark Hugh Nancy Williams Sarah Kuipers LaVerne Woods Author and editor biographies can be found in Appendix A. We would like to thank Document Processing at Foster Pepper PLLC for their extensive editorial and word processing support. We would also like to thank Lisa Durant for her graphic design skills in designing the Washington Nonprofit Handbook cover and Lane Powell PC for donating Lisa s time. Finally, thank you to Washington Nonprofits and the Washington Office of the Secretary of State for their editorial and financial support.

3 Judith Andrews Joanna Plichta Boisen Jodi Nishioka Lead Editors Washington Nonprofit Handbook , July 2018 Edition Publisher s Note Wayfind would like to give special thanks to lead editors, Judy Andrews and Joanna Plichta Boisen, for partnering with Wayfind on the revision of the Washington Nonprofit Handbook (July 2018 Edition ). Content, integrity and writing quality were ensured because of Judy and Joanna s knowledge and dedication to this project. We would also like to thank Willa Osborn, Pro Bono Fellow at Foster Pepper for her time and editing skills to make sure that all of the chapter references and links were accurate.

4 Wayfind would also like to acknowledge Washington Nonprofits for their on-going partnership with Wayfind to develop high quality learning tools, including the Washington Nonprofit Handbook . The Introduction to the Handbook , was based on the Starting a Nonprofit toolkit, authored by Nancy Bacon, Director of Learning and Engagement at Washington Nonprofits. Along with Nancy, Laura Pierce, Executive Director, provided critical input to the Washington Nonprofit Handbook . We are grateful for their ongoing support and commitment to the Nonprofit sector.

5 Finally, Wayfind would like to thank the Washington Office of the Secretary of State, Corporations and Charities Division, for its support in developing educational tools like the Handbook and for its commitment to creating a thriving environment for Nonprofit organizations in our state. Resources like this one make a meaningful difference in the Nonprofit sector and beyond. Jodi Nishioka Executive Director Wayfind Cautionary Note This Handbook contains information about the laws impacting Nonprofit organizations in Washington . Legal information is not the same as legal advice (which involves applying laws to particular individuals and organizations and their unique circumstances).

6 It is always a good idea to consult with an attorney to obtain advice as to how the law should be interpreted in light of the particularities of you, your organization and your situation. You should be aware that the laws impacting Nonprofit organizations change over time. The information contained in this Handbook may become out of date. This Handbook is only partially revised. All chapters involving the Washington Nonprofit Corporation Act (RCW ) have not been materially revised because the statute has not changed since the 2009 Edition . We do expect the Washington Nonprofit Corporation Act to be revised by the Washington State Legislature in the near future and we will revise those chapters at that time.

7 All other chapters have been revised. Copyright 2018 Wayfind. All rights reserved. This Handbook is available for personal use by downloading and printing from the websites of Wayfind ( ), Washington Nonprofits ( ) and Washington State Office of the Secretary of State ( Washington Nonprofit Handbook -i- 2018 TABLE OF CONTENTS Page PART 1. THERE ARE MANY WAYS TO DO GOOD IN THE WORLD .. 2 CHAPTER 1. What is a Nonprofit ? .. 2 CHAPTER 2. Are You Sure You Want to Do This?.. 3 CHAPTER 3. Alternatives to Incorporating .. 4 CHAPTER 4. Importance of Formality.)

8 5 CHAPTER 5. Early Decisions .. 6 PART 2. HOW TO FORM A Nonprofit .. 9 CHAPTER 6. Common Nonprofit Organizational Structures .. 9 CHAPTER 7. The Washington Nonprofit Corporation Act (RCW ) .. 11 CHAPTER 8. Pre-Incorporation Issues .. 12 CHAPTER 9. Nuts and Bolts of Incorporating .. 14 CHAPTER 10. The Organizational Meeting and Post-Incorporation Tasks .. 27 PART 3. GOVERNANCE AND OPERATIONS .. 32 CHAPTER 11. Importance of Acting Like a Corporation .. 32 CHAPTER 12. Function and Authority of the Board of Directors .. 34 CHAPTER 13. Duties and Obligations of Board Members to the Corporation.

9 40 CHAPTER 14. The Role of the Executive Director .. 45 CHAPTER 15. Board Development .. 48 CHAPTER 16. Annual Reporting Requirements .. 50 CHAPTER 17. Entities to Report as Charitable Trusts .. 51 CHAPTER 18. Amending Governing Documents .. 52 CHAPTER 19. Sarbanes-Oxley Document Retention and Protections for Whistleblowers .. 54 CHAPTER 20. Exposure and Risks of Directors and Officers .. 56 CHAPTER 21. Directors and Officers Insurance .. 59 TABLE OF CONTENTS (continued) Page Washington Nonprofit Handbook -ii- 2018 PART 4. OBTAINING RECOGNITION AS A CODE SECTION 501(C)(3) ORGANIZATION.

10 62 CHAPTER 22. Considerations in Determining Whether (and When) to Seek Code Section 501(c)(3) Status .. 62 CHAPTER 23. Applying with the Form 1023EZ .. 70 CHAPTER 24. Assembling Your Form 1023 Application .. 72 CHAPTER 25. Obtaining Recognition for a Publicly Supported Charity .. 89 CHAPTER 26. IRS Processing of Exemption Applications .. 89 PART 5. MAINTAINING FEDERAL TAX-EXEMPT STATUS FOR YOUR 501(C)(3) ORGANIZATION .. 93 CHAPTER 27. Continuing Obligations Under Federal Tax 93 CHAPTER 28. Charitable Purposes .. 94 CHAPTER 29. Private Inurement .. 95 CHAPTER 30.