Build the legal framework: Legal logistics

Converting to a nonprofit is a legal change that affects how you handle assets from your for-profit and the ownership stake of owner-investors. Get legal advice early.

You’ll want to understand the issues for your particular news organization, and the requirements of your local state law on incorporation and fundraising, as well as federal laws.

INN cannot provide this legal advice, but on our INN.org legal resources page you can find referral links to some law firms we work with. You also can find nonprofit law specialists through state nonprofit associations. Find yours through the National Council of Nonprofits.

Owners who have converted have found legal help in a variety of ways, from asking contacts at existing nonprofit organizations in their community, to doing online searches for “nonprofit startups.”

The cost of setting up a new organization and managing the asset transfer depends on several variables, with the simplest asset transfer running about $5,000 to $15,000.

Here’s what an attorney is going to want from you in order to file the application for nonprofit status, called form 1023: 

• Your strategic plan: A business plan that articulates your mission statement, primary activities and transition issues. What is your for-profit corporate structure; who are your stakeholders, major lenders? Are there any conflicts of interest or interested parties? Do you plan to continue to lead the organization, or are you retiring and planning a handoff period with a new editor or publisher?

• A three-year financial plan: Where is your new money coming from (subscriptions, membership, foundations, donors, etc.) The form 1023 includes a model of what you expect in terms of revenues and expenses, including programmatic and nonrelated income.

• A financial valuation: That includes assets, including real property and equipment, your brand/masthead, lists of subscribers and advertisers, newspaper archive and stakes in any events or ongoing programs vs. liabilities of debts, notes and liens.

• Governance: Who’s going to be on your board and what your staffing structure is going to look like; your conflict of interest and other policies.

Resources

• Your state newspaper associations for resources on converting to a nonprofit, references for local attorneys familiar with the process, and donor or grant suggestions
• The Digital Media Law Project at Harvard University’s Berkman Center for Internet & Society offers an overview of nonprofit legal issues, with links to further resources. The project closed in 2014 but the overview still stands as a good resource. 
  • Definition of nonprofits, overview  
  • Section on forming a nonprofit, step by step, with links to further resources
  • Understanding IRS issues around political activity 
• Thomson Reuters Foundation and Morrison & Foerster LLP, Social Enterprise Structures in the U.S.
• Council of Nonprofits, State by state filing requirements 
• IRS, state incorporation forms and registration requirements by state