Complete Guide to Nonprofit Formation and Ongoing Compliance in Erwin
Forming and maintaining a nonprofit organization in Erwin demands careful attention to state and federal rules as well as thoughtful governance documents tailored to your mission. This guide explains the steps required to establish a nonprofit corporation in Tennessee, obtain tax-exempt status where appropriate, and build internal policies that protect the organization and its board members. Whether you are launching a new community organization or formalizing an existing grassroots effort, clear legal structure and compliant practices help sustain charitable activities and donor confidence over the long term.
Getting the right legal structure and ongoing compliance processes in place reduces the risk of penalties, loss of tax benefits, and governance disputes. This overview outlines common formation choices, required filings with Tennessee agencies and the IRS, and routine compliance tasks such as annual reporting and recordkeeping. Practical attention to bylaws, conflict-of-interest policies, and fundraising regulations supports stable operations and helps volunteers and donors understand how the organization is managed and held accountable.
Why Legal Guidance Matters for Nonprofits in Erwin
Legal guidance during formation and compliance planning provides clarity about obligations and protections for board members, staff, and the organization itself. Proper formation establishes limited liability protections, clarifies governance roles, and enables access to tax benefits that support fundraising. Ongoing compliance safeguards the organization’s tax-exempt status and helps avoid fines, involuntary dissolution, or reputational harm. A well-structured nonprofit also attracts grantmakers and major donors who require clear documentation of governance practices, financial controls, and mission-focused activities.
About Jay Johnson Law Firm and Our Approach to Nonprofit Matters
Jay Johnson Law Firm serves organizations across Tennessee with practical legal guidance for business and nonprofit matters. We focus on helping clients in Erwin and surrounding communities understand formation choices, draft clear governing documents, and meet state and federal filing requirements. Our approach emphasizes straightforward explanations, timely filings, and the development of governance policies that support good stewardship. We prioritize responsive communication so board members and organizers can proceed with confidence while preserving resources for the nonprofit’s programs and mission.
Nonprofit formation in Tennessee typically begins with selecting an appropriate legal structure, most commonly a nonprofit corporation, and preparing articles of incorporation that meet statutory requirements. Organizers must adopt bylaws, appoint an initial board of directors, and obtain necessary tax registrations. For organizations seeking tax-exempt status under federal law, preparation of IRS Form 1023 or Form 1023-EZ involves demonstrating qualifying charitable, educational, religious, or other exempt purposes and providing supporting documentation on governance and finances.
After formation, compliance includes timely annual reports to the Tennessee Secretary of State, maintenance of accurate corporate records and minutes, adherence to charitable solicitation laws when fundraising, and consistent financial accounting practices. Organizations that obtain federal tax exemption must file required IRS returns and follow rules governing unrelated business income, donor acknowledgments, and private inurement. Routine compliance planning also addresses conflict-of-interest policies, document retention, and training for board members about fiduciary responsibilities.
Key Definitions: What Nonprofit Formation and Compliance Entail
Nonprofit formation refers to creating a legal entity organized for a public or mutual benefit purpose rather than private profit, typically through filing articles of incorporation under state law. Compliance encompasses the ongoing legal and regulatory obligations such as reporting, recordkeeping, and tax filings required to maintain good standing and tax benefits. Together, formation and compliance create a framework that allows an organization to operate transparently, accept donations with appropriate tax treatment, and protect those who serve on the board from certain personal liabilities when duties are carried out correctly.
Primary Elements of Forming and Maintaining a Nonprofit
The formation process usually includes drafting articles of incorporation, adopting bylaws, selecting an initial board, and obtaining an employer identification number for banking and tax purposes. Applying for federal tax exemption requires careful documentation of the nonprofit’s purpose, planned activities, and financial projections. Ongoing processes include annual filings with state authorities, IRS filings, and maintaining proper financial controls and minutes of board meetings. Effective processes also incorporate policies for conflicts of interest, document retention, and volunteer or employee management to reduce risk and support mission delivery.
Key Terms and Glossary for Nonprofit Formation
Understanding frequently used terms helps organizers and board members make informed decisions. This glossary highlights common concepts encountered during formation and compliance, including distinctions between charitable, social welfare, and membership organizations, as well as technical terms used in tax filings and governance documents. Clear definitions reduce confusion and enable leaders to communicate with attorneys, accountants, and regulators more effectively as the organization moves from concept to fully operational nonprofit.
Articles of Incorporation
Articles of incorporation are the formal documents filed with the Tennessee Secretary of State to create a nonprofit corporation. They typically state the organization’s name, purpose, registered agent, and initial directors, and they may include clauses about nondistribution of assets upon dissolution and provisions limiting director liability. Properly drafted articles form the legal basis for the nonprofit’s existence and are necessary before other registrations and tax filings can proceed, so careful attention to statutory requirements and future governance needs is recommended.
Bylaws
Bylaws are the internal rules adopted by a nonprofit’s board that govern corporate procedures such as board composition, officer duties, meeting schedules, voting thresholds, and committee structures. While articles of incorporation create the entity, bylaws provide the operational roadmap for governance and daily decision-making. Bylaws should be drafted to reflect the organization’s size and activities and updated as the nonprofit grows to ensure consistent procedures, clarify roles, and reduce disputes among volunteers, staff, and board members.
501(c)(3) and Other Tax-Exempt Classifications
Federal tax-exempt classifications, most commonly 501(c)(3), identify organizations eligible for exemption from federal income tax based on charitable, religious, educational, scientific, or similar purposes. Different sections of the Internal Revenue Code provide exemptions for diverse organization types, each with distinct rules for political activity, lobbying, and allowable activities. Choosing the correct classification affects eligibility for tax-deductible donations and imposes specific compliance obligations, including public disclosure requirements and limitations on private benefit.
Conflict-of-Interest Policy
A conflict-of-interest policy sets standards for board members and key staff to disclose financial or personal interests that could influence decision-making. Such a policy outlines procedures for disclosure, recusal from votes, and documentation of any transactions involving related parties. Implementing and following a conflict-of-interest policy demonstrates the organization’s commitment to transparent governance and helps protect the nonprofit’s tax-exempt status by showing that decisions are made in the organization’s best interest rather than for private gain.
Comparing Legal Options for New Nonprofits
Organizers should weigh different formation alternatives including nonprofit corporation, unincorporated association, and fiscal sponsorship arrangements. Incorporation offers liability protection and a clear governance structure, while unincorporated associations may be simpler initially but can expose leaders to personal liability and complicate fundraising. Fiscal sponsorship allows a project to operate under an existing nonprofit’s umbrella while easing administrative burdens, but it limits independence. Each option carries trade-offs related to liability, administrative complexity, fundraising capability, and eligibility for grants and public support.
When a Limited or Informal Approach May Be Appropriate:
Small Community Groups Starting Informally
For small volunteer-led groups that are testing a community program or coordinating occasional events, an informal structure or unincorporated association might suffice initially. This approach can minimize upfront costs and administrative tasks while organizers determine whether to scale operations. However, even small groups should keep basic records, adopt simple conflict and financial controls, and consider formalizing if they begin soliciting public donations, entering into contracts, or hiring staff in order to reduce personal risk to leaders and ensure continuity.
Short-Term Projects or One-Off Events
Short-term projects or single-event fundraisers that are unlikely to persist may not require immediate incorporation. Organizers can partner with an existing nonprofit as a fiscal sponsor or operate under a temporary, informal structure to manage receipts and expenses. This path can streamline planning and reduce paperwork while allowing the project to evaluate impact and sustainability. If the initiative evolves into a recurring program, transitioning to a formal structure will help manage liability, tax concerns, and donor expectations.
When Comprehensive Formation and Compliance Planning Is Recommended:
Long-Term Operations and Fundraising Growth
Organizations planning sustained operations, larger fundraising campaigns, or hiring staff benefit from comprehensive legal planning to ensure appropriate structure and controls. Incorporation, tax-exemption filings, detailed bylaws, and formal financial policies support scalability and donor confidence. Comprehensive planning also anticipates common pitfalls such as unrelated business income, grant restrictions, and employment law obligations, enabling leaders to focus on program delivery rather than reactive compliance crises.
Complex Programs, Grants, or Multi-State Activities
Nonprofits engaged in complex service delivery, managing large grants, or operating across state lines face additional regulatory and contractual obligations. Comprehensive legal assistance can help structure agreements with partners, draft grant-compliant policies, and address multistate registration and solicitation requirements. Proactive planning helps avoid disputes and ensures that contractual commitments align with permitted activities under the organization’s tax status, reducing the risk of losing funding or facing penalties from oversight agencies.
Benefits of a Comprehensive Formation and Compliance Strategy
A comprehensive approach aligns governance documents, financial controls, and compliance tasks so the organization can operate transparently and attract support. Clear policies reduce board disputes, protect volunteers and directors from personal liability, and make it easier to secure grants or major gifts that require documented internal controls. Investing in strong foundations at the start reduces the likelihood of costly corrective measures later and helps preserve time and resources for program activities rather than administrative remediation.
Long-term benefits also include more reliable reporting to funders and oversight agencies, an improved reputation in the community, and the capacity to expand services responsibly. Predictable compliance routines and accurate financial records support strategic decision-making and help board members fulfill fiduciary duties. For mission-driven groups, these structural benefits protect the organization’s ability to serve its constituency and ensure donor contributions are used as intended.
Stronger Donor Confidence and Funding Opportunities
Carefully documented governance and financial practices signal reliability to donors, foundations, and government funders. Demonstrating compliant handling of donations, transparent reporting, and adopted policies increases the likelihood of receiving grants and large gifts. When potential funders can review accurate bylaws, auditable financial statements, and written procedures for handling conflicts and restricted funds, they are more comfortable supporting the organization’s programs and making multi-year commitments that help sustain operations.
Reduced Risk and Clear Operational Guidelines
Detailed bylaws, policies, and compliance calendars reduce operational risk and help avoid errors that could lead to penalties or loss of tax benefits. Clear guidelines for decision-making and document retention help boards and staff act consistently, especially during transitions or growth. Having these frameworks in place supports efficient onboarding of new board members and staff, enabling continuity in governance and allowing leadership to focus on mission delivery with fewer legal or administrative interruptions.
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Practical Tips for Nonprofit Formation and Compliance
Start with Clear Purpose and Governance
Begin formation by articulating a concise mission statement and drafting bylaws that fit the organization’s size and activities. Clear governance provisions reduce ambiguity around board responsibilities, meeting frequency, officer roles, and voting procedures. Investing time in these foundational documents prevents disputes and supports consistent decision-making, which is especially helpful as the organization expands. Well-constructed bylaws also facilitate transparent communication with funders and volunteers who want assurance that the organization follows stable, documented practices.
Maintain Organized Financial Records
Adopt Conflicts and Document Policies Early
Adopt a conflict-of-interest policy and document retention schedule soon after formation to safeguard governance integrity and legal compliance. These policies protect the organization when potential conflicts arise and demonstrate to regulators and donors that the nonprofit prioritizes transparent decision-making. A document retention plan also clarifies which records must be kept and for how long, facilitating audits and protecting institutional memory. Implementing these policies early helps embed consistent practices among volunteers, staff, and board members.
When to Consider Professional Formation and Compliance Assistance
Seek assistance when organizers encounter unfamiliar legal terms, expect to solicit donations publicly, plan for paid staff, or intend to apply for federal tax exemption. Professional help can streamline required filings, reduce the risk of technical errors that delay or jeopardize tax-exempt status, and ensure governance documents align with long-term plans. Assistance is especially valuable when applying for grants or entering contracts where clear organizational status and documented policies are prerequisites for funding and partnerships.
Consider formal guidance if the organization anticipates multiple revenue streams, complex programs, or operations that cross state lines. Legal review can address multistate registration requirements, fundraising compliance, and employment obligations. Getting these matters right from the start helps the board focus on mission-driven activities while reducing exposure to penalties or misunderstandings with donors and partners. Guidance also supports consistent implementation of internal controls and prepares the organization for growth and increased public scrutiny.
Common Situations That Lead Groups to Seek Formation and Compliance Help
Typical triggers include planning to accept public donations, applying for grants, hiring staff or contractors, or formalizing a volunteer-led program into a lasting organization. Other circumstances are dealing with gift restrictions, handling donations of property, or responding to a request from a potential funder for governance documentation. Any circumstance that increases financial complexity or public exposure is a reason to review the entity’s legal structure and compliance practices to avoid surprises down the road.
Accepting Public Donations or Grants
When a group begins soliciting donations from the public or seeking grant funding, it must ensure proper registration and financial transparency. Funders and regulatory bodies typically expect to see a formal structure, audited or reviewed financial statements for larger organizations, and policies that safeguard donor restrictions. Preparing these materials ahead of time improves credibility and helps prevent delays or refusals when applying for grants or philanthropic support.
Hiring Staff or Entering Contracts
Transitioning from an all-volunteer organization to one that pays employees or signs leases introduces employment and contract obligations. Having a formal legal structure, appropriate insurance, and clear financial controls protects the organization and the individuals who manage it. Employment laws, payroll taxes, and contractual liabilities require careful attention so that the nonprofit remains compliant while expanding program delivery through paid positions and formal agreements.
Receiving a Significant Gift or Property Donation
Accepting a major cash gift, endowment, or real property donation can create reporting obligations and fiduciary considerations that require formal policies. The organization should assess any conditions attached to the gift, confirm it aligns with the charitable purpose, and document the intended use. Legal review can advise on accepting restricted gifts, ensuring compliance with donor intent, and making necessary filings to protect both the nonprofit and its leadership.
Nonprofit Formation and Compliance Services Serving Erwin
Jay Johnson Law Firm assists nonprofit organizers in Erwin and surrounding areas with formation filings, tax-exemption applications, and development of governance policies. Our services include drafting articles of incorporation and bylaws, preparing documentation for federal tax-exempt status, and advising on state registration and fundraising compliance. We aim to make the legal aspects of nonprofit startup and ongoing compliance clear and manageable so leaders can focus on advancing their mission in the community.
Why Choose Jay Johnson Law Firm for Nonprofit Legal Support
Our firm focuses on clear, practical legal counsel that aligns with each organization’s goals and resources. We guide clients through the formalities of incorporation, assist with tax-exemption applications, and help the board establish policies that support good governance. Timely filings and sound documentation protect the organization and enable leaders to demonstrate transparency to donors and funders, which helps build sustainable community support.
We emphasize straightforward explanations and responsive service so organizers understand their obligations and options at each step. Our work includes drafting tailored bylaws and policies, advising on fundraising and solicitation requirements, and coordinating with accountants when financial statements or tax filings are needed. This collaborative approach helps boards make informed choices about structure, risk management, and compliance priorities.
By addressing formation and compliance early, organizations reduce the likelihood of costly corrections or interruptions later. Our role is to provide practical legal support that keeps the nonprofit in good standing, preserves donor trust, and allows staff and volunteers to focus on program delivery. We work with leaders in Erwin to create governance frameworks that promote mission success while meeting state and federal obligations.
Contact Jay Johnson Law Firm to Discuss Your Nonprofit Needs
How Our Firm Handles Nonprofit Formation and Compliance
Our process begins with an initial consultation to understand the organization’s mission, planned activities, and leadership structure. We then recommend an appropriate legal form and outline the steps to incorporate in Tennessee and apply for federal tax-exempt status if applicable. From drafting articles and bylaws to preparing IRS filings and state registrations, our service includes a checklist of required documents and timelines so organizers know what to expect and can plan accordingly.
Step 1: Formation and Initial Governance
During formation we prepare and file articles of incorporation with the Tennessee Secretary of State, assist in adopting bylaws, and help establish initial board procedures. We ensure required language is included where necessary for tax-exempt purposes and advise on selecting a registered agent and initial directors. This stage also covers obtaining an Employer Identification Number, setting up basic financial systems, and advising on initial governance meetings and minutes.
Drafting and Filing Articles of Incorporation
We draft articles of incorporation that satisfy state requirements and reflect the organization’s mission and dissolution provisions. Proper drafting helps preserve eligibility for tax-exempt status and sets the foundation for sound governance. Once articles are approved and filed, the nonprofit exists as a corporate entity in Tennessee and can move forward with internal organization and registrations needed for operations and fundraising.
Adopting Bylaws and Establishing Board Practices
We assist the board in drafting bylaws that define director responsibilities, meeting procedures, officer roles, and voting rules. Bylaws provide practical guidance for daily management and help protect the organization when disagreements arise. Establishing consistent board practices and documenting initial resolutions builds institutional stability and prepares the nonprofit to engage with funders, volunteers, and partners confidently.
Step 2: Tax-Exemption and Registrations
After formation, we help prepare federal tax-exemption applications when the organization qualifies and wishes to obtain treatment such as 501(c)(3) status. We also advise on state tax registrations, sales tax exemptions where appropriate, and Tennessee charitable solicitation requirements. Preparing complete and accurate filings reduces processing delays and helps ensure the organization meets the conditions necessary for tax-exempt recognition and related benefits.
Preparing IRS Filings and Supporting Documentation
We prepare the IRS application package, including narratives describing activities, financial projections, and necessary attachments to support the organization’s qualifying purpose. Careful documentation of governance practices and financial plans is essential for a smooth review. We also review and advise on proper classifications and answer questions about ongoing reporting obligations after exemption is granted.
State Registrations and Fundraising Compliance
We ensure necessary state registrations are completed, including charitable solicitation registration when required, and advise on compliance with Tennessee reporting and renewal requirements. For organizations fundraising across state lines, we provide guidance on multistate registration obligations and best practices to maintain compliance while minimizing administrative burdens. Proper registration protects the organization and promotes confidence among donors and grantmakers.
Step 3: Ongoing Compliance and Governance Support
Ongoing support includes preparation of annual corporate filings, assistance with IRS annual returns, and advice on governance matters such as conflict-of-interest disclosures and board transitions. We help create compliance calendars, review significant transactions, and advise when legal or regulatory issues arise. This ongoing relationship helps organizations remain current with obligations and respond proactively to operational changes or funding opportunities.
Annual Filings and Recordkeeping
We advise on the timing and content of annual state filings, the requirements for federal annual returns, and methods to maintain organized corporate records. Consistent recordkeeping simplifies audits, annual reporting, and grant compliance. We can assist with preparing the necessary documentation and recommend internal processes to ensure board minutes, financial records, and donor acknowledgments are maintained appropriately.
Policy Updates and Board Advising
As programs evolve, we review and update bylaws and policies to reflect operational realities and regulatory changes. We provide guidance to boards on fiduciary duties, potential conflicts, and structural changes like mergers or dissolution. Timely legal input helps the board make decisions that protect the organization’s mission and maintain compliance with applicable laws and funding conditions.
Frequently Asked Questions About Nonprofit Formation and Compliance
What are the first steps to form a nonprofit in Tennessee?
To form a nonprofit in Tennessee, begin by clarifying your organization’s purpose and drafting articles of incorporation that meet state statutory requirements. These articles typically include the organization’s name, purpose, registered agent, and initial board members. Filing with the Tennessee Secretary of State establishes the corporation and allows you to open bank accounts and enter into contracts in the organization’s name. After incorporation, adopt bylaws, appoint officers, and obtain an Employer Identification Number to handle banking and tax matters.It is also important to develop basic financial controls and recordkeeping practices at the outset. Consider whether you will seek federal tax-exempt status, as that decision affects required language in governing documents and the need for additional documentation. Early attention to governance and bookkeeping makes subsequent registrations and funding applications more straightforward and supports trust with donors and partners.
How do we apply for federal tax-exempt status?
Applying for federal tax-exempt status involves preparing and submitting the appropriate IRS application form based on the organization’s activities and expected revenues. Most charitable organizations seeking recognition under the Internal Revenue Code use Form 1023 or the streamlined Form 1023-EZ, depending on eligibility. The application requires a description of activities, financial statements or projections, governance documents, and statements that explain how the organization’s activities further its exempt purposes.Completing the application accurately with supporting documentation reduces delays and increases the chance of approval. The IRS review can take time, so submitting a thorough application and responding promptly to any follow-up requests is important. After approval, the organization must maintain compliance with annual reporting and operational limits to preserve the tax-exempt status.
What ongoing filings are required after formation?
After formation, nonprofits must maintain corporate records and meet state filing requirements such as annual reports to the Tennessee Secretary of State. Additionally, organizations with federal tax-exempt status must file required annual returns with the IRS, such as Form 990, Form 990-EZ, or Form 990-N, depending on gross receipts. Maintaining accurate bookkeeping and documenting board meetings and major decisions supports these filings and provides transparency for stakeholders.Other ongoing obligations include compliance with charitable solicitation rules when fundraising, employment tax filings if staff are hired, and adherence to policies on donor restrictions and unrelated business income. Establishing a compliance calendar and delegating responsibility for routine filings helps the organization remain in good standing and avoid penalties.
Do we need a conflict-of-interest policy and why?
A conflict-of-interest policy is an essential governance tool that requires directors and key staff to disclose personal or financial interests that could influence decision-making. The policy typically outlines procedures for disclosure, recusal from votes, and documentation of any related-party transactions. Adopting and following such a policy demonstrates to donors and regulators that the organization prioritizes transparency and proper stewardship of resources.When conflicts are managed through clear policies, the organization reduces the risk of self-dealing and preserves public trust. Effective implementation includes regular disclosure statements, board training about the policy, and consistent documentation whenever potential conflicts arise so decisions are well-recorded and defensible.
Can our nonprofit hire employees and what should we consider?
A nonprofit can hire employees, but doing so introduces obligations including payroll tax withholding, employment law compliance, and worker classification considerations. Organizations should set up payroll systems, obtain appropriate insurance, and adopt employee policies such as job descriptions, performance evaluations, and leave rules. Complying with federal and state employment regulations from the outset helps avoid penalties and ensures fair treatment of staff.Before hiring, consider the impact on governance and finances, including budget forecasting and benefits administration. Proper employment practices include documenting compensation decisions, adopting conflict-of-interest procedures, and maintaining clear financial controls to separate payroll responsibilities from other financial duties.
What are the rules for soliciting donations in Tennessee?
Solicitation of donations in Tennessee may require registration with state agencies, depending on the organization’s fundraising activities and whether contributions are solicited across state lines. Organizations should verify registration requirements before engaging in broad public solicitation or large-scale campaigns. Clear donor receipts and procedures for handling restricted gifts also support compliance and donor confidence.In addition to state requirements, compliance with IRS rules for tax-exempt organizations is essential. Proper acknowledgment of donations and adherence to restrictions helps retain tax benefits for donors and prevents misunderstandings. Organizations should maintain records of donor communications, gift restrictions, and fundraising expenses to support reporting and grant applications.
How does fiscal sponsorship work for new projects?
Fiscal sponsorship allows a new project to operate under the legal and tax umbrella of an existing nonprofit, which can simplify administration and make fundraising easier while the project tests its viability. Under a sponsorship arrangement, the sponsor typically accepts donations, manages finances, and provides oversight while the project focuses on program delivery. Careful written agreements define roles, fee structures, reporting requirements, and liability allocation between the sponsor and the project.This arrangement is useful for initiatives that are not yet ready to incorporate or apply for tax-exempt status. It is important to select a sponsor with compatible mission and sound financial practices and to clearly document expectations to avoid misunderstandings about control, branding, and fiscal responsibilities.
What should be included in nonprofit bylaws?
Bylaws should address core governance issues such as board size and terms, officer roles and duties, meeting procedures, quorum and voting requirements, committees, conflict-of-interest policies, and procedures for amendment and dissolution. Well-drafted bylaws provide clarity on operations and prevent disputes by setting predictable processes for decision-making. Including provisions for emergency meetings and remote participation is often helpful for modern governance needs.Bylaws should be tailored to the organization’s size and activities and revisited periodically to reflect operational changes. Clear bylaws combined with board-adopted policies for financial controls and personnel matters create a comprehensive governance framework that supports accountability and consistent leadership transitions.
When should an organization incorporate rather than remain informal?
Incorporation is advisable when a group plans to accept public donations, enter into contracts, hire employees, or wants to limit personal liability for board members and organizers. Incorporation provides a formal legal identity that can hold property, negotiate agreements, and receive grants. It also clarifies governance through articles of incorporation and bylaws, which supports fundraising and public trust as the organization grows.Remaining informal may work for short-term or low-risk volunteer projects, but organizers should monitor changes in scope, funding, and risk. When activities expand or financial matters become significant, transitioning to an incorporated entity reduces personal exposure and facilitates compliance with fundraising and tax rules.
How do we accept and manage restricted gifts or donations of property?
When accepting restricted gifts or property donations, the organization should document donor restrictions and ensure the gift aligns with the nonprofit’s mission. Written donor agreements or gift acknowledgment letters that specify restrictions help prevent misunderstandings about intended use. Legal review can advise on restrictions that are burdensome or impractical and recommend ways to negotiate terms that protect the organization’s ability to carry out its mission.For property donations, due diligence is important to assess maintenance costs, title issues, or environmental concerns. Recording the acceptance process, acknowledging the donor, and ensuring clear bookkeeping for restricted funds supports transparency and compliance with donor intent and applicable reporting obligations.