A Plan To Be Successful: SUD treatment facilities

Does the Plan call for the Creation of a Non-Profit?

4 fundamental issues will dictate the course of action:

- How many benefits can the beneficiary expect from the non-profit organization?

- Are the expected benefits drawn from the non-profit activity in scale with the beneficiary entity's overall business level?

- Can the beneficiary entity afford the non-profit’s set-up and operating costs until the benefits legally drawn out of the non-profit are sufficient to cover such costs?

- Does the beneficiary entity sponsoring the non-profit organization’s launch and operations have quick access to (i) a knowledgeable accountant, (ii) a knowledgeable “manager,” and (iii) a knowledgeable fundraiser?

To answer these questions, management must have an in-depth analytical knowledge of the beneficiary entity as well as as prudent budgeting standards¹.

What are the Operational Relationships between the Non-Profit Organization and the Beneficiary Entity?

There are four major principles embodied in federal and state statutes and regulations covering non-profit organizations²:

1. Outside of the non-profit organization general and special purposes, none of the non-profit organization’s activities can benefit individuals or for-profit entities.

2. All transactions between the non-profit and any entity – and even more so when the sole / major beneficiary entity -- must be an arms’ length transaction.

3. The requirement for arms’ length transactions does not prohibit transactions between a non-profit and a for-profit entity (even if this entity benefits from the non-profit organization).

4. To ensure that such transactions do not unduly profit individuals and/or organizations, non-profit organizations must develop specific procedures covering disclosures and conflicts of interests (The non-profit governing body is held to high standards of implementation and enforcement by IRS and State tax authorities ).

What are the Financial Relationships between the Non-Profit and the For-Profit Entity?

When it comes to financial relationships between a beneficiary entity and a non-profit, the standards guaranteeing total independence are higher than operational relationships.

¹ For more details, please visit (7seasventures)

² For more details, please visit ( 7seasventures )

- It is a prerequisite for the non-profit organization to have its controlling body (Board of Directors) and officers (vice-president, secretary, treasurer) completely independent from family members' control and/or beneficiary entity

- It is a prerequisite for the non-profit organization to have its complete set of books and records.

- It is a prerequisite for the non-profit organization to have its own bank accounts, brokerage accounts, and credit card accounts.

- It is a prerequisite for the non-profit organization to maintain its own payroll records for its employees.

- Out of caution, non-profit organizations record all financial movements in compliance with GAAP.

- Strict adherence to the non-profit organization by-laws is mandatory.

- All financial movements between non-profit organizations and insiders must be disclosed and treated in a manner consistent with the organization’s purpose and founding documents (articles of incorporation and by-laws).

One Last Word about Non-Profit Organizations’ Regulations

Non-strict compliance with IRS and State regulations covering non-profit organizations may lead to deductibility disqualification (which can lead to severe financial consequences) and also to severe penalties since documents filed with the IRS and State fiscal authorities are filed under penalty of perjury.