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Ep 14 - Understanding the Differences Between Charities and Private Foundations With Danika Mendrygal

In this episode, we delve into a crucial aspect of the nonprofit world: understanding the distinctions between charities and private foundations. Joining us is the esteemed Danika Mendrygal, Founder and CEO of Mendrygal Law, based in Dallas, Texas.

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Introducing Genevra Williams


Today, we delve into a crucial aspect of the nonprofit world: understanding the distinctions between charities and private foundations. Joining us is the esteemed Danika Mendrygal, Founder and CEO of Mendrygal Law, based in Dallas, Texas.

Danika Mendrygal, a prominent figure in the nonprofit legal sphere, shares her journey from her beginnings at a large wealth management firm in Dallas to establishing her own boutique law firm. Initially assigned what she affectionately terms "pet-bono work," Danika's dedication to the nonprofit sector burgeoned, leading her to found Mendrygal Law to further serve nonprofits. Her firm, initially envisioned as a solo practice, has flourished, now boasting a team of attorneys dedicated to supporting the nonprofit sector in Texas.

Navigating State Transitions: A Legal Perspective

To start, May and Danika discuss how transitioning a nonprofit organization between states can be a labyrinth of legal intricacies. They shed light on this often daunting process, emphasizing the necessity of legal guidance tailored to the nonprofit sector's unique requirements. Danika underscores the importance of local legal expertise where you are currently located AND where you are relocating to when going through this process, because all states have different regulations and the last thing you want is to miss something and have compliance issues down the road.

Unveiling the Divide: Charities vs. Private Foundations

In the realm of nonprofits, the distinctions between charities and private foundations are pivotal yet often misunderstood. While both fall under the 501(c)(3) designation, Danika elucidates the critical disparities. Charities, she explains, garner public support, while private foundations rely on centralized funding sources, such as individuals or families. Danika cautions against the common pitfall of misclassifying one's organization on the 1023 application, stressing the necessity of meticulous attention to detail in IRS filings.

Necessary Precautions for Private Foundations

For nascent private foundations, understanding the regulatory landscape is paramount. Danika emphasizes the importance of preemptive legal counsel, as innocent missteps can incur punitive repercussions. She dispels common misconceptions surrounding foundation operations, affirming the permissibility of fundraising and board member cross-over, as well as there not being as many limitations as some founders think. Acknowledging the complexity of nonprofit governance, Danika advocates for proactive legal consultation from the get-go, as it can save you and your organization a headache in the future.


Parting Words: Proactive Compliance and Resource Utilization

As our discussion draws to a close, May and Danika offer invaluable parting advice. They advocate for proactive engagement with professional firms well-versed in nonprofit intricacies, essentially treating these services as preventive medicine for organizational health. Additionally, they encourage nonprofit leaders to leverage authoritative resources, such as the IRS website, for accurate compliance guidance. Getting your information from governing body websites is one of the only ways to completely avoid misleading information peddled by blogs and other websites across the web.

In conclusion, the distinctions between charities and private foundations are not merely semantic; they are foundational pillars of nonprofit organizations. Through insightful dialogue and expert guidance, May and Danika illuminate the regulatory intricacies underpinning the nonprofit sector, empowering leaders to navigate these waters with confidence and foresight.

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