I am not a lawyer, I am a Judgment Broker. This article is my opinion, and not legal advice, based on my experience in California. Laws vary in each state. If you ever need any legal advice or a strategy to use, please contact a lawyer.
One can do judgment recovery against a (judgment debtor) large nonprofit company, is done with the same tools as with any other corporate entity or business.
This article is about recovering judgments against (judgment debtor) small nonprofit entities. What if your judgment debtor is a small nonprofit organization, or an officer in a small nonprofit organization?
Whether a nonprofit organization is large or small, the process for levying an employee’s wages at the entity remains the same. If an employee works for a nonprofit company, their wages can usually be levied.
If the nonprofit employer does not respond to the Sheriff’s wage levy notification, one can sue the nonprofit employer for the amount that they should have withheld, when state laws permit.
Whether a nonprofit organization is a corporate entity registered with the Secretary Of State’s office, or not; small nonprofit organizations are less likely to pay salaries or dividends. Can their assets be levied to satisfy a judgment?
Nonprofit companies have no stock shares, and most small ones do not pay their officers with conventional incomes. The forms to form a non profit corporation are on the Secretary of State Website, and you law library will have the Nolo book that has them.
While one could pay a Sheriff to levy a judgment debtor’s office furniture, that is a very expensive way to recover a judgment. It could cost more than will be recovered at the Sheriff’s auction sale.
It is usually very difficult to levy nonprofit asset distributions or dues, to recover a judgment, unless they could be proven to be fraudulent transfers. If that is the case, recovering would still be difficult.
The term “nonprofit” means only that the structure of the entity is not for profit, and there are no shares or stock certificates. In almost every other way, a nonprofit company is run the same as any other business.
Some nonprofits, for example, Sesame Street, have a spin-off (for profit) corporation, which is where the money goes when one buys an Elmo doll.
Some larger and more “profitable” nonprofit organizations pay competitive wages, and sometimes offer matching with saving accounts funds. There could be a lot of money inside a nonprofit company.
One-person nonprofit organizations are sometimes used as a personal tax shelter, and occasionally there is some sort of scam going on.
In small nonprofit organizations, there might be a co-mingling of funds between the president of the nonprofit company and their personal checking account, treating the company as their personal piggy bank.
As with for-profit companies, nonprofits must keep their company minutes, have meetings, be registered with the Secretary Of State, keep separate business bank accounts, etc.
If they fail to comply with the requirements to be or stay a nonprofit company, they may lose their liability protection, and owe a lot of taxes. If they have a 501(c)(3) that is not properly registered with the IRS, one might be able to convince a judge that it is merely a DBA of the judgment debtor, making the person liable.
If a nonprofit dissolves, the creditors might get paid something upon the dissolution.
Judgment debtor exams and post-judgment document production requests, served on the nonprofit entity and perhaps third-parties, may turn up many clues to finding assets, that might be used to satisfy the judgment.
Also, tax returns of nonprofits are public records, see www.GuideStar.org. If a judgment debtor says they earn nothing working at a nonprofit, yet they live really well and obviously making good money, Guidestar might tell a different story. Guidestar might show their board of directors, so you can examine them as third-parties knowing or possessing assets of your judgment debtor.