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Development Agreement
Between Nonprofit "Parent" and
Its Wholly-Owned Subsidiary

Click Here to Download a Sample "Development Agreement"
The document is a Word file (edit it to suit your needs).

DISCUSSION: Often it is advisable for a nonprofit to create a separate entity to own and develop its real estate projects.  Doing this can protect the nonprofit from potential liability.  The subsidiary can be either a for-profit corporation, a limited liability company (LLC) or even another nonprofit.

Often these types of subsidiaries will have no paid staff of their own.  The "game plan" typically is for the nonprofit's own staff to do the leg work necessary to complete the subsidiary's project. In such case THERE NEEDS TO BE A FORMAL AGREEMENT between the nonprofit and the subsidiary (otherwise, how can you explain why one company is providing services to another?).

Here are the benefits of a "Development Agreement" between a nonprofit and its subsidiary:
  • It shows an "arms-length" relationship (making it likely that a Court will honor the separation if a lawsuit is ever filed against the nonprofit on account of liability arising out of the subsidiary's project or its ownership of real estate).
  • It provides a paper trail justifying the payment of development related fees to the nonprofit