Re: [newtech-1] LLC + 501c3 question

From: Jeffrey Altman (.
Sent on: Sunday, March 17, 2013 12:25 AM
Tony,

There are no fast and hard rules that state when the IRS must approve a
not-for-profit corporation as a public benefit charity, 501(c)(3).  If
all you want is not-for-profit status that does not require the blessing
of the IRS.

I think a fundamental question to answer is "what are your goals for the
NFP organization?"

Are you looking to have control and if so, over which entity?

There are a number of different models.  For example, the Mozilla
Foundation is a NFP that owns Mozilla Corporation and all profits of the
for-profit corporation flow to the Foundation after taxes are paid.

The OpenSSL Foundation is simply a for-profit corporation that collects
money to help support the income of the core developers:

  https://www.openss...­

The primary benefit of 501(c)(3) status is the ability to accept
charitable donations from U.S. citizens or grants from other 501(c)(3)
organizations.  If you expect that most of your donations would come
from corporations or non-U.S. citizens or U.S. citizens that don't care
about the tax deduction, I wouldn't bother.

Jeffrey Altman



On 3/16/[masked]:00 PM, Anthony Zeoli wrote:
> Alyssa,
> 
> I am working on Netmix.org, which will be a non-profit developing a
> free, open source theme framework for artist/dj/band/label­ websites.
> 
> My goal is to set up a structure like Wordpress or Drupal. The Wordpress
> foundation operates Wordpress.org, which is the open source project.
> Automattic operates the professional services division, which supports
> companies that want to use Wordpress, but need guidance/support. There
> is Acquia for Drupal and Red Hat for Linux.
> 
> I know you may not have deep insight into this setup, but if you have
> some knowledge, I'd like to know more. Thanks.
> 
> After reading about 501(c)3 status, I'm wondering if I'm better served
> by B Corp of L3C.
> 
> 
> Digital Strategy Works
> WordPress | Digital Strategy | IA & UxD
> ✉ [address removed]
> <mailto:[address removed]> | Visit Our Site
> <http://www.digita...;­
> ☎[masked]
> Twitter: @dswks | Facebook: digitalstrategyworks­ 
> 
> 
> 
> On Fri, Mar 15, 2013 at 8:59 PM, Alyssa Martina <[address removed]
> <mailto:[address removed]>> wrote:
> 
>     John's response is on point. And, the government will scrutinize
>     your 501c(3) if you also have a related for-profit company to make
>     sure that it isn't being set up as a pass-through. You need to keep
>     the two organizations separate from one another in many respects.
> 
> 
>     On Fri, Mar 15, 2013 at 10:28 AM, Stuart Dambrot <[address removed]
>     <mailto:[address removed]>> wrote:
> 
>         This is a long overdue apology – I intended to write “Thank you,
>         John” – but on reviewing messages on this topic just now, I saw
>         the typo for the first time.____
> 
>         __ __
> 
>         *From:*[address removed] <mailto:[address removed]>
>         [mailto:[address removed] <mailto:[address removed]>] *On
>         Behalf Of *Stuart Dambrot
>         *Sent:* Wednesday, January 23,[masked]:09 AM
>         *To:* [address removed] <mailto:[address removed]>
>         *Subject:* RE: [newtech-1] LLC + 501c3 question____
> 
>         __ __
> 
>         K you, John. I’ve considered an L3V, but I understand it
>         requires grants to be made as a comparatively underused form of
>         investment. Anyway, L3Cs are not yet available in NY.____
> 
>          ____
> 
>         I’ll look into a B corp.____
> 
>          ____
> 
>         *From:*[address removed] <mailto:[address removed]>
>         [mailto:[address removed] <mailto:[address removed]>] *On
>         Behalf Of *John Gordon
>         *Sent:* Tuesday, January 22,[masked]:25 PM
>         *To:* [address removed] <mailto:[address removed]>
>         *Subject:* Re: [newtech-1] LLC + 501c3 question____
> 
>          ____
> 
>         Keep in mind that you cannot "own" a 501c3 organization. You can
>         organize it, contribute to it and lead it, but whatever assets
>         you contribute to it, and any growth in value that derives from
>         it, is no longer yours. If the 501c3 is closed for any reason,
>         its remaining assets have to be distributed to other charities -
>         you can't sell it off, much less for a profit. You can be paid
>         by the 501c3 for services rendered, but not "excessively," and
>         your annual return is a public document. If your 2 organizations
>         deal with each other intimately, you need to be able to document
>         how you arrived at preventing conflicts of interest.____
> 
>          ____
> 
>         Just getting 501c3 status itself is a colossal pain; the process
>         in long, arduous and not guaranteed of success. Setting up a B
>         corp or an L3C might be a better route if you can do it.____
> 
>          ____
> 
>         Did I mention that the cost of accounting for a nonprofit is
>         multiples of that of a business organization? Assuming that you
>         can find a competent accountant that will deal with a 501c3, I
>         know from being on a nonprofit board that the cost having the
>         annual Form 990 is very high. If the rate is cheap, then there
>         is probably a reason and this reason will haunt you later.____
> 
>          ____
> 
>         Just some thoughts based on experience in the field.____
> 
>          ____
> 
>         John Gordon____
> 
>          ____
> 
>         On Tue, Jan 22, 2013 at 9:49 PM, Anthony Zeoli
>         <[address removed]
>         <mailto:[address removed]>> wrote:____
> 
>         Actually, I need to do the same thing with my .com under the LLC
>         and my .org under the 501(c)3. I will read this myself. Thanks.
> 
> 
>         ____
> 
>         Tony Zeoli, Founder
>         *Error! Filename not specified.* 
>         WordPress | Digital Strategy | IA & UxD
>         310 W. 4th St, Winston-Salem NC 27101
>         ✉[address removed]
>         <mailto:[address removed]> | Visit Our Site
>         <http://www.digita...;­
>         ☎[masked] <tel:[masked]>­ ____
> 
>         My profiles: *Error! Filename not specified.*
>         <http://www.facebo...­! Filename
>         not specified.* <http://www.twitte...­! Filename
>         not specified.* <http://www.linked...;­
>         Contact me: *Error! Filename not specified.*djtonyz *Error!
>         Filename not specified.*tonyzeoli­____
> 
>         More words:Learn more about WordPress 3.0
>         <http://digitalstr...­
> 
>          ____
> 
>         On Tue, Jan 22, 2013 at 7:24 PM, Stuart Dambrot
>         <[address removed] <mailto:[address removed]>> wrote:____
> 
>             If a sole proprietor wants to form a two-component business
>             structure (an LLC and a 501c3), what are the legal pitfalls?
>             For example, I imagine that key issues would be resource
>             sharing (one human resource, one computer, one office,
>             etc.), expense allocation, taxes, funding the 501c3 in part
>             through donations from the LLC and/or the sole proprietor,
>             and intellectual property. Note that the names would be
>             structured as */Name/* (LLC) and */Name Subname/* (501c3).____
> 
>              ____
> 
>             Sorry to be vague, but it’s an exploratory question that I’m
>             asking for the first time, and after doing research as well.
>             ____
> 
>              ____
> 
>             Relatedly, the LLC web presence would be a WordPress site,
>             and the 501c3 a YouTube or Vimeo channel. I’d like the 501c3
>             site to present as a page on the LLC site. Any thoughts on
>             how that could be done would be greatly appreciated.____
> 
>              ____
> 
>             Thanks in advance for any and all advice and
>             recommendations.____­
> 
>              ____
> 
>             SM Dambrot____
> 
> 
> 
> 
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