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I am setting up a not-for profit organization. I have a corporation

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I am setting up a not-for profit organization. I have a corporation sole that is 95% of my LLC. Should I set this organization up in the LLC or Corporation sole? Most people are unaware of Corporation Soles. I will be dealing with corporate donations, so how do I handle the tax-deductible donations and is there a form to fill out? A lot of questions I know. It's important to get this set up correctly, so I don't have IRS issues.
Submitted: 4 years ago.
Category: Business Law
Expert:  Thomas McJD replied 4 years ago.

The best thing, generally, is to set up your not-for-profit as a completely separate entity from your other businesses, which means your LLC really shouldn't own the membership interest in your not-for-profit.

 

There really is no additional benefit to having a separate limited liability entity hold the membership interest to the not-for-profit, since the members will generally be insulated from liability of the corporation and the corporation insulated from the members' liability without any extra gimmicks in place.

 

And, depending on exactly how all your businesses would be related if the LLC owns the not for profit membership interest, it could make it more difficult to obtain and maintain tax exemption status under IRC 501(c).

 

If you, however, are adamant about having the not for profit interest held by your LLC, you should speak to a CPA to determine whether that would complicate the tax status of the not for profit or the LLC.

 

There is such a thing as a not-for-profit LLC, at least in theory, but I've never actually seen one and certainly would never recommend one. The IRS is familiar with the not for profit corporation, so why complicate things.

 

For donations to the not for profit to be tax deductible, the not for profit will have to be qualified as a 501(c)(3) charitable organization under the revenue code. You will need to speak with a CPA about obtaining this qualification and properly maintaining it.

 

 

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You understand that your use of or communication on this forum, in any and all ways, is intended for general informational purposes only and shall not constitute and/or be relied upon as legal advice or be construed as creating an attorney-client relationship. Further, you agree not to rely on anything I say and will obtain appropriate legal and or tax advice with an attorney or other professional licensed to practice in the jurisdiction where your legal or other issue arises.

Customer: replied 4 years ago.
Are you familiar with Navada Corporation Soles? It is not a 501(c)3 charitable organization.
Expert:  Thomas McJD replied 4 years ago.

To get a federal income tax exemption it will still have to qualify as a 501(c)(3), and that is also true for those making donations if they want them to be tax deductible.

 

IRS doesn't care about state law -- only federal law.

 

I am slightly familiar with corporate soles.

 

 

_________________________________________________________________________________________________

 

 

You understand that your use of or communication on this forum, in any and all ways, is intended for general informational purposes only and shall not constitute and/or be relied upon as legal advice or be construed as creating an attorney-client relationship. Further, you agree not to rely on anything I say and will obtain appropriate legal and or tax advice with an attorney or other professional licensed to practice in the jurisdiction where your legal or other issue arises.

Thomas McJD, Attorney
Category: Business Law
Satisfied Customers: 6510
Experience: Experienced in Corps, LLCs, Partnership, etc.
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