Hello, I will be assisting you. Can you describe the structure of the not for profit? is the NP a 501c3? Is there a board and if there is, who makes up the board? Then if you could let me know what is your specific tax/business question regrading the LLC? Looking forward
Hi, the NP has little structure. I am President and we have three Directors. It is not a 501c but our accountant plans to file for member-based federal status. (The NP is registered in the state of Illinois). Since the former Treasurer paid (his) LLC invoiced expenses from the NP account without the knowledge of the NP that these were his LLC expenses, what is the legal status of the property paid for by the NO -- but for the LLC invoices. What would you advise an accountant to do with these expenses? Are they legitimate expenses of the NP?
The issue is not so much a tax issue but rather a legal question of how you would like to treat an apparent t unauthorized appropriation of funds from the NP to the LLC.
Legally speaking, the LLC is a separate entity from the person and property that generally speaking in such situations the LLC is a bona fide good faith purchaser and therefore would own the property notwithstanding the fact that the money to purchase that property may have been illegally misappropriated (this is largely because there are other members in the LLC that I assume were privy to the transfer of funfs from he NP to the LLC).
You have several choices: - You can demand the money back and have the person pay it from their own pocket. - file a criminal complaint for embezzlement - demand that the LLC hand over title to whatever it purchased (although as noted it may not have to) and if it doesn't file a law suit against as being a co-conspirator (companies have criminal liability as well) - or do nothing and move forward. You can treat it as an expense and your accountant would know best what type of expense it would be.
Be mindful though that on the 501c3 application you will need to disclose these expenditures.
I made a mistake when I wrote "I have 50% voting shares in the NP.". I have 50% voting shares in the LLC (and am President of the NP). The former Treasurer of the LLC is also a member of the NP.
I was not privy to the use, by the NP Treasurer, of NP funds to pay bills for the Treasurer in his role in the LLC. (Actually, most of the copies of the invoices that I recently obtained were made our to the Treasurer, personally, and not the LLC). Does that clarify things?
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