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Scheherazade in Blue Jeans
freelance alchemist
Question! 
28th-Apr-2011 08:25 pm
Hearth
Attention, people who know business stuff!

What sort of corporation should one form in order to make the easiest transition to a 501(c)(3)? C corporation? S corporation? Something else entirely?
Comments 
29th-Apr-2011 03:22 am (UTC)
If you intend to end up as a 501(c)(3), why not start as one? From what little I know of the beasts, they're easier to set up.
29th-Apr-2011 03:25 am (UTC)
Starting out with the 501 from the get go would be best. If you do a C corp, S corp, LLC, etc, those are for profit businesses. The 501 is not. From my experience, it's hard to turn a for profit into a non profit tax, state & IRS wise (you'd be better off closing those and starting new corp papers as non profit). There's some information on IRS.gov. Hope this helps.
29th-Apr-2011 11:23 am (UTC)
What they said.

I work for an S corp, which means that my bosses have to declare all of the profit as their OWN income and pay taxes on it as such. Upshot is when (if) they sell the buisness, they won't get hit with as many taxes or won't have to pay an extra tax or something like that.

C corps are taxed at a corporate rate (usually higher than individuals? but I'm not sure); and when you sell it you have to pay more to the gub'mint for the privilege of having profit.

It all depends on when you want to pay the Man: now or later.

That's what I remember, but I could be wrong...are you planning to sell the business at some point?

I've known people who've started up non-profits, so you apparently *can* do that right off the bat.

I don't know, however, if you can go from an S corp to non-profit or C corp to non-profit. Sometimes there are time limits, too; for example, my employer switched from a C to an S corp but they had to wait 10 years after that date to sell if they wanted to reap the benefits of the S corp's sale provision.
30th-Apr-2011 08:18 am (UTC)

Getting federal 501c3 not-for-profit status typically takes 12-18 months. If you want to have any of the benefits of incorporation before then, you start with a different kind of corporation. I'm not sure offhand which kind, though. Which is odd, since I'm in the middle of supplying lawyers with info for a 501c3 application.

While you are going through the application process, there is something known as "fiscal sponsorship", in which an existing 501c3 puts you under their umbrella, essentially vouching for you with the IRS and allowing you to take tax-deductible donations. Your organization's mission should fall within the scope of the existing not-for-profit's mission.
29th-Apr-2011 01:25 pm (UTC)
Nonprofit Corps in MA are a totally separate entity from other corps. Call me if you want more details.
29th-Apr-2011 01:45 pm (UTC)
Don't have your number, and it wouldn't be a MA company! More details?
29th-Apr-2011 07:56 pm (UTC)
Did a quick search. There's a FAQ from a company which registers non-profits. Using the search term "non profit incorporation us federal" showed a number of sites advertising non-profit incorporation for a fee.
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