[frgeek-michiana] Incorporation plan
- From: Tom Brown <tbrown@xxxxxxxxxxxx>
- To: FreeGeek Michiana <frgeek-michiana@xxxxxxxxxxxxx>
- Date: Fri, 20 Dec 2002 10:53:33 -0500
Reference: How to form a nonprofit corporation. Nolo Press, Oct. 1997,
Berkeley, CA.
There are, broadly speaking, two phases to nonprofit incorporation.
1. filing state corporation documents
2. filing for 501(c)3 tax exemption
Of these two steps the most important is deciding the type of 501(c)3
nonprofit we are going to ask the IRS to grant. There are roughly five
501(c)3 tax-exempt purposes.
1. charitable
2. religious
3. scientific
4. literary
5. educational
Q. Is FG/M charitable or educational?
We can eliminate religious, scientific and literary right away. However it
is more difficult to decide whether FG/M is charitable or educational. FG/M
could easily be either. I will ask Oso Martin which category FG chose.
Q. Can FG/M pursue commercial interests?
Yes. Nonprofits can engage in unrelated for-profit business. The Nolo
example is a nonprofit dance group which owns a building and rents unused
space. Unrelated business cannot be a substantial activity or a substantial
source of income.
If nonprofit activities are related, take substantial time and energy, and
generate substantial income, they should be included in the organization's
exempt purposes and be classified as related activities.
So it is critical that our purposes reflect the major activities we have
identified for FG/M. It seems that consulting, training and system
administration are allowed. But can I clearly and convincingly relate them
as purposes? An attorney or tax accountant should check my work to make
sure the IRS is approached properly.
Q. What else needs doing?
Here is Nolo's outline of major tasks.
1. order materials from the Sec. of State (done)
2. choose a corporate name (mostly done)
3. prepare articles of incorporation (incomplete)
4. file articles of incorporation
5. prepare bylaws
6. apply for 501(c)3 tax exemption
I plan to write the bylaws before filing for incorporation. But I might
change my mind if filing articles of incorporation and filing bylaws are
separate steps chronologically in Indiana, as the Nolo outline implies.
Tom
tbrown@xxxxxxxxxxxx
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