Nonprofit Limited Liability Company

A limited responsibility company (LLC) is a legal form of business, owned by one or more members, which may be arranged and managed for a multitude of purposes, including charitable purposes. One of the major advantages of an LLC is the limited liability protection it includes to its associates.

Members are generally not liable for the debt and commitments of the LLC except to the degree of their investments in the LLC. 1. See IRS Website. See Instructions for Limited Liability Company Reference Guide Sheet (IRS). While an LLC may be recognized by the IRS as tax-exempt for federal government income tax purposes, this does not necessarily mean that it will be named exempt from condition taxes or condition property taxes.

See Limited Liability Companies and Tax-Exempt Status (Franchise Tax Board); Limited Liability Companies As Tax-Exempt Organizations; Limited Responsibility Qualification and Companies for the Welfare Exemption. 1. To protect itself from the liabilities and risks associated with the property or activities of the LLC. This isolation-of-risk strategy may be particularly appropriate where the LLC’s assets (e.g., real property with environmental risks) and/or activities (e.g., adventure camps) have a higher risk profile than the nonprofit’s property and activities. 2. This strategy is commonly employed in which a nonprofit really wants to keep on an unrelated business that is significant in scope and size. In this case, the LLC will never be tax-exempt.

3. To use a joint venture with one or more other entities. The LLC casing the joint venture may be tax-exempt if most of its members are tax-exempt or taxable if its members consist of both nonprofit and for-profit organizations. See Single Member LLCs: The versatility of limited responsibility companies is one asset for nonprofits (Alliance for Children & Families Magazine). A nonprofit fiscal sponsor may choose to set up and own an LLC to protect itself from the risks and liabilities associated with the possessions or activities of the sponsored task.

  • Each business premises lease is locked in; and
  • 97 percent decrease
  • Investment Date: 3/14/17
  • 3- Home buying

If appropriately organized, an LLC exclusively owned by a fiscal sponsor may be looked at tax-exempt as a disregarded entity and seek out its own deductible charitable efforts and private foundation grants, as defined above. 1. Where extensive fiscal sponsorship (Model A) is being considered however the risks and liabilities associated with a fresh project are of significant concern to the fiscal sponsor. 2. Where an existing nonprofit wants to dissolve and transfer its programs to a fiscal sponsor however the fiscal sponsor is concerned about potential successor liability. 1. The actions of the LLC might be attributed to the fiscal sponsor for taxes purposes.

And the LLC’s unrelated business activities may lead to unrelated business taxable income to the fiscal sponsor. 2. The LLC is itself a charitable asset owned by the fiscal sponsor impressed with a charitable trust. Accordingly, the board people of the fiscal sponsor have a duty to protect such asset from misuse.