<div dir="ltr">It took AMT ~2 years to fill out the forms, and then ~9.5 months from the filing to hear back from the IRS (and we got approved right away with no additional followup required. Noisebridge required additional followup/clarifications on their application).</div>
<div class="gmail_extra"><br><br><div class="gmail_quote">On Thu, Jul 18, 2013 at 11:29 AM, Rachel McConnell <span dir="ltr"><<a href="mailto:rachel@xtreme.com" target="_blank">rachel@xtreme.com</a>></span> wrote:<br>
<blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">I'm a founding member of both Noisebridge and Ace Monster Toys, and have been through the incorporation and 501(c)(3) process with both. Â I just want to clarify that incorporation and federal tax exemption are two separate designations. Â Incorporation, either as an LLC or a full corporation, is something you do at the state level, so the state can identify, tax, and regulate you. Â The 501(c)(3) is an IRS designation, which gives you the ability to accept tax deductible donations. Â You do have to be incorporated in order to apply for 501(c)(3) status. Â I don't think an LLC is eligible as it's a for-profit type of incorporation; I think you have to be a California Non-Profit Corporation before the IRS will grant 501(c)(3) status, but this should be verified.<br>
<br>
Also, once incorporated, the 501(c)(3) can be applied for immediately. It did take both Noisebridge and Ace longer than 10 months to receive approval. Â At Noisebridge it was because the IRS was apparently baffled at the concept of a hackerspace and had a lot of follow-on questions. Â I think Ace just took a while to file, but also it took over a year for the IRS to respond. Â It's an annoying, tedious, and time-consuming process but not really that hard.<br>
<br>
Cheers,<br>
Rachel McConnell<div class="im"><br>
<br>
On 7/18/13 11:07 AM, mark burdett wrote:<br>
</div><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex"><div class="im">
I'd say talk to a lawyer about this first, because the typical 501(c)3<br>
is a corporation - the usual route is incorporating and then awaiting<br>
tax exempt status for the corporation.<br>
<br>
(On the other hand, an LLC could make sense if sudoroom wants to keep<br>
around a non-501(c)3 entity that doesn't have all the restrictions of a<br>
tax exempt org... I know some enterprising (literally) artists who have<br>
created both LLCs and non-profit orgs so they can get grants and also<br>
operate as a business....)<br>
<br>
See also<br>
<a href="http://www.nolo.com/legal-encyclopedia/nonprofit-tax-exempt-status-501c3-30124.html" target="_blank">http://www.nolo.com/legal-<u></u>encyclopedia/nonprofit-tax-<u></u>exempt-status-501c3-30124.html</a><br>
<br>
This section requires that you attach a copy of your articles of<br>
incorporation and your bylaws<br></div>
<<a href="http://www.nolo.com/legal-encyclopedia/nonprofit-formation-documents-articles-incorporation-bylaws-minutes-30311.html" target="_blank">http://www.nolo.com/legal-<u></u>encyclopedia/nonprofit-<u></u>formation-documents-articles-<u></u>incorporation-bylaws-minutes-<u></u>30311.html</a>> to<div class="im">
<br>
the application form. (Most nonprofits seeking 501(c)(3) status are<br>
corporations. If your entity is an LLC<br></div>
<<a href="http://www.nolo.com/legal-encyclopedia/limited-liability-company" target="_blank">http://www.nolo.com/legal-<u></u>encyclopedia/limited-<u></u>liability-company</a>>,<br>
unincorporated association<br>
<<a href="http://www.nolo.com/legal-encyclopedia/five-reasons-incorporate-nonprofit-association-30266.html" target="_blank">http://www.nolo.com/legal-<u></u>encyclopedia/five-reasons-<u></u>incorporate-nonprofit-<u></u>association-30266.html</a>>,<div class="im">
<br>
or nonprofit trust, you should seek the help of a lawyer<br></div>
<<a href="http://www.nolo.com/lawyers" target="_blank">http://www.nolo.com/lawyers</a>> with experience in nonprofit tax law to<div class="im"><br>
complete your Form 1023 application.)<br>
<br>
--mark B.<br>
<br>
On Thu, Jul 18, 2013 at 10:50 AM, Marina Kukso <<a href="mailto:marina.kukso@gmail.com" target="_blank">marina.kukso@gmail.com</a><br></div><div class="im">
<mailto:<a href="mailto:marina.kukso@gmail.com" target="_blank">marina.kukso@gmail.com</a><u></u>>> wrote:<br>
<br>
  thanks bill, very helpful!<br>
<br>
  what are the advantages to filing as an LLC?<br>
<br>
  also, i think that jenny recently had a call with james from the<br>
  school factory - jenny, could you possibly share some of what you<br>
  both discussed?<br>
<br>
  - marina<br>
<br>
<br>
  On Thu, Jul 18, 2013 at 10:43 AM, William Budington<br></div><div><div class="h5">
  <<a href="mailto:bill@inputoutput.io" target="_blank">bill@inputoutput.io</a> <mailto:<a href="mailto:bill@inputoutput.io" target="_blank">bill@inputoutput.io</a>>> wrote:<br>
<br>
    Hey all,<br>
<br>
    I talked to Danny O'Brien (Noisebridge's financial functionary)<br>
    yesterday about the sudoroom legal status.  I know this has been an<br>
    ongoing discussion so I'm going to summarize the options we've<br>
    already<br>
    looked into and present the new information Danny has brought to my<br>
    attention.<br>
<br>
    *Why do we need a legal status?*<br>
    Over the past few months we've found various challenges to our<br>
    normal<br>
    operations since we don't have a legal status.  We aren't able<br>
    to sign<br>
    up for services like Stripe without having a federal tax id.  In<br>
    addition, since we are formally under one person's name, he is<br>
    liable if<br>
    anything happens at sudoroom.  Also, we aren't able to sign up<br>
    for most<br>
    banks -- only the Community Bank of the Bay will actually give<br>
    us a bank<br>
    account with our status as a DBA.  And as we've seen, Community<br>
    Bank of<br>
    the Bay is not the most web-savvy organization, and so it's hard<br>
    for us<br>
    to actually check our balances.<br>
<br>
    *What we've looked at*<br>
    Our eventual goal has been to get 501(c)3 status for sudoroom.<br>
     This is<br>
    a status that would allow us to accept tax-deductible donations<br>
    and be<br>
    incorporated formally as a nonprofit.  A lot of Hacker Spaces go<br>
    this<br>
    route, and it seems like a reasonable long-term goal.  One of the<br>
    problems we've been warned of is that it takes a long time to<br>
    actually<br>
    be granted 501(c)3 status - upwards of 2 years, which can as I<br>
    understand be expedited to 10 months.<br>
<br>
    Because of this delay, we've looked into some other options --<br>
    namely<br>
    being umbrella'd under another organization's 501(c)3 status.  This<br>
    would involve 10% of our revenue going to said umbrella<br>
    organization to<br>
    cover costs of the books.  I've been in contact with Danny at<br>
    Noisebridge and Jenny has been in contact with (Steve?) at the<br>
    School<br>
    Factory and discussing if this is a possibility.  It is<br>
    certainly one<br>
    way to go, but as for Noisebridge they've only umbrella'd<br>
    Noisetor, and<br>
    they didn't need a separate account for that.<br>
<br>
    *What I've learned recently*<br>
    Danny mentioned that his partner is looking into nonprofit<br>
    status for a<br>
    new feminist hacker space in SF, and has investigated these<br>
    options as<br>
    well as others.  In order to have a certain degree of autonomy,<br>
    it is<br>
    probably in our interests to actually not go the umbrella route and<br>
    pursue separate legal status altogether.  He also mentioned that<br>
    there's<br>
    no reason why we couldn't incorporate as an LLC or other corporate<br>
    status before pursuing 501c3 status, and that even if it takes a<br>
    number<br>
    of years to be granted non-profit status we can transition from<br>
    an LLC<br>
    without much of a problem.  There's no real disadvantage to<br>
    having LLC<br>
    status in the meantime, as I understand it.  The main advantage of<br>
    nonprofit status is tax deduction, but that is usually superseded on<br>
    most peoples taxes by the standard deduction.  The main place<br>
    where it<br>
    does make a difference is when employers do matching donations<br>
    for their<br>
    employees, then it can make a difference.<br>
<br>
    *The plan*<br>
    It makes sense to me to pursue the options that would resolve our<br>
    short-term problems without impeding the path to our long-term<br>
    goals.<br>
    It seems to me reasonable as a short-term goal to register as an LLC<br>
    (Jenny tells me this can be done in an afternoon and with $50 with a<br>
    drive to Sacramento), and as a longer term goal actually pursuing<br>
    nonprofit, 501c3 status.<br>
<br>
    *Disclaimer*<br>
    There may be caveats to this plan and I'm not a lawyer.<br>
<br>
<br>
    Bill<br>
<br>
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