Legal Question in Business Law in New Jersey

Business law Q re: 501(c)3 and LLC cooperation

Hello All,

I am unsure if an accounting forum would be more appropriate for this question. I apologize if this is the case but would appreciate any advice regarding the following situation:

Business A is an existing export LLC which deals primarily in used goods.

Would it be legal to create a 501(c)3 to accept donations of the same goods which Business A exports and then provide the used goods to Business A at cost? The mission statement of this 501(c)3 would be to facilitate recycling and to educate the local community about the importance of recycling. Tax deductions would provide businesses and individuals with a motive to donate their used goods.

The 501(c)3 would use Business A as their primary exporter. Business A would then charge the end recipient a shipping, handling,administrative and other fees, resulting in a net profit for Business A. The 501(c)3 would not profit but would charge Business A a fee to cover whatever expenses were incurred in acquiring the items (marketing, transportation, admin, etc.)

Business & Individuals ---- 501(c)3 Recycling Non-Profit ---- For-Profit Export LLC ---- Importer/Recipient

Any input would be greatly appreciated but please, no yes or no answers.

Thank You


Asked on 3/01/09, 7:29 pm

2 Answers from Attorneys
Ronald Cappuccio Ronald J. Cappuccio, J.D., LL.M.(Tax)

Re: Business law Q re: 501(c)3 and LLC cooperation

It is possible that your idea may be workable. First, for a Non-Profit entity to accept donations as you suggested. The donors should be able to get a deduction. The real difficulty is whether the non-rofit can actually hire Business A as its exclusive exporter. Probably, you will have open the exporting to competition, but this should be discussed with your atorney.

Setting-up a Non-Profit entity requires much more work than a business entity. You need the expertise of an experience tax attorney.

I hope this helps!

Ron Cappuccio

http://www.NonProfitEsq.com

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Answered on 3/01/09, 7:53 pm
Jef Henninger, Esq Law Offices of Jef Henninger, Esq.

Re: Business law Q re: 501(c)3 and LLC cooperation

If this is legal, you are walking a very fine line. It just doesn't sound right to me. I suggest you speak with an attorney about this and have him or her set all this up. Call me for the name of a good business attorney.

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Answered on 3/01/09, 9:26 pm


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