Legal Question in Business Law in California

Re: incorperation and tax exempt status

You need to get an experienced corporate attorney, because your question shows you are in need of a lot of guidance. Charities must be formed as a corporation under the non-profit rules, which require federal tax clearances, and other paperwork that must be done right to avoid serious financial penalties and problems. Contact me if interested in doing it right.

Re: incorperation and tax exempt status

California does not currently allow for an LLC to be a nonprofit organization. I have assisted a number of clients form nonprofit corporations and successfully apply for recognition as a tax exempt organization by the state and federal government, so feel free to contact my office for a consultation.

Re: incorperation and tax exempt status

California allows charities to operate as nonprofit corporations or nonprofit associations. There is also statutory authority for the so-called "sole corporation," an older form of organization for religious bodies.

Forming a nonprofit corporation is somewhat more complex than forming a business corporation, but there are self-help law books that make it possible for a non-attorney to accomplish this. Once accomplished, the organization is potentially exempt from paying taxes itself.

If you plan to operate as a charity, to receive donations, and to have your donors be able to deduct their contributions, you also need to obtain IRS tax-exempt (charity) status, which isn't about whether your organization pays taxes so much as it is about whether donations you receive are deductible. This is a more difficult process, takes careful preparation of a lengthy application, and success isn't certain.

Therefore, I strongly recommend retaining an attorney who has prior experience with non-profit formation and operation. You don't need a specialist, just someone with prior successful experience in forming, qualifying and advising charitable organizations.

Another reason you need lawyer assistance is that there are some rather strict and not necessarily intuitively obvious rules and limitations on nonprofits in general and charities in particular. Their formation, governance, finances, permitted activities and accounting practices are restricted and subject to reporting and governmental scrutiny.