DBAs and LLCs and 501(c)3, oh my! (was Re: [Noisebridge-discuss] Meeting notes posted for Thu 7t

Mitch Altman maltman23 at hotmail.com
Fri Feb 8 22:05:30 UTC 2008

Andy, I'd like to help out with the legal stuff.  Please let me know where to meet at 4pm tomorrow.


> Date: Fri, 8 Feb 2008 10:48:00 -0800
> From: adi at hexapodia.org
> To: matt at peterson.org
> Subject: DBAs and LLCs and 501(c)3,	oh my! (was Re: [Noisebridge-discuss] Meeting notes posted for Thu	7th)
> CC: noisebridge-discuss at lists.noisebridge.net
> On Fri, Feb 08, 2008 at 09:22:24AM -0800, Matt Peterson wrote:
> > An LLC appears to be the logical least-path-of-resistance at this  
> > point, mostly because non-profit money tracking needs to be very  
> > extensive and an unknown "thumbs up" commitment from various  
> > government levels for approval.  A concern also exists on setting up a  
> > non-profit correctly to factor in board member insurance.  This is not  
> > to say a 501c3 isn't the best option, again just not the easiest for  
> > the initial setup months.
> I'd just like to expand on my thinking here, since I seem to have the
> most knowledge given my shiny new Nolo press books.  (Kinda scary, eh?)
> First off, if you have *ANY* willingness to help make this happen on the
> legal front, please come do legal homework with me Saturday around 4 PM
> in the mission!  I don't want to be the sole resource here.  Exact
> location to be announced, email for details.
> Starting out with a DBA gets us a bank account and the beginnings of an
> official group identity.  (Given that we don't want to make interest on
> our bank account for tax reasons, and so we'll have several thousand
> dollars sitting there doing nothing, banks should be falling over each
> other to hold our money for us.)  The costs are pretty minimal:  under
> $100 in fees plus a bunch of annoying time spent waiting in line at City
> Hall.  Given that we have monies we would like to start collecting --
> more specifically, I have money I want to donate towards the cause
> starting immediately -- there really isn't any reason not to do this
> now.
> There appear to be two routes to take from there:
> 1. incorporate as a California LLC, a for-profit entity.
> 2. incorporate as a California non-profit corporation.
>   2a. Shoot for 501(c)3 status.
>   2b. operate as a "fraternal organization" akin to the Shriners.
>       (this is managed under other sections of 501(c).)
> I've considered and dismissed the following possibilities:
>  - a different for-profit organization (C corp, S corp, partnership)
>    (the llc is specifically tailored to the for-profit version of what
>    we're trying to do here; if we can't go nonprofit, LLC is the really
>    obvious choice.)
>  - incorporating in a different state
>    (several people have recommended against this.  There are papers and
>    fees associated with being an out-of-state corp operating in
>    california, plus two sets of rules to deal with.)
> It is possible (though it may be somewhat expensive, say maybe $4k in
> legal costs) to start out as an LLC and transition to a non-profit.
> Both LLC and nonprofit have expenses associated with them; it looks like
> paperwork and fees are going to cost us a minimum of $1k per year.
> -andy
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