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

Meredith L. Patterson mlp at thesmartpolitenerd.com
Fri Feb 8 23:41:05 UTC 2008

Andy Isaacson wrote:
> 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!

D'oh. I'd be glad to help, but I'm in Latvia right now. Sorry. :(

> 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.)

I must have missed the part where 501(c)(3)s aren't supposed to have 
interest-bearing accounts -- did someone turn that up in research 
somewhere? Plenty of large, well-known nonprofits do have 
interest-bearing accounts for the donations they receive; the interest 
is flowed back into the operating expenses of the organisation.

> 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.

I still think a 501(c)(3) educational nonprofit is the way to go. I was 
able to get in touch with my lawyer friend down in Orange County, and 
though I apparently remembered wrong and he wasn't involved with the 
incorporation of the science fiction club I was thinking about, he's 
still willing to help out; I've not had time to follow up beyond that, 
but I'll do so after this weekend (BarCamp Baltics is going on and I'm 
going to be a little swamped).

>  - 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.)

If there's some reason to do anything other than an LLC or a nonprofit, 
then Delaware is the way to go; incorporating as a C-corp (or possibly 
also an S-corp, I've only established a C-corp) will require a 
registered agent in the state of incorporation, which runs me $125/year; 
Delaware taxes are also pretty cheap if a company doesn't have income. 
(Osogato paid less than $100 for 2006.)


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