There are more compelling reasons to form a not-for-profit or a tax-exempt entity than you might think: a homeowners’ association, a private family foundation, a charitable corporation or even an educational corporation. The benefits of creating such an entity can vary depending upon the mission of the specific organizations; but there are commonalities among them.
These entities are creatures of statute; and, if certain and specific tax benefits and treatments are sought, strict compliance with established guidelines must be met and maintained. Careful consideration must be given to formation and entity selection as well as the content of an application for tax-exempt status where appropriate. You will want to pay particular attention to the landscape for operating such an entity in light of an array of possible excise tax exposure, disqualification, self-dealing scrutiny, federal tax ramifications of prohibited transactions, unrelated business income issues, private inurement and private benefit transactions, reasonable compensation and intermediate sanctions and rules for supporting organizations and donor-advised funds.
The Internal Revenue Service and the Department of Revenue are just two of the regulatory agencies that come into play when you are contemplating the pursuit of a tax-exempt determination. Don’t underestimate the experience and skill required to get you there.