Can our homeschool group get sued if we’re not a recognized nonprofit?

Carol,
We are a Christian homeschool group and co-op. The church that hosts our co-op classes is concerned with the possibility of us getting sued if we are not a recognized non-profit.  We are comprised of like-minded believers for a specific cause.  Can you comment on this?

TW

 

TW,

I usually recommend nonprofit incorporation to protect the leaders and members of a homeschool organization.

Nothing can stop a lawsuit, but forming as a corporation means the liability is limited to the corporation’s assets and it protects the personal assets of the leaders and members from the lawsuit damages.

Unfortunately, being like-minded does not mean you’re immune from lawsuits. One group told me that a co-op member’s health insurance sued the homeschool group for medical bills when a child was injured while at co-op. The co-op member did not bring the lawsuit, her health insurance company did.

If you need more information on the benefits of nonprofit incorporation for your homeschool group, read The IRS and Your Homeschool Organization. It includes a chapter on nonprofit incorporation.

I hope that helps,

Carol Topp, CPA

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Do we need a new EIN for our new nonprofit corporation?

Our homeschool group already has an EIN (Employer Identification Number), but we recently decided to work toward 501c3 status. We are now incorporated.
Do we need a new EIN or can we just change the name on the one we have?

-Kellie

The IRS, who issues EINs, makes it clear that you need a new EIN when you form a new nonprofit corporation.

You will be required to obtain a new EIN if any of the following statements are true.

  • A corporation receives a new charter from the secretary of state.

Source:

You can get a new EIN online, but it’s helpful to look over the Form SS-4 so you know what questions will be asked.

Carol Topp, CPA

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Should my homeschool nonprofit corporation have members?

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Carol,

I’m filling out the paperwork for my homeschool co-op to be a nonprofit corporation in my state. They ask “Does your organization have members?” We have families that pay for co-op classes and we call them members. Is this what the form is asking?

Joann in IN

Joann,

The state is asking about members of your corporation, not what you call members who participate in your homeschool co-op classes.

Here’s a helpful explanation from Nolo.com

Although a nonprofit corporation can choose to have members who have voting rights, many nonprofit corporations decide not to adopt a membership structure and, in the interests of efficiency, leave the decision making up to the directors. If a nonprofit does opt for a membership structure, the members participate in major corporate decisions. Specifically, the members have the exclusive right to elect directors, amend articles and bylaws, and vote on a merger or dissolution of the corporation.

I have found that most homeschool co-ops are run by a board and do not have members participate in decision making or vote on anything.

One homeschool group incorrectly checked the box on their nonprofit corporation application stating they had members. Later, they needed to amend their Articles of Incorporation  when applying for 501c3 tax exempt status with the IRS. This meant they had to gather the members together for a vote to amend the Articles. This was not easy because co-op classes had ended for the summer and the members no longer gathered together. It also involved explaining complicated IRS language to a group of people who didn’t really care, gathering ballots for votes, etc.

So be careful about what you are agreeing to when you check the box stating your nonprofit homeschool corporation has members.

Carol Topp, CPA