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

Save

Save

Can a nonprofit homeschool co-op be an LLC?

stickman_question_mark_Green

Dear Carol,

Greetings!  I first would like to thank you for your book (Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out); the advice has been most helpful in the starting of our non-profit homeschooling co-op.

The husband of one of our students is an accountant, and suggested that we form a non-profit LLC until we have raised the funds to file for 501C3 status.   However, your book suggests incorporation.  Can you offer any recommendation on which would be better for us with the eventual goal of tax exempt status? I have opted to hold off on LLC until we see if that would be a mistake further down the road.

Another concern is that we wish to avoid any business model that will adversely affect the board members’ personal tax status, as we are all single income families and do not wish to incur any extra tax liability personally due to being a leader for the co-op.

I thank you in advance for your consideration and sage advice.

Sincerely,
Angela L in PA

 

Angela,

Only recently has the IRS granted 501c3 tax exempt status to LLCs. LLCs are a relatively new business structure and the IRS is slow to accept changes. In a document titled “Limited Liability Companies as Exempt Organizations-Update” (2001 Exempt Organization CPE Text. Available at http://www.irs.gov/pub/irs-tege/eotopicb01.pdf ) the IRS outlined 12 conditions that an LLC must satisfy to qualify for exemption under Internal Revenue Code 501c3.

These conditions are legally complex and I would strongly recommend that you seek experienced legal counsel before organizing a nonprofit LLC.

Here’s a great article titled “Nonprofit LLCs: Time for a New Experiment” (http://www.mayer-riser.com/Articles/nonprofit/npllc.htm) written by a nonprofit attorney.

The reason that most for-profit businesses obtain LLC structure is for limited liability. I organized my own sole proprietorship accounting practice as an LLC because I wanted limited liability and protection of my personal assets.

For a nonprofit organization such as your homeschool co-op, nonprofit corporation status in your state brings similar protections of limited liability. So if your main reason for seeking LLC structure is for limited liability, nonprofit incorporation in your state is the easier option.

Carol Topp, CPA

 

The information contained on this site is designed to provide accurate information in regard to the subject matter covered. However, this site is  not a substitute for legal guidance. This information is provided with the understanding that the author is not engaged in rendering legal advice. If such advice is required, the services of a competent legal professional should be secured.

Does a Release of Liability Agreement really count for anything?

Over on the I Am A homeschool Group Leader on Facebook,   Betty asked a great question:

 

Does a Release of Liability Agreement really count for anything? I see these all of the time; we had one last year as well, but with all of our insurance concerns this year I am beginning to wonder if they are valid at all. Will they hold up in court? Are they sufficient in lieu of insurance?

My reply:

The best information on using liability waivers I heard came from TJ Schmidt, an attorney with Home School Legal Defense Association (HSLDA). I heard him speak at a homeschool convention. He explained that waivers may deter people from suing you. A member may think twice about filing a lawsuit because he or she remembered  signing a liability waiver. That may be why insurance companies require waivers; they cut down on claims and lawsuits.

Liability waivers are NOT sufficient in lieu of insurance. Waivers will not pay damages or attorney fees if there is a claim or lawsuit. That’s what insurance does.

Liability waivers also show that your organization practices due diligence. It demonstrates that you run an organizations that values safety and protection, which might be helpful in a claim or lawsuit.

Carol Topp, CPA

Do liability waivers really protect homeschool leaders?

I was recently asked about liability waivers from a homeschool leader:

As we draw up a liability waiver, do we need to have an attorney in our state look at it to make sure it is okay, or are they generally pretty generic forms? It seems those I have filled out in the past were basically the same, with just a few minor changes to make it appropriate for the group and/or event. Judy K. (Tennessee)

I wasn’t sure how to answer Judy, so I turned to Christine Field, an homeschool parent and attorney with Homeschool Legal Advantage:

You don’t think of homeschool groups as engaging in potentially dangerous activity, so the whole idea of waivers and liability insurance may seem unnecessary. Yet many groups are increasingly called upon to obtain liability insurance. The insurer may insist on your group having a release of liability form or a liability waiver.

Many people believe that a signed waiver makes them invulnerable. This is not true. Here are some common misconceptions about liability waivers:

1. If someone signs a waiver, they can’t sue us. This is not true. An injured party can still attack the validity and scope of a waiver.

2. If I have a waiver signed, I send it to the injured party’s lawyer and they won’t sue. Also not true. As a homeschool group, you still need to report the claim to your insurance company along with sending them a copy of the waiver to be used as part of your defense.

3. If I have waivers signed, I don’t need insurance. Definitely not true! In fact, if you have insurance, the insurer will often insist that you obtain waivers or releases from participants.
An enforceable waiver of liability is one which is prepared in accordance with state law, sufficiently describes the risk and is understood by the reader.

Some things to look out for in your releases are as follows:
1. Remember, minors generally cannot release liability. Parents or guardians must sign the release on behalf of the minor.

2. A release can only release from ordinary negligence. In other words, if there is gross negligence or intentional injury, the release will not be effective.

3. The language of the release must be in compliance with the state law and the signer must understand the language of the release. Look for language barriers or other inability to understand.

It is always good to have an attorney licensed in your state take a look at your liability waivers or releases. Doing so provides the best possible protection for your group as well as your directors.


Thank you, Christine, for your reply and insight into the best use of liability waivers for homeschool leaders.

Carol Topp, CPA