12 moms want to start a homeschool co-op. How to get started

Carol,

12 mommies started a homeschool co-op. We offer an educational learning class three times a month and social events (field trips). We are wanting to do things right. We are thinking of collecting dues and selling goods to have money for trips. How do we get started with registering as nonprofit, filing a 501c3, doing everything legal in my state?
Courtney

 

Courtney,

Good for you and the 12 families to help each other homeschool by forming a co-op!

Start by reading through my checklist of steps to form a nonprofit and apply for tax exempt status.

One of your first tasks will be to form a board, the 3-5 people who will lead the group and make major decisions.

My webinar Create a Nonprofit for Your Homeschool Community will offer you some great tips to form a board.

 

Then my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out should be a big help.

Finally one of your officers (usually the Treasurer) should read my book The IRS and Your Homeschool Organization. It explains the process to apply for 501c3 tax exempt status.

 

 

When you’re ready contact me and we can set up a phone call to see if you’re set up enough to apply for 501c3 tax exempt status!

 

Carol Topp, CPA

HomeschoolCPA.com

Helping Homeschool Leaders

Inurement: a funny word the IRS doesn’t like!

The IRS uses an unusual word that most of us don’t know the meaning of: inure or inurement. Here’s how the IRS uses it in their definition of a 501(c)(3) tax exempt organization:

A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization. (emphasis added)

Source: https://www.irs.gov/charities-non-profits/charitable-organizations/inurement-private-benefit-charitable-organizations

What does inurement mean?

“Inurement” means “benefit.”  The IRS forbids a tax exempt organization to use its income or assets to directly or indirectly benefit an individual, a person with a close relationship with the organization or a person who is able to exercise significant control over the organization. These can be board members or donors.

Jeramie Fortenberry an attorney, gives an excellent explanation of inurement in his website article “The Inurement Prohibition & Non-Profit Organizations.”

Non-profit organizations are subject to what is known as the nondistribution constraint.  Simply stated, this means that non-profit organizations cannot distribute profits to those who control it.  The nondistribution constraint is the fundamental distinction between non-profit organizations from for-profit organizations.  (emphasis added)

Any time assets of the organization flow through to benefit the organization’s insiders, whether directly or directly, inurement is an issue.

What are some examples of inurement?

  • A nonprofit executive used the organization’s money to pay his child’s college tuition, lease a luxury car for his wife, have his kitchen remodeled, and rent a vacation house at the beach.
  • The CEO at a tax-exempt hospital used charitable assets to pay for personal items such as liquor, china, crystal, perfume, an airplane, and theater tickets.
  • A nonprofit art gallery exhibits artwork created by its members for a fee but grants board members the same service without cost.
  • The nonprofit organization’s sole activity is conducting seminars and lectures based on the program owned by its president and his for-profit company.
  • An educational organization had four board members who voted themselves free tuition to the program for their children. This benefit ranged from $2,000-$4,000 per board member per academic year.

Sources: https://www.nolo.com/legal-encyclopedia/what-is-private-inurement.html and https://boardsource.org/resources/private-benefit-private-inurement-self-dealing/ and https://www.forpurposelaw.com/the-private-benefit-rule-three-more-examples/

What happens if a nonprofit practices inurement?

I would hope inurement would never happen in a homeschool group, by Mr. Fortenbury discusses the IRS’s options against a nonprofit organization.

The inurement restriction is absolute: An organization that violates this prohibition will not qualify (or will cease to qualify) for tax exemption.

In cases involving inurement, the IRS may impose the penalties in lieu of or in addition to the revocation of tax exempt status. 

This system effectively gives the IRS two options to enforce the nondistribution constraint.  In blatant violations of the inurement prohibition, the IRS can both revoke tax exemption and impose monetary penalties under the intermediate sanction regimes. In less severe cases, the IRS may seek to correct the situation through intermediate sanctions alone.

For the full article visit: https://www.fortenberrylaw.com/inurement-prohibition-nonprofit-organizations,

 

So, please homeschool leaders, stay away from inurement (giving benefits or the assets that belongs to the nonprofit) to any insiders (those who exercise control over the organization).

We’re homeschoolers and we’re better than that.

Carol Topp, CPA

Converting a Business to a Nonprofit: Tax Exempt Status

 

Some homeschool groups that started as a for-profit business want to convert to a nonprofit organization. Most of these nonprofit organization also want 501c3 tax exempt status from the IRS as well.

In this 3-part podcast series Carol Topp, CPA has explained the basics of a nonprofit organization and how to form a nonprofit corporation. In this third episode Carol discusses 501c3 tax exempt status.

The first two episodes (#168 and 169) can be found at HomeschoolCPA.com/Podcast

Show Notes

In this episode, Carol will discuss:

  • The benefits of tax exempt status
  • The application process and Forms 1023-EZ and 1023.
  • Time and cost to apply for 501c3 status
  • A successor to a for-profit entity must use IRS Form 1023 (not the shorter 1023-EZ) to apply for 501c3 status.

 

Featured Product

This webinar recording on Creating a Nonprofit for Your Homeschool Community will be very helpful as you launch a homeschool group

This webinar recording is helpful for new nonprofits, existing homeschool groups especially if you’re unsure if your group is a nonprofit, or for a business wanting to convert to a nonprofit organization.

The webinar runs about 90 minutes and covers:

  • The difference between a business and a nonprofit
  • What are the advantages and disadvantages of being a nonprofit
  • Forming a board: who can be one it, what do they do, etc.
  • Creating bylaws
  • Drafting a budget
  • Setting up a bank account
  • Forming a nonprofit corporation in your state
  • The timeline to get this all done
  • The expense to accomplish this

The cost is only $10!

For more information visit HomeschoolCPA.com/CreateNP

 

In the podcast I mentioned my book, The IRS and Your Homeschool Organization.

The IRS and Your Homeschool Organization

Does your homeschool group need to pay taxes? Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

 

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Starting a Nonprofit: Nonprofit Incorporation

 

Sometimes a homeschool group started as a for-profit business desires to convert to a nonprofit organization for its many benefits. Can that be done? How hard is it? How costly is it?

In Episode 168 Carol Topp, CPA explained the basics of forming a nonprofit board. In this second episode Carol discusses bylaws and nonprofit incorporation.

Show Notes

Your organization’s purpose will not be making a profit, but now will be educational and maybe religious.

The control shifts from the owner to a board. At least 3 members need to be on the organization’s board.

  • Officers are Chair, Vice, Secretary and Treasurer. Add more board members if needed.
  • Board members should be unrelated to each other (by family and by business relationships) and unrelated to any paid employees. So a board cannot be all the paid staff/teachers/tutors, but could be parents, community members, etc.

The Board has duties of care, loyalty, management (or obedience to law)

  • The board has authority and responsibility. No “rubber stamp” boards!
  • An officer of the Board signs all contracts, agreements, licenses, etc. not the Executive Director
  • The board has control, not the Exec Director. The board decides who to hire and fire, what purpose and activities are,

Conflict of Interest Policy. A paid staff member (Executive Director) can attend board meeting, but no vote because she has a conflict of interest. Sample Conflict of Interest Policy can be found at HomeschoolCPA.com/Samples.

Webinar

In the podcast I mentioned that I created a webinar on Create a Nonprofit for Your Homeschool Community

This is good for both new nonprofits, or if you’re unsure if your group is a nonprofit (!) or for a business wanting to convert to a nonprofit.

The cost is only $10!

For more information visit HomeschoolCPA.com/CreateNP

 

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Create a Nonprofit Organization for Your Homeschool Community


Can a homeschool community of families become a nonprofit? What if it is currently a business?
How hard is it?
What are the steps to take?
How fast can it get it done?
How much will it cost?

 

I have recorded a webinar to answer all these questions and more!

Create a Nonprofit Organization for Your Homeschool Community

The webinar is 90 minutes and covers:

  • The difference between a business and a nonprofit
  • What are the advantages and disadvantages of being a nonprofit
  • Forming a board: who can be one it, what do they do, etc.
  • Creating bylaws
  • Drafting a budget
  • Setting up a bank account
  • Forming a nonprofit corporation in your state
  • The timeline to get this all done
  • The expense to accomplish this

Who should watch the webinar?

  • Brand new start up homeschool groups
  • Existing groups that never formed as a nonprofit
  • Homeschool communities run as a business that want to convert to be a nonprofit
  • Leaders that are unsure if their homeschool group is a business or a nonprofit. It can be confusing!

 

Watch a preview:

 

The webinar fee is $10. Yes only $10.

You will receive:

  • A link to the recording of the video (90 minutes). Watch anytime (just bookmark the link)
  • A copy of the slides from the webinar


Thank you for this webinar! It was great!-Alicia, homeschool leader
Thank you! It was very informative!-Rhonda, live attendee


UPDATE: The follow-on to this webinar is 501c3 Application for Homeschool Nonprofits. It walks you though the IRS Form 1023-EZ application line-by-line. You will be ready to apply on your own after watching this webinar.

 

Your host:

Carol Topp, CPA is the owner of HomeschoolCPA.com and has assisted more than 150 homeschool organizations apply for 501c3 tax exempt status. She is the author of 15 books.

 

 

 

Making Sure Your Nonprofit Organization is Compliant

 

A lot of homeschool leaders ask me,

“What do I need to do after my homeschool gets nonprofit or tax exempt status?”

They are asking about being compliant with the laws of our land, both federal and sate.

This article Making Sure your Nonprofit Organization is Compliant from MoneyMinder.com has a great article that explains compliance in these areas:

Tax Exempt Status which includes federal income tax exempt granted by the IRS, and sales tax exemption from your state. Your nonprofit may even be eligible for property tax exemption if your own a building. The laws on sales tax and property tax exemption vary by state.

My article explains the IRS filing requirements Do You Know About Required IRS Filings? for tax exempt organizations.

Register with the State Registration laws vary from state to state but most require you to confirm your active status (especially if you are formed as a nonprofit corporation), contact information, mailing address, and name of board members. This reporting is usually to the Secretary of State’s Office.

Charitable Solicitations
Many states ask that you register before actually asking for donations or fundraising. This registration is usually to the Attorney General’s office in your state.

Donation Receipt Requirements
A donor should be given a receipt for any single contribution of $250 or more. The article gives more details on what your donation receipt should say.

 

To research what your state compliance requirements are visit this helpful website

https://www.harborcompliance.com/information/nonprofit-startup-guide.php

If you wish, I can research your state’s requirements and compose a letter explaining what you should do next for filing in your state. I will charge $50 for the research and letter. Just let me know if I can help you in this way.

 

I hope that helps you know what it takes for your homeschool nonprofit to be compliant in your state and with the IRS.

 

Carol Topp, CPA

HomeschoolCPA.com

Converting a Homeschool Business to a Nonprofit: The Basics

 

Sometimes a homeschool group that started as a for-profit business now desires to convert to a nonprofit organization for its many benefits. Can that be done? How hard is it? How costly is it?

In the next 3 podcast episodes Carol Topp, CPA will explain how to convert a for-profit business into a nonprofit organization.

Show Notes

In this first episode covering the basics Carol discusses:

Your organization’s purpose will not be making a profit but now will be educational and maybe religious.

The control of the group’s mission and activities shifts from the owner to a board. A nonprofit is not owned by anyone. At least 3 members need to be on the organization’s board.

  • Officers are Chair, Vice, Secretary and Treasurer. Add more board members if needed.
  • Board members should be unrelated to each other (by family and by business relationships) and unrelated to any paid employees. So a board cannot be all the paid staff/teachers/tutors, but could be parents, community members, etc.

The Board has duties of care, loyalty, management (or obedience to law)

  • The board has authority and responsibility. No “rubber stamp” boards!
  • An officer of the Board signs all contracts, agreements, licenses, etc. not the Executive Director
  • The board has control, not the Exec Director. The board decides who to hire and fire, what purpose and activities are,

Conflict of Interest Policy. A paid staff member (Executive Director) can attend board meeting, but no vote because she has a conflict of interest. Sample Conflict of Interest Policy can be found at HomeschoolCPA.com/Samples.

Webinar

In the podcast I mentioned that I’m offering a webinar on Create a Nonprofit Organization for Your Homeschool Community

This is good for both new nonprofits, or if you’re unsure if your group is a nonprofit (!), or for a business wanting to convert to a nonprofit.

The cost is only $10!

For more information visit HomeschoolCPA.com/CreateNP

 

 

Save

Save

How to Convert Your Homeschool Business into a Nonprofit Organization

 

 

Sometimes a homeschool group that started as a for-profit business wants to convert to a nonprofit organization.

Can that be done? Yes!

How hard is it?

How costly is it?

What steps do I take?

 

I’m offering a webinar on How to Convert Your Business into a Nonprofit Organization for Homeschool Programs

Now it has a new name!

Create a Nonprofit Organization for Your Homeschool Community

This is a slight name change from the original webinar. As I was preparing the slides, I realized that the information I was sharing was broad enough to be helpful to anyone starting a new homeschool nonprofit or converting a business to a nonprofit. So I re-named the webinar and I also reduced the price to $10 to make it affordable to more people.

The webinar will be airing live on Monday April 22, 2019 at 8 pm ET/7 pm CT/6 pt MT/5 pm PT.

 

The goal of this webinar is to equip homeschool leaders with an understanding of how to form a nonprofit. You will understand:

  • The steps to take
  • What documents need to be filed and with who
  • The cost and time commitment
  • How to determine if this is a viable option for your homeschool program to pursue

The webinar will cover:

  • The difference between a business and a nonprofit
  • What are the advantages and disadvantages of being a nonprofit
  • Forming a board: who can be one it, what do they do, etc.
  • Creating bylaws
  • Drafting a budget
  • Setting up a bank account
  • Forming a nonprofit corporation in your state
  • The timeline to get this all done
  • The expense to accomplish this

A follow up webinar will cover the IRS Form 1023/1023-EZ Application for 501c3 Tax Exempt Status. It will air sometime in June 2019.

Who should register?

  • Brand new start up homeschool groups
  • Existing groups that never formed as a nonprofit
  • Homeschool communities run as a business that want to convert to be a nonprofit
  • Leaders that are unsure if their homeschool group is a business or a nonprofit. It can be confusing!

The webinar fee is $10. 

You will receive:

  • Access to the live webinar with a chat room to ask questions
  • A link to the recording of the video to watch later
  • A copy of the slides from the webinar

 

Your host:

Carol Topp, CPA is the owner of HomeschoolCPA.com and has assisted more than 150 homeschool organizations apply for 501c3 tax exempt status. She is the author of 15 books.

 

 

 

The IRS is on the prowl in 2019!

Every year the IRS Tax Exempt division releases a list of areas and issues they plan to focus on for audits and investigations. The IRS Tax Exempt division calls it their Program Letter. The Exempt Division is the branch of the IRS that grants 501c tax exempt status to nonprofit organizations.

The Charity Law blog discussed the IRS Tax Exempt work plan for 2019.

 

I found the list of things the IRS considers “the highest known priority and emerging risks” to be interesting, especially these two issues that affect homeschool programs, both nonprofit and for-profit:

  • Previous for-profit: focus on organizations formerly operated as for-profit entities prior to their conversion to IRC Section 501(c)(3) organizations.
  • Worker classification (misclassified workers): determine whether misclassified workers result in incorrectly treating employees as independent contractors.

 

So if you are converting a for-profit homeschool business to a nonprofit organization, be prepared for some extra questioning and scrutiny from the IRS. You’ll have to file the longer Form 1023 to apply for 501c3 tax exempt status and explain in your Narrative why you are converting to nonprofit status. You will not be eligible for using the shorter IRS Form 1023-EZ.

 

My book, The IRS and Your Homeschool Organization  explains how to apply for 501c3 tax exempt status.

 

 

 

 

 

Additionally, if you are treating your homeschool program teachers or tutors as Independent Contractors, be prepared for the IRS to keep an eye on you and they may open an investigation into your worker classification.

 

 

My book Paying Workers in a Homeschool Organization will be a big help to you in paying workers.

 

 

 

Additionally, the IRS is hiring approximately 40 new revenue agents to process determination applications. Is that good news? More IRS revenue agents should mean both faster processing and increased audits and investigations! Both good and bad, in my opinion.

Carol Topp, CPA

HomeschoolCPA.com

 

Is your homeschool program a ministry or a business?

Sometimes I hear people calling their business a “ministry.”

Maybe because they are motivated by concern and care for their customers or because they donate a lot of their time for free.

I don’t refer to my accounting and consulting business as a ministry, but some people have thanked me for “my ministry” to homeschoolers.

Yes, I do give a lot of my time away for free especially on social media like this Facebook group for homeschool leaders that I moderate and frequently I might reply to an email without charging a fee (if it is a short reply!)

But I am running a business and I don’t want to give the false impression that I am running a ministry or operating a nonprofit organization.

OK, not a lot of accounting firms get confused with nonprofits (!), but there are some businesses and homeschool programs that present themselves as nonprofit organizations or “ministries” but they are really for-profit businesses.

I don’t like that. At best, it is confusing to call your business a ministry. At worst, it is deceptive and can damage the reputation of homeschooling.

 

I have tremendous respect for the late Larry Burkett founder of Christian Financial Concepts (now Crown Financial Ministries) who was both a business owner and operated a nonprofit ministry. He wrote:

Don’t practice deception. If you have a product to sell that you honestly believe will benefit other Christians, let it be known, but don’t promote it as a ministry or as a spiritual happening.

Let your yes be yes and your no be no. In other words, let people know what the company is and what the product is.

If there is a referral or finder’s fee paid to another person for a lead, let that be known too.

If you’re afraid of losing a sale because of total honesty, the program is dishonest.

Source: Larry Burkett in Using Your Money Wisely p. 76 and 77 copyright 1985. You can read a longer excerpt here.

 

I have heard from several nonprofit homeschool organizations that say churches in their local communities got “burned” by for-profit homeschool groups posing as “ministries.” Read this blog post to understand why churches are reluctant to host for-profit businesses.

Now these legitimate nonprofit homeschool groups have difficulty getting a church to host their program.

Being deceptive hurts everyone.

We’re better than that!

 

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders