I am working with three friends to start a homeschool co-op this fall.
I applied for and received an EIN number. I would like to apply for non-profit status corporation status with my state and the IRS. However, the fees are discouraging right now.
My question is this: If we are charging parents and all that money is going right back into rent, materials, etc. and no profit is made, can we just start doing that before we apply and then save money to apply for non-profit?
And then if the answer is yes, what are we until then for tax purposes…do we have to file taxes as a business and just show $0 profit and $0 taxes owed?
Lynne
Lynne,
Great question!
Yes, you can organize and operate as a nonprofit for a while and save up some money to apply for tax exempt status.
The IRS expects nonprofit organizations to apply within 27 months of formation. If you file for nonprofit corporation status in your state, then the day you become incorporated is the date of formation. Sort of like the organization’s official birth date.
The IRS will grant you tax exempt status from the date you incorporate. It’s kind of like “back dating” your tax exempt status. So that’s nice.
You should not consider yourselves as a for-profit business if you are organized (meaning have a board and bylaws) and operate (no profit motive, no one pocketing the profits) as a nonprofit. You can call yourself an “nonprofit corporation who is in the process of applying for tax exempt status.” You do not need to file a business tax return.
So, the bottom line is that you can start and run your co-op for about a year, maybe close to two years, and then apply for tax exempt status with the IRS.
For more information, please see my webinar
I hope that helps!
Carol Topp, CPA
HomeschoolCPA.com
