The leadership of our church is concerned that our homeschool co-op does not have any legal status. They suggested that we look into becoming something official, like a 501c3.
The issue is that we are a pretty small group, and the teachers are not paid by the co-op, but by the individual students directly. At this point, there really isn’t any money changing hands. I have a lot of reservations about the 501c3 status, too.
Is there another “legal entity” that our smallish co-op could become that would let us do some basic things like have a checking account? We don’t really have any money to put toward legal fees or anything like that, so it would have to be very inexpensive to set up.
Thanks so much for all your work.
Kerry in Ohio
Kerry,
It’s nicest if the church takes you under their tax exempt status as a ministry, but for legal and insurance purposes a lot of churches are reluctant to do that.
Two choices
There are really two legal structures you group can be: nonprofit or for-profit. Most homeschool groups are nonprofits and in addition have tax exempt status from the IRS.
If your gross annual income is under $5,000 per year, you do not have to file any application to be tax exempt with the IRS; you can simply self declare your 501c3 tax exempt status. That’s pretty easy!
You will have to file an annual information return with the IRS called a Form 990-N, but it’s quick and easy. See my 990-N FAQ page here: https://homeschoolcpa.com/irs-form-990n-faq/
If you do not self declare 501c3 status (and file the annual 990-N), then, by default, your organization is a for-profit business. That’s your other legal alternative. The income and expenses would have to be reported on someone’s tax return as a business. The church may not rent space to a for-profit business (my church won’t), so you should read more about nonprofit and 501c3 status.
My book The IRS and Your Homeschool Organization can calm many of your fears.
I hope that helps.
Carol Topp, CPA
I have a question… our church is considering allowing a non-profit home school co-op with revenues under $5K a year and no paid teachers to operate as a ministry of our church under our church’s EIN.Since churches do not need to file a Form 990, would this eliminate the need for the home-school to file a Form 990.
Churches do not have to file an annual information return, Form 990, wit the IRS. So if your homeschool group is a ministry of the church, they do not have to file a Form 990.
Hi Carol,
Our homeschool coop is part of a larger organization that supports the special needs of our children. We meet at a church and are required to get liability insurance. The parent organization provides this but we are considering branching off from them for insurance. Would we need to declare ourselves a separate 501 in order to obtain insurance?
It’s probably best to ask an insurance agent this question. It’s unclear from your question if you will remain under the 501c3 umbrella of the parent or completely separate from them.
My guess is that an insurance agent will recommend that you organize as a new legal entity, probably a nonprofit corporation, in order to obtain an insurance policy. And tax exempt status is also highly recommended. Some insurance companies give a discount when a group obtains 501c3 tax exempt status.
Thank you so much!