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
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.
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