How do I set up a new homeschool co-op with the right structure and tax forms?

What business structure and tax forms are needed for a new homeschool co-op?

Hi,
I am a 15 year homeschooling veteran who started a co-op last fall.  I am now being asked by my church for ‘official’ documents to include:  business status, liability insurance, tax information.  I have a checking account for our co-op.
We offer 30 classes, one day a week, for 5 hours.  Six of the 30 classes are paid classes.  The student gives the co-op ~$2.00 each class.  I write a check to the teacher for $20.00 each time they teach.  The teacher always makes $20.00.  The student pays a varying rate dependent upon how many students are in the class. What business status do I need?
What tax forms am I required to file?
What type of liability insurance do I need if the parents are always on site and never drop off students?
Thank you greatly for the information.

Sincerely,
Lauren T

Lauren,

Good for you for starting a homeschool co-op. I’m sure it is a blessing for many families. Your business status could be a for-profit business or a nonprofit organization. It depends on whether you own and run the co-op  as your business or whether you have a board to make decisions. It also depends on how you opened up the checking account (although that can be changed). Did you use your personal name and SSN? Then you would be a for profit business, likely a sole proprietorship.

Or did you organize without a profit motive and assemble a board to lead the group and drafts bylaws to govern the nonprofit? Then your group is a nonprofit organization.

These articles might be helpful:

Getting an EIN from the IRS

Checklist for new  homeschool organizations.pdf

Choosing a leadership team

The tax forms depend on your business structure. Sole proprietors report business income on Schedule C of their Form 1040.

Most nonprofits apply for 501c3 tax exempt status from the IRS to avoid paying taxes on their surplus. They file an annual information return with the IRS called Form 990-n, 990-EZ or 990 depending on their annual revenues. Most states require nonprofits to file annual reports as well. My webinar IRS and State Filings explains annual reports in detail.

There can still be a need for insurance, even if parents stay on site. Accidents can happen, damage to property can happen. You might benefit from reading my article on  Insurance for homeschool groups.

Since you are paying teachers, you should read my ebook Paying Workers in a Homeschool Organization. You need to determine their worker status as either employees or independent contractors and be giving them a W-2 or Form 1099-NEC showing their wages.

You can learn a lot by listening to a podcast I recorded on Paying Workers.

Carol Topp, CPA

HomeschoolCPA.com

One comment

  1. Our group found Carol’s book extremely helpful with the questions our organization had in these areas. I cannot recommend it highly enough!

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