Information on 501c3 organizations
Problem to be solved
When ATX Hackerspace was formed the LLC business form was selected as an expedient and as a way to get things going quickly and simply. As a result we have a form where the LLC can veto any decision of the board or membership. This worked when we were a small cohesive group because we all know and trust the LLC members. However, as we grow into a large diverse group, we may be better served with an organizational form that relies less on interpersonal trust and more on clearly defined roles, responsibilities and limits of power. A 501(c)3 nonprofit may be one way to accomplish this.
What is a 501(c)3
501(c)3 refers to a section of the IRS tax code that provides for a nonprofit organization limited to (among other things) charitable, educational, and scientific purposes. 501(c)3 organizations are exempt from taxes, and can receive donations on a tax deductible basis to the donor. Membership fees, however, are not tax deductible.
A 501(c)3 can be a "public charity" or a "private foundation". We would want to be a private charity if at all possible. Some hackerspaces that have organized as public charities include (INSERT LINKS) HacDC (Washington), Noisebridge (San Francisco), Harford Hackerspace (Baltimore), Makers Local 256 (Huntsville), and HeatSyncLabs (Mesa).
A 501(c)3 organization can make a "profit", but the profit must go to further the organization's nonprofit mission. It cannot go to benefit individuals. 501(c)3 nonprofits can hire employees and contractors, and can pay for services.