FOTSC/501c3

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Revision as of 19:54, 16 November 2011 by Mert.eastman (talk | contribs) (What is a 501(c)3)

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Information on 501c3 organizations&nbsp

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 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.