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Non-profit question for our lawyer members


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Bottom Line Up Front: I'm establishing a non-profit C Corporation to provide no-cost accelerated flight training to select high-potential senior high students and am looking at the options for minimizing my personal expenses while providing the highest possible quality of training. I need legal help to understand what I need to do to make this go and limit liability, stay within tax law requirements, etc. and am looking to commission legal advice.

Basic premise is that the Corporation will initially be funded and administered solely by me and my wife. The Corporation will own the training aircraft. I will provide the instruction for the Corporation. Once we establish a track record I would like to open up opportunities for external financial support.

If you have expertise in this arena and are interested please PM me.

Cheers,
Rick

 

 

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2 minutes ago, carusoam said:

Have you considered speaking with AOPA regarding your plan?

Yes, that's in the thought process to be implemented at some point down the road. I initially want to set this up on my own terms, in accordance with my own ideas on determination and selection of candidates, so I'm reluctant to solicit help from organizations that may have their own ideas on those things at this point.

 

Cheers,
Rick

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I would suggest you get a local, word-of-mouth referral.  Find a local nonprofit, like a farmers market or charity, and ask who does their legal work. For general info on the basic steps, this is helpful:  https://www.nolo.com/legal-encyclopedia/form-nonprofit-eight-steps-29484.html

Good luck!

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41 minutes ago, carusoam said:

If a flight sim is part of the plan...

Yes Anthony, I'm planning to use X-Plane as a training aid but am not planning on investing in an AATD-level device to get started. However, at the right price I may reconsider...

I'm still working a day job so can't commit the full-time hours to provide the immersion instruction for another couple of years but need to get things in place incrementally so that I can hit the ground running when the time comes. Craig's AATD would be ideal for my purposes but the timing isn't quite right yet.

Cheers,
Rick

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5 hours ago, Rwsavory said:

I would suggest you get a local, word-of-mouth referral.  Find a local nonprofit, like a farmers market or charity, and ask who does their legal work. 

This is an excellent suggestion. 

If your goal is an educational/charitable nonprofit which can accept tax deductible donations, the time to begin putting proper procedures in place is now.

if your goal is "just" tax exempt status as a social club, the considerations are different, but early planning is also necessary.

Sounds like you know that but, either way your best bet is going to be someone in your local area who works with these types of organizations. Since it involves aviation, there are going to be some aviation-specific legal issues, but those are simple compared to the tax ones and would IMO be best handled by a consultation initiated by your tax professional.

Edited by midlifeflyer
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Since you want to roll your own.

Create a corporation in your state.  It could be a C corp or an LLC.  PRobably need three people to be on the board.   Need bylaws.  Some states have reduced filing fees for not for profit.  Start thinking about a name for the company.   This is harder than you think.  Use your secretary of state to look up names.  There are lots of Wing and a Prayers already out there.

Your gonna need a checking account.  Try some of the brokerage houses.  Schwab and Paypal and such

File forms with IRS for 501c3 stating purpose and that you are educational.

There is a once a year form you have to file with the IRS.

Once you have your approved 501c3 sign up for Amazon Smile and Ebay charities (if you sell stuff)   Gonna need paypal account and email account for this. gmail if you are a user seems best.

Ask your friends to use the Amazon smile account when they buy.

Your donations to the 501c3 are tax deductible.  but the donations can never come back to you or family members.   You can work for the non profit with all the related payroll and such stuff.

It's a bit of paperwork to get it going, but the IRS card is a no brainer and is Turbo tax corporate edition.

 

 

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39 minutes ago, Yetti said:

Since you want to roll your own.

Create a corporation in your state.  It could be a C corp or an LLC. 

 

With apologies...

One doesn't have to go further than the first sentence to show how off-base SGOTI advice can be.

Check out this article from the IRS about the requirements for attempting to set up an LLC as a nonprofit, even if you are in one of those states whose nonprofit corporation law permits it to begin with. There's a list if 12 requirements for nonprofit LLC status  in the article. I like this one:

"The organizational language must require that the LLC’s members be section 501(c)(3) organizations or governmental units or wholly owned instrumentalities of a state or political subdivision thereof (“governmental units or instrumentalities”)."

 

Edited by midlifeflyer
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3 minutes ago, midlifeflyer said:

Let's put it this way. One of the advantages/disadvantages of being a lawyer for as long as I have is a fairly decent handle on how little I know about certain subjects.

I saved $100K on a law degree and just got old instead.  Apparently knowledge is inversely related to age. 

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Rick:

Consider making it a for-profit entity.  How you structure your business is far less important than what you want out of it.  The optic of a not-for-profit is losing its lustre in many circles because of the integrity (or lack thereof) of the people running them. 

As well, regardless of how little you personally make (draw or earn in salary) in either category, only a for profit allows you to collect for the equivalent of "sweat equity."  It is called "loans from owner" or some other term. 

And if you haven't figured this out already (which would really surprise me knowing how you feel about integrity), it does not matter which structure you use, reputation will come first - then coverage of operating expenses (profit) follows.   Not the other way round.  No amount of marketing helps build reputation.   

How do I know this?  www.motiva-training.com.  Been doing this for nearly 8 years now.  Clients are from all over the world.  Give advice for free (no charge).  Some of them come back and  pay for our ability to do the pro bono work.  The real difference between our (yours and mine) commercial endeavours is that there is nearly zero risk associated to my company for the work I do.  Most of my clients are international aid organisations (UNIDO etc), national accreditation bodies or some other part of a national government.  They tend to sue less and terminate more. 

There is much more risk associated with flight training and the consequence of things going wrong.  If someone has told you that any legal entity you may establish (however that is defined or structured) will protect thee and thine from exposure in the case of legal action - be skeptical.  These are no longer the days of Salomon v. Salomon (Salomon v A Salomon and Co Ltd [1897] AC 22). 

I am not a lawyer, and this is not legal advice.  It is unsolicited opinion based only on personal experience.  It is worth exactly what you paid for it.

Now stop listening to me;).   Go have fun building something worthwhile. 

And get a good lawyer.  Can you spell:  "minute book?":D

 

 

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8 hours ago, midlifeflyer said:

If your goal is an educational/charitable nonprofit which can accept tax deductible donations, the time to begin putting proper procedures in place is now.

My goal is precisely as you've stated. I'm giving myself two years for research, consultation, and establishment of the appropriate entity and supporting documents/procedures. I'll look locally as suggested for the professional support I need.

Thanks!

Cheers,
Rick

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2 hours ago, Ned Gravel said:

And if you haven't figured this out already (which would really surprise me knowing how you feel about integrity), it does not matter which structure you use, reputation will come first - then coverage of operating expenses (profit) follows.   Not the other way round.  No amount of marketing helps build reputation.

Thanks Ned, this is an interesting and very important point to which I have given a couple of years of consideration. My intent is to do my own thing under the radar, if you will, and not grow this beyond what Glennie and I can manage and operate by ourselves. Notionally a very small operation with only one primary training immersion student per summer. We're planning to cover all O&M costs with our personal funds and efforts, and are not expecting any income from this, ever. My thought a few years ago was to "just do it", but then I started thinking in terms of opportunities to reduce (not eliminate) liability exposure and perhaps reduce our taxes by setting this up as a non-profit entity that could allow us to deduct at least some of the O&M. And then there is the possibility that external contributions from like-minded people may emerge, once we get established, and a non-profit entity would make that easier to manage as well as allow for a tax deduction for any contributions.

I'm very keen on your point about integrity and reputation. Its encouraging to us that we already have a number of friends who have volunteered their up-and-coming high school students to get us off to a good start. Unfortunately this will not be a high volume operation (one airplane, one instructor) so I will immediately be faced with a candidate down-select exercise. The entry criteria I have established, and am continuing to refine, are quite demanding, as I want to assure the best opportunity of success for the candidate we select. After a couple of years of successfully leading students to their private certificates, we'll reassess what reputation we have established. At that point we may be ready to accept any contributions or grants that may be available to help with the O&M. But the instruction will always be my baby, and there will never be a cost assessed to instruction. 

Our best to you and Ute, Glennie says hello!

Cheers,
Rick

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3 hours ago, Junkman said:

My goal is precisely as you've stated. I'm giving myself two years for research, consultation, and establishment of the appropriate entity and supporting documents/procedures. I'll look locally as suggested for the professional support I need.

Thanks!

Cheers,
Rick

Good luck. Sounds like a worthwhile endeavor.

You know , the suggestion to talk to AOPA still holds. Not the normal membership route. Two others. One, they have been in the aviation educational nonprofit world for decades; the organization might be willing to share some specific referrals to folks in the know. The other is the Legal Services Plan. I say that with a bit of hesitation. Perhaps not more than a handful of the attorneys in the Plan are qualified in the 501(c)(3) arena. But there are a few. 

Edited by midlifeflyer
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6 minutes ago, midlifeflyer said:

You know , the suggestion to talk to AOPA still holds.

Yes, I've reconsidered on that. I subscribe to the legal services plan so will give them a call and see what they have to say. I'm not ready to ask for any support from AOPA at this point but that is definitely something we will look at once we have a successful program established.

Cheers,
Rick

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9 hours ago, midlifeflyer said:

With apologies...

One doesn't have to go further than the first sentence to show how off-base SGOTI advice can be.

Check out this article from the IRS about the requirements for attempting to set up an LLC as a nonprofit, even if you are in one of those states whose nonprofit corporation law permits it to begin with. There's a list if 12 requirements for nonprofit LLC status  in the article. I like this one:

"The organizational language must require that the LLC’s members be section 501(c)(3) organizations or governmental units or wholly owned instrumentalities of a state or political subdivision thereof (“governmental units or instrumentalities”)."

 

I forgot to put in the part of setting up a small town for the LLC.  so slay me Who would take advice from a large mythical furry creature anyways

Edited by Yetti
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Get the instructions for form 1023, read them in depth to ascertain if you think the NFP route fits your needs. If so set up your Corp, elect nfp via 1023, get strong insurance and find a good nfp attorney. Not quite as easy as many think.

Good luck.

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6 minutes ago, Jerry 5TJ said:

Since you will be donating aircraft instruction for free I suspect you should have no problem avoiding profits.

As Danb et al. hint, setting up a 501(c)(3) is not hard, but getting IRS approval is another matter.

Best luck!

Took a couple of weeks for IRS approval.  Not that hard.

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Thanks to all. I've been researching this for a while, and have accomplished much of what has been recommended short of submitting paperwork. You've confirmed my hesitation to proceed before gaining the involvement of legal, tax, and accounting professionals. I very much appreciate your sharing of knowledge! The resources available on the internet can give one a false sense of security, so your counsel will be heeded by me.

I've reached out to my friends at Wings of Hope and expect to consult with the professionals that facilitate their operations. 

Cheers,
Rick

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