You are here:

Nonprofit Law/Funding spin offs and subsidiaries

Advertisement


Question
Mr. Mechanic,
We are a 501(c)(3) public charity and through a very involved re-organization have created both a non-profit entity (CE application pending) which we will serve as sole corporate member and for-profit entity which we will serve as controlling shareholder. Both were established to allow the development of resources and relationships to achieve our charitable purpose.  The question is how much funding (as a percentage or threshold amount of our typical yearly expenditures)can we provide to these entities so that they can begin operating? Would any funding to the for-profit have to be a FMV loan?    

Thank you for your assistance. If more details are needed, do you provide limited consulting for a fee?

Answer
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations and not about their for-profit businesses.  However, I will inform you that a public charity may be funded up to any level, so I don't believe you are asking specifically about the funding to that 501(c)(3) organization for its own charitable, educational or religious activities but asking about funding to the for-profit entity. The IRS does not have any regulation as to how much funding may be provided for the for-profit entity to begin operating, nor does the IRS require some of the funding to be a FMV loan.

If you want to hire me to help you with other issues as to the relationship between the public charity and the for-profit entity send me an email directly to my email address below and I will quote you my fees.

Harvey Mechanic, Attorney at Law -
Harvey108@homail.com

P.S. This response is intended to be a Mechanic general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

Nonprofit Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


Harvey Mechanic

Expertise

I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


©2016 About.com. All rights reserved.