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Nonprofit Law/501c3 incorporation fees and initial start-up funds

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Question
Greetings. This appears to be a wonderful service. I completely understand that you cannot assist on certain topics. I was a CPA at one time a long time ago, just not current. My career has been about implementing financial systems in public sector.

I find myself in a situation where I am very passionate about starting a 501c3. So I have started with Legal Zoom, but incorporation is not complete. Are the fees I pay from my personal account to start this deductible for me? I want to reserve URLs as well, and that seems to happen as part of the incorporation, which makes sense. As soon as I get the EIN, I will open a business account under that EIN. I will move a little of personal money into that account for start-up fees, like logo, permits, legal, bank and merchant accounts, web hosting, probably a little consulting if I cannot get a volunteer. Can I write-off whatever money is spent that I put in to get it started?

I consider myself a pretty good accountant, but am in unfamiliar territory.

Thank you for any advice.
Natalee

Answer
I suggest that you treat the funds as a no-interest loan to the entity. That loan is later ratified by the board and after you are paid paid the amount that you loaned for the preformation costs and for the start-up costs, then you can donate the same amount to the corporation or more or less and take a charitable donation deduction after receiving an acknowledgment of the donation from the corporation.

The alternative is to have the board, at its organizational meeting, authorize reimbursement of the start-up amounts by a resolution similar to that of another nonprofit - screenshot is at https://picasaweb.google.com/lh/photo/ZN7_tp_69-zs_jbXdq6fL1CmwABepmSs-RgzIip3ehk
(obtained at http://www.orwac.org/uploads/pdf/articlesofinc.pdf on page 12:
--- Start of excerpt ---
RESOLVED, that the Banking Resolution of Organization for Research on Women and Communication, Inc. November 16, 2010, conferring banking and borrowing authority upon certain of the Corporation’s officers as therein provided be and the same are hereby approved and adopted,
RESOLVED, that the Corporation’s fiscal year be the calendar year,
RESOLVED, that the reimbursement of pre-incorporation expenses incurred by the incorporator, directors and officers is hereby approved, with such expenses to be properly accounted for in the records of the Corporation;
RESOLVED, that the Corporation hereby approves and ratifies the steps taken and any contracts entered into on behalf of the Corporation by the incorporator, officers, and directors during the incorporation process and hereby agrees to indemnify said individuals from and against any expenses or liabilities incurred on behalf of and in furtherance of the business of the Corporation;
RESOLVED, that this Organizational Certifícate shall be deemed to be in lieu of the organizational meeting of the initial Board of Directors required by the Colorado Business Corporation Act;
RESOLVED, that this Certifícate be inserted in the Corporation’s record book;
Dated this day 20 of February, 2011.
--- End of excerpt ---

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

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

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Harvey Mechanic

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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.


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