Forming a non-profit versus being under a school's jurisdiction

[Qbot2640]

Originally Posted by Zebra_Fact_Man

Individual non-profit status for a team is very expensive and very time consuming.

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

[Jimmy Nichols]

Originally Posted by Qbot2640

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

Do you still have to deal with Annual audits and tax filings?

We formed a Non-Profit with the State of Ohio when we lost our space at the school. This was fairly easy. We were beginning to work on our 501(c)(3) paperwork when we met with the Community Foundation in our area. After meeting with them we decided to create a Fund under their organization. Reimbursements and payments are really easy. They aren't able to do PO's (Purchase Orders), but that's probably specific to them. They do charge a 2% annual fee for administration charges. Cutting checks, processing deposits, handling the tax's and audits. For a group of engineers this was worth it. Plus our account earns interest and typically we earn enough to cover the annual fee.

We also still carry an account at the school in which we use to collect student travel fees and pay for charter bus and hotels. We found that we had sponsors that preferred to donate to the school and sponsors who preferred to donate outside of the school. So having both accounts maximizes our opportunities to receive donations and grants.

[GeeTwo]

3946 did create a 501 c 3 corporation, called "Slidell Tiger Robotics Booster Club", but the team is still officially chartered by the school. We modeled our charter and by-laws after the band boosters, which serve a similar function, that is, to support an activity which is part of a school. By doing this, we have both an account with the school (it's easier to get some sponsors, like NDEP, to give to the school) and an account with STRBC; this money is more nimble, especially when you need to go down to the hardware store for a few machine screws. Team members can get excused absences for competition and other team events; this would be a show stopper for a true community team in LA. It did take a bunch of effort, but we feel it was worth it.

[Qbot2640]

Originally Posted by Jimmy Nichols

Do you still have to deal with Annual audits and tax filings?

We formed a Non-Profit with the State of Ohio when we lost our space at the school. This was fairly easy. We were beginning to work on our 501(c)(3) paperwork when we met with the Community Foundation in our area. After meeting with them we decided to create a Fund under their organization. Reimbursements and payments are really easy. They aren't able to do PO's (Purchase Orders), but that's probably specific to them. They do charge a 2% annual fee for administration charges. Cutting checks, processing deposits, handling the tax's and audits. For a group of engineers this was worth it. Plus our account earns interest and typically we earn enough to cover the annual fee.

We also still carry an account at the school in which we use to collect student travel fees and pay for charter bus and hotels. We found that we had sponsors that preferred to donate to the school and sponsors who preferred to donate outside of the school. So having both accounts maximizes our opportunities to receive donations and grants.

Yes, we have to file taxes...and have not yet done this for the first time. I suppose we will deal with audits if someone decides to audit us, but as a pretty small player I can't imagine that being a big deal. We can submit the very easy "post card" version of the 990 form...but may choose to do a complete submission in our first year so that all our information is searchable to potential donors.

For us, the relationship with our school was becoming increasingly tenuous. I never will understand what a school has to gain from becoming more and more obstinate when dealing with a group of the very best students at the school - and further, a group that consistently provides them with good publicity, but that was the situation. I don't think we would have been able to continue under the school's draconian control. I realize that the average team has a much better situation, thus understand that our answer is not correct for all.

[Kevin Leonard]

20 has had a nonprofit since 2004 in addition to our association with the school.
It allows us significantly more financial freedom and allows. For direct donations and fundraising.

[David Brinza]

Originally Posted by Zebra_Fact_Man

Individual non-profit status for a team is very expensive and very time consuming.

Originally Posted by Qbot2640

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

It's too bad this streamlined application wasn't available in 2010 when Team 980, a SoCal community team, filed for non-profit exemption status. Still, filing the complete IRS Form 1023 wasn't really all that difficult. The filing fee then was $750, which is well worth the benefits gained with 501(c)(3) status. We had to go through the process of becoming incorporated in the State of California in order to file. We also registered as a Charitable Trust with the California Attorney General''s office. We posted our 501(c)(3) formation documents on our website: FRC Team 980 501(c)(3) Formation Documents

Originally Posted by Jimmy Nichols

Do you still have to deal with Annual audits and tax filings?

Besides the very simple on-line annual filing of 990N "IRS e-postcard" and FTB199N (California e-postcard), we also electronically file (biennially) a of Statement of Information (SI-100) to the California Secretary of State. Finally, we file an annual renewal (RRF-1) for our California charitable trust.

The overhead of filings is minimal compared to the benefit our team gains with non-profit status:
We've found many grants require non-profit status. Team 980 receives software donations (i.e. Microsoft Windows, Office) and discounts through http://www.techsoup.org/. We use Google Apps for Non-profits and Paypal to manage our operations. Finally, we receive donations, many through Piggybackr, because of our tax-exempt status.

[Rosiebotboss]

I am not going to repeat anything that has already been said other than to say, I started the Agawam Robotics Education Assn. Inc in 2009 with the help of an attorney that was a Rosie Mom and a CPA that was a Rosie Mom. Ask your kids who's parent is an attorney/accountant. Make sure you keep good records in case of an IRS audit!

That being said, you do not need to jump in with both feet into a 501 right away. AREA started out as noth8ing more than a checking account, opened by a couple (non related) parents that the bank will set up to require 2 signatures on each check. The 2nd signer MUST be non related to the other signer, either by marriage or blood. The 2nd signer adds a level of security to misuse of funds.

A 501 c 3 is a Corporation and it adds its own level of security other than financial. If an angry parent files a suit against the team, they can only attach the assets of the team, not the mentor, for example.

Do your homework! Talk to a professional. You'll be better off in the long run. I'll try to find the presentation I have given over the years in my Senior Mentor duties and post it on www.firstnemo.org

[John Retkowski]

Our team has been part of the 501c3 non-profit South Jersey Robotics, which started in 2008. Here is an exerpt from the website.

In 2008 the team incorporated to a non for profit organization – South Jersey Robotics, Inc. Since that time, SJR has continued to grow and add additional teams. Currently, there are ten teams:

FRC Team 316, the LuNaTeCs
FRC Team 5420, Velocity
FTC Team 7071, the EngiNerds
and seven FLL teams that include the Lunabots, Team Shockwave, and Pyro Penguins

Our FRC teams have been quite successful with what we like to call the "College Model" Since 1999 The Lunatics have partnered with Salem community college to use their workshop and space to practice. We, along with team 365 MOE also host The off season event Duel On The Delaware in the Salem Community College gym.

This past year, South Jersey Robotics forged a new partnership with Cumberland Community College for FRC team 5420 Velocity. This year, Velocity is also expanding into the new Makerspace in Bridgeton NJ.

We are excited to see what the future will bring for SJR.

[GeeTwo]

Originally Posted by Rosiebotboss

That being said, you do not need to jump in with both feet into a 501 right away. AREA started out as noth8ing more than a checking account, opened by a couple (non related) parents that the bank will set up to require 2 signatures on each check. The 2nd signer MUST be non related to the other signer, either by marriage or blood. The 2nd signer adds a level of security to misuse of funds.

This has become harder recently; few banks want to deal with requiring multiple signatures. My church was interested in requiring a second signature about four or five years ago. We only found one bank in our area that offered this as an option (on a business account). It is a large national bank which fortunately has a branch two blocks away from the church!

[FrankJ]

As Gee 2 sez, second signature checks are going the way of the Dodo bird. Banks don't really verify signatures anyway. I routinely signed my utility payments as Mickey Mouse, back when I wrote checks for those things. Our foundation requires a second set of eyes to review the bank statement every month.

[Steven Smith]

3005 partnered with a local 501c3 that was specifically set up by a well off businessman in 2008 to support the local children in our area. They have been very interested in the robotics team, and have given us small donations over the years, so I would typically give them an update every 6 months.

I mentioned to them that the school purchasing was an issue, and I was thinking about making a 501c3 to fix it. The directors comment to me was "That is what we do. I have 3 bankers on this board that can handle all the paperwork, I want you to focus on working with the kids."

Because of my history with them, they were willing to set up a dedicated account for me with debit card access. I just provide receipts and expense justifications, which is as simple as taking a picture of the receipt with my phone and uploading it.

So to the other points, no a 501c3 is not so difficult to set up that you can't... but there is a lot of overhead. Make sure you talk to existing organizations in your area to make sure they wouldn't already meet your needs before setting out on your own.

[itsjustmrb]

FRC Team 4063 has it's own 501(c)3 non-profit status. I would like to add a couple things that I didn't see mentioned above.

Many times it is much easier to get donations from companies and organizations if they see your non-profit status.It allows them to deduct the value of most donations from their taxable income.

Check for accountants and lawyers that may be willing to donate their time and services to your team.

The benefits of our 501(c)3 are immeasurable.

[BSV]

Thanks, everyone for all the helpful information. This helps shed some light for a discussion we've been having.

Has anyone gone the 503(c) route and then decided that they wish they would have stayed with the school?

[Mr V]

Originally Posted by BSV

Thanks, everyone for all the helpful information. This helps shed some light for a discussion we've been having.

Has anyone gone the 503(c) route and then decided that they wish they would have stayed with the school?

Most teams I'm familiar with do not sever ties with the school. Many teams still maintain school accounts for grants to be deposited and to be able to set up Purchase Orders with companies like AndyMark or McMaster. Funds raised through booster club efforts then go into that account and are used for times when a quick payment is needed scholarships and other things that don't work well in the confines of the school system.

[GeeTwo]

Originally Posted by BSV

Has anyone gone the 503(c) route and then decided that they wish they would have stayed with the school?

Expanding on Mr V's answer (I started this morning before his post and decided to finish anyway):

Forming a 501(c)(3) to help fund the team does not mean that you have to break your association with the school, unless the school's policies forbid this.
In our case, it means a build and meeting space, a venue for recruiting, and "field-trip" excused absence for the students. The first two could be overcome, the third is essential.

Looking at the posters who did indicate that they formed/affiliated with a non-school organization:

• cbale2000: according to their website, team 703 is still associated with the Saginaw Career Complex where they formed.
• BitTwiddler: Team 1723 is still listed as associated with the schools on TBA.
• QBot2640: The team 2640 web site still shows an affiliation with the Rockingham County Schools.
• GeeTwo: 3946 is still fully in with the school
• Kevin Leonard: clearly states "20 has had a nonprofit since 2004 in addition to our association with the school". [emphasis mine]
• David Brinza: clearly identifies that 980 was already "a SoCal community team".
• Rosiebotboss: Team 839's TBA listing still shows affiliation with AGAWAM HIGH.
• John Retkowski: The teams listed were always community teams. See the first sentence under "Our History" at this page: "Team 316, the LuNaTeCs, began in 1999 with seven students and four mentors through a partnership with local businesses and educators."
• Steven Smith: Begins "3005 partnered with a local 501c3.."
• itsjustmrb: 4063 is associated with HS according to TBA.
  MrV: 5588 is associated with Holy Names Academy according to TBA.

Bottom line is that no one who has posted appears to have been involved with a team that was once part of a school that has completely severed ties. If you do consider severing ties, approach this at least as methodically as a robot design - figure out what you will gain and what you will give up before you make the commitment; there's probably no going back.