I’m starting a new team after having left my former team of three years. This new team will be non school affiliated, and I was wondering if there is any way that I could register this teams finances as a nonprofit (501©3) in order to make it easier to gain sponsors. I was curious as to whether there is any way that I could register through the FIRST organization itself and use their nonprofit status as our own?
I’m no lawyer by any means, but there’s more than one type of 501c3. State and federal. most “non-profit donations” require to be both state and federal, so you’ll need to end up doing both most likely.
The IRS’ website is a good place to start, and remember, you’re going to need legal adults to represent your board; no students unfortunately.
There is no way you can register through the FIRST organization like you are saying.
If you are thinking of starting a new team, I recommend looking at this “application” Paper: GuamFIRST FRC Rookie "Application" and candidly analyze your prospects.
It may be easier to go through something like a local 4H club if you don’t have the resources to set up a 501c3. My team has been doing that for about a year so far and it’s worked out for us.
It’s been a couple years, but last I knew (here in Michigan) you have to register as a corporation, which is fairly cheap and easy to do, then file paperwork with the IRS for 501©3 status, which requires significantly more paperwork and around $750. Totally not sure about that dollar amount, by the way.
There’s more steps, like drafting articles of incorporation and forming an executive board, but that’s the gist of it anyway.
If you can operate under the umbrella of an existing nonprofit organization, that’s definitely the way to go until you have the money and manpower to do it yourself.
FIRST does not allow teams to accept tax-deductible donations through their nonprofit status. If they did so, that would give them the legal responsibility for accounting for all contributions and expenses you make and documenting them on their annual 990 filing.
The first thing you need to do is create a corporate structure which can later apply for 501©(3) status. To do so, you will need to come up with a name. You will have to check with your state SecState office, usually under the Division of Corporations or something like that, to determine the rules for creating a name. Usually it must end in “Corporation” or “Inc.” and it must be unique. The existence of a trademark for your name without an accompanying corporate registration in your state is unlikely to be an issue because trademarks are limited in the fields of business to which they apply. However, it is best to chose a completely unique name that people will not associate with any other entity or product.
After a name has been selected, you will file articles of incorporation. In some states, you may actually incorporate as a “nonprofit corporation,” in others, you will incorporate normally and deal with the state later to get nonprofit status. A list of procedures for each state can be found here. This is mostly pro forma stuff that you just fill in and pay the fees. You will then create bylaws, which again is mostly pro forma but it is very important to read them and understand how they will apply in terms of various situations that may arrive. Lastly, you will have to appoint the initial board of directors, which will is done a little differently in each state. The board of directors will ultimately govern the nonprofit as set out in the bylaws. The board must comply with bylaws and state procedures in formally taking minutes of its meetings. You may have to get a corporate seal made and stamp them with it.
At this time, the board can get bank accounts opened in the name of the corporation, have checkbooks and credit cards issued to the corporation, etc. It is critical that personal and corporate finances and property not be mingled together. For example, debts your team might incur should not be paid with personal checks, but with corporate ones. This is important to separate in case of a tax audit and also to preserve liability separation. The idea is that if a corporation, non-profit or for-profit, is sued, individual people associated with it are not liable. This is called the corporate veil. Depending on your state, you may have to file for sales tax exemption, nonprofit donation soliciting registration, business license, etc.
The actual obtaining of the 501©(3) public charity status, which is what most people mean by “nonprofit,” is done by filing Form 1023 with the IRS. You will likely qualify for the EZ form. Then you will receive something called a status letter which you will keep on file as proof of nonprofit status. You will probably file what’s called a 990 postcard, which is ultra simple, but you still need to keep detailed financial records. There are a number of restrictions on public charities, such as limits on unrelated business income, that must be followed.
Then you will have to ensure that the board files annual reports, tax returns, and the like. There may be annual fees which need to be budgeted for and paid on time. The board has important legal responsibilities to get this stuff done and if it is not done, serious issues such as losing 501©(3) status or being administratively dissolved by the state can result.