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Message
Was thinking of starting my own 501(c)(3)...
Posted on 7/26/22 at 3:55 am
Posted on 7/26/22 at 3:55 am
Anyone have any experience with this?
7
Posted on 7/26/22 at 5:54 am to Gideon Swashbuckler
I prepare tax returns for them and have been involved in the process of setup, organizing, applying for tax-exempt status, etc. Might be able to point you in the right direction if your questions are on these subjects.
Posted on 7/26/22 at 8:47 am to Gideon Swashbuckler
Yes. What questions do you have??
What state are you in?
What state are you in?
Posted on 7/26/22 at 12:12 pm to Gideon Swashbuckler
Nm
This post was edited on 7/26/22 at 12:48 pm
Posted on 7/26/22 at 1:26 pm to Gideon Swashbuckler
quote:Post an email. I know some folks who could potentially help.
Anyone have any experience with this?
Posted on 7/26/22 at 2:51 pm to LSUFanHouston
I was planning on starting it in Delaware since it seems this is the state with the most relaxed financial rules.
I was planning on privately funding a foundation, not a charity that solicits funds from doners like the United Way or Wounded Warriors.
I was planning on privately funding a foundation, not a charity that solicits funds from doners like the United Way or Wounded Warriors.
Posted on 7/26/22 at 2:56 pm to CherokeeTiger
Can a company donate 50% of their profit to a foundation to avoid the tax burden?
Can an individual donate 30% of their income to a foundation to avoid the tax burden?
If these are true what would stop an individual from doing the following:
Start an LLC AND a foundation.
Let's say the LLC, after expenses makes $100k. Could the LLC donate to the foundation $50k?
Could the owner of said LLC (who also happens to own and operate the LLC alone) then take the other $50k of profit from the LLC as salary and then donate $15k to the foundation to avoid the tax burden?
Would that then net the LLC $0 taxable income leaving the individual a tax burden of $35k?
My LLC will be based in Florida.
Can an individual donate 30% of their income to a foundation to avoid the tax burden?
If these are true what would stop an individual from doing the following:
Start an LLC AND a foundation.
Let's say the LLC, after expenses makes $100k. Could the LLC donate to the foundation $50k?
Could the owner of said LLC (who also happens to own and operate the LLC alone) then take the other $50k of profit from the LLC as salary and then donate $15k to the foundation to avoid the tax burden?
Would that then net the LLC $0 taxable income leaving the individual a tax burden of $35k?
My LLC will be based in Florida.
This post was edited on 7/26/22 at 2:58 pm
Posted on 7/26/22 at 4:06 pm to Gideon Swashbuckler
If the LLC is taxed as a corporation:
50K wages to shareholder-employee leaves 50K in profit.
Corps can get a charity deduction for up to 10% of annual taxable income before deduction, excess is carryover.
So max deduction is 5K.
Then he takes the 50K wages and makes a 15K donation to the private foundation. He gets the 15K deduction only if he itemizes, and the donation is limited to 30% of AGI.
If the LLC is taxed as a S Corp or single member LLC:
The total donated by the company and by the individual are lumped together on the personal return, available only if they itemize, and still limited to 30 percent of AGI.
In either event, we would need to know the individual AGI to make a final determination of how much could be deducted. Amounts over the limit carry forward for 5 years.
50K wages to shareholder-employee leaves 50K in profit.
Corps can get a charity deduction for up to 10% of annual taxable income before deduction, excess is carryover.
So max deduction is 5K.
Then he takes the 50K wages and makes a 15K donation to the private foundation. He gets the 15K deduction only if he itemizes, and the donation is limited to 30% of AGI.
If the LLC is taxed as a S Corp or single member LLC:
The total donated by the company and by the individual are lumped together on the personal return, available only if they itemize, and still limited to 30 percent of AGI.
In either event, we would need to know the individual AGI to make a final determination of how much could be deducted. Amounts over the limit carry forward for 5 years.
This post was edited on 7/26/22 at 4:08 pm
Posted on 7/26/22 at 4:10 pm to Gideon Swashbuckler
quote:
Start an LLC AND a foundation.
Let's say the LLC, after expenses makes $100k. Could the LLC donate to the foundation $50k?
Could the owner of said LLC (who also happens to own and operate the LLC alone) then take the other $50k of profit from the LLC as salary and then donate $15k to the foundation to avoid the tax burden?
Would that then net the LLC $0 taxable income leaving the individual a tax burden of $35k?
My LLC will be based in Florida.
Without getting into the mechanics of limits and such, do you not need any cash? The 501 would still have to use the money for charitable endeavors. I guess you could pay yourself as the CEO of the charity, but that accomplishes nothing over just taking the money originally.
Im not sure what you're trying to accomplish
This post was edited on 7/26/22 at 4:11 pm
Posted on 7/26/22 at 4:22 pm to Gideon Swashbuckler
You’re describing a single member LLC in which case income passes through to the owner and is all subject to the same 30% limitation when donating to a private foundation. Not to mention the headaches and costs associated with maintaining the foundation, one of which being that the foundation must make a certain amount of donations each year to qualified charities or else it will pay an excise tax.
If you want to donate to charity for the tax benefits, you’re better off just doing it like the rest of us.
If you want to donate to charity for the tax benefits, you’re better off just doing it like the rest of us.
Posted on 7/26/22 at 5:48 pm to Gideon Swashbuckler
Ask the Clintons...works swell for them
Posted on 7/26/22 at 11:33 pm to Gideon Swashbuckler
I’ve read this thread a few times, and I’m confused as to the purpose of going through all of the steps of setting up your own non-profit, unless you’re setting up some specific service that is needed (like the Gideon Swashbuckler food bank or something). And even then without accepting any donations and just using your own money, unless you’re making WAYY more than the example figures you’ve provided, that doesn’t seem like enough to start something new.
So in that case, you’ll likely just be donating to your foundation then donating from your foundation to other charities, which you could have done anyways directly, without the work of setting up your own non-profit.
In addition, while this is money board, so you’re focusing on the financial implications so you have no obligation to discuss the actual charitable/non-profit activities and plans. That said, your posts make it seem like the purpose is to avoid taxes, and charity is secondary and/or unimportant at all. Of course, you may already be planning to give X amount of money to some cause, and you just want to maximize the amount that can be deducted, and that is perfectly reasonable.
But again, this gets back to its purpose, but unless it serves a charitable purpose that can’t be done with existing charities/foundations, creating your own foundation seems like unnecessary work at best, but raises red flags at worst given the focus of your posts. I don’t know how the IRS evaluates these things. But if I was reviewing tax documents, and I saw the owner of his own “single owner” small business giving to his own “single owner” non-charity and only to his non-charity and no one else was donating to it, I would scrutinize it much more carefully than normal. Maybe the IRS wouldn’t, but that seems like a risk that you would want to avoid, requiring more work to ensure proper documentation and accounting on top of setting it up in the first place.
Maybe I’m just misinterpreting your posts, and maybe you do have a distinct purpose for creating your own non-profit and/or are just trying to maximize the deductions from the amount that you were already planning to give. But if not, and the primary or sole purpose is to avoid taxes, that just seems like a bad idea.
So in that case, you’ll likely just be donating to your foundation then donating from your foundation to other charities, which you could have done anyways directly, without the work of setting up your own non-profit.
In addition, while this is money board, so you’re focusing on the financial implications so you have no obligation to discuss the actual charitable/non-profit activities and plans. That said, your posts make it seem like the purpose is to avoid taxes, and charity is secondary and/or unimportant at all. Of course, you may already be planning to give X amount of money to some cause, and you just want to maximize the amount that can be deducted, and that is perfectly reasonable.
But again, this gets back to its purpose, but unless it serves a charitable purpose that can’t be done with existing charities/foundations, creating your own foundation seems like unnecessary work at best, but raises red flags at worst given the focus of your posts. I don’t know how the IRS evaluates these things. But if I was reviewing tax documents, and I saw the owner of his own “single owner” small business giving to his own “single owner” non-charity and only to his non-charity and no one else was donating to it, I would scrutinize it much more carefully than normal. Maybe the IRS wouldn’t, but that seems like a risk that you would want to avoid, requiring more work to ensure proper documentation and accounting on top of setting it up in the first place.
Maybe I’m just misinterpreting your posts, and maybe you do have a distinct purpose for creating your own non-profit and/or are just trying to maximize the deductions from the amount that you were already planning to give. But if not, and the primary or sole purpose is to avoid taxes, that just seems like a bad idea.
Posted on 7/27/22 at 9:11 am to Gideon Swashbuckler
Setting up a charity to avoid income taxes doesn't work (at least for someone not named Clinton). Just stop.
Posted on 7/27/22 at 9:45 am to buckeye_vol
quote:
So in that case, you’ll likely just be donating to your foundation then donating from your foundation to other charities, which you could have done anyways directly, without the work of setting up your own non-profit.
Private foundations were more common before charitable gift funds became popular. They serve the same purpose - to get a tax deduction before the money is actually donated to a charity.
There are legit reasons for this. Say you have a windfall year - like your AGI is normally 100K and this year you make 2M. You decide you want to give 1M to charity. Puting into a CGF / Private Foundation allows you to take all the deduction this year - when the deduction will be worth the most (due to marginal tax rates) and when you won't hit the AGI limitation for annual donations.
But you might actually want to spread the 1M donation over 5-10 years. Doing it this way is great tax planning.
Because the charitable gift funds have become so popular, we only see new private foundations setting up when the amounts in play are so large that the compliance costs of running the PF are less than the admin costs of using a CGF.
I agree the OP seems to be just looking for creative ways to not pay taxes.
Posted on 7/27/22 at 10:15 am to LSUFanHouston
What about setting up a charitable family foundation in order to donate and have the foundation invest some of the donations? Would the foundations funds grow tax free even when they sell and donate?
If I control the foundation and invest well, then I could in theory have a larger impact years down the road.
If I control the foundation and invest well, then I could in theory have a larger impact years down the road.
Posted on 7/27/22 at 12:42 pm to lighter345
quote:
What about setting up a charitable family foundation in order to donate and have the foundation invest some of the donations? Would the foundations funds grow tax free even when they sell and donate?
You can do the same thing with a charitable gift fund.
How much are we talking? The amount invested in a family foundation needs to be enough to justify the cost of setting it up, annual compliance costs, etc.
Most people who do a family foundation do it more for the name recognition than anything else. Of course you can also take the Byrde Family Foundation route and use it for money laundering!
Posted on 7/27/22 at 12:57 pm to LSUFanHouston
We are not talking more than a couple thousand a year, but for the next 30 years. I already have a charity set up that’s initial goal was to donate to other charities. It’s receipts have always been less than $50K so I just file for 990EZ each year. I have a bank account as well. I am the only director so I can change the name.
I guess I’m not seeing much more compliant related costs but please let me know.
I will look into the charitable gift fund as well.
I guess I’m not seeing much more compliant related costs but please let me know.
I will look into the charitable gift fund as well.
Posted on 7/27/22 at 2:32 pm to LSUFanHouston
I fully intend on making grants from the foundation. The requirement is 5% of net assets per year spent on charitable granting if I understand the rules correctly.
I appreciate the comments and advice.
Another question:
If the LLC I am setting up is a money mngt firm, can the foundation use it to grow its liquid assets by way of trading stocks?
What would be the tax burdens of the foundation if it made a ROI from the money used from its coffers?
Meaning if the foundation used the LLC (money mngt firm) to manage its investments, what would it owe in taxes on that ROI?
I want to start an investment firm that is privately funded with income already earned and taxed.
I want to start a foundation to help people pay their hospital bills before they go into collections. I want to anonymously grant hospitals charitable funds to people's accounts just before hospitals take action to put these accounts into collections for people struggling to pay their bills through my foundation.
I want to manage the money in the foundation, to grow the holdings, with my LLC money mngt company.
I'm paying income tax on the profits I make from trading stocks. Why not try and minimize the amount I pay in taxes in order to grant that money to people that actually need it?
That's why I'm asking about donating not only AGI from the LLC, but also from my personal income. Sounds as if I should make the AGI as low as possible from the LLC, and pay myself a salary to run the Foundation is what I'm seeing, or just no salary at all. The foundation can own assets and pay for my expenses provided that I'm always representing the foundation in my travels, no? Couldn't the foundation pay me a no-tax per diem for expenses in lieu of a salary? Provided it matches the per diem that the govt allows? Can I not live in a house owned by the foundation provided that it isn't my primary address, and I maintain a separate primary address? What if it were say, a condo at the beach, that the foundation purchased? A charity can have real estate as an asset, no? It can also provide me with a personal vehicle, right?
I have saved half a million in order to begin the foundation (that number grows every month because of my investments of that $$$). Over 50% of foundations in the USA are started with less than $1m.
I have talked to a company that specializes in starting foundations, so they say. They are the ones that told me to start it in Delaware and that they could do all this for a fee. AND, that fee in the first year goes towards the 5% that I would need to grant out as part of my 5% of my net assets granting obligation which would be $25k in my first year.
They essentially set this foundation up, apply for 501(c)(3) status, handle the taxes for the foundation, and provide other services for a one time start up fee, and then a yearly fee.
They never get access or control of how the money is spent.
I did some research on this company and they seem 100% legit. They did not solicit me, I called them. They manage several foundations that have assets over a billion dollars each. The reason I'm asking TD about this, is because I'd really rather not have an outside company involved, but most lawyers and accountant I've spoken to just told me to donate to another charity basically to absolve myself on the work involved. But I want to make this my passion. I am already retired. I want this to be my job, so I'd like complete control of how the money is spent. I also don't want to go to jail for breaking laws I don't even know exist, hence the thread. I wanted people to poke holes in my ideas, before I go off and bite off more than I can chew with this thing.
I appreciate the comments and advice.
Another question:
If the LLC I am setting up is a money mngt firm, can the foundation use it to grow its liquid assets by way of trading stocks?
What would be the tax burdens of the foundation if it made a ROI from the money used from its coffers?
Meaning if the foundation used the LLC (money mngt firm) to manage its investments, what would it owe in taxes on that ROI?
I want to start an investment firm that is privately funded with income already earned and taxed.
I want to start a foundation to help people pay their hospital bills before they go into collections. I want to anonymously grant hospitals charitable funds to people's accounts just before hospitals take action to put these accounts into collections for people struggling to pay their bills through my foundation.
I want to manage the money in the foundation, to grow the holdings, with my LLC money mngt company.
I'm paying income tax on the profits I make from trading stocks. Why not try and minimize the amount I pay in taxes in order to grant that money to people that actually need it?
That's why I'm asking about donating not only AGI from the LLC, but also from my personal income. Sounds as if I should make the AGI as low as possible from the LLC, and pay myself a salary to run the Foundation is what I'm seeing, or just no salary at all. The foundation can own assets and pay for my expenses provided that I'm always representing the foundation in my travels, no? Couldn't the foundation pay me a no-tax per diem for expenses in lieu of a salary? Provided it matches the per diem that the govt allows? Can I not live in a house owned by the foundation provided that it isn't my primary address, and I maintain a separate primary address? What if it were say, a condo at the beach, that the foundation purchased? A charity can have real estate as an asset, no? It can also provide me with a personal vehicle, right?
I have saved half a million in order to begin the foundation (that number grows every month because of my investments of that $$$). Over 50% of foundations in the USA are started with less than $1m.
I have talked to a company that specializes in starting foundations, so they say. They are the ones that told me to start it in Delaware and that they could do all this for a fee. AND, that fee in the first year goes towards the 5% that I would need to grant out as part of my 5% of my net assets granting obligation which would be $25k in my first year.
They essentially set this foundation up, apply for 501(c)(3) status, handle the taxes for the foundation, and provide other services for a one time start up fee, and then a yearly fee.
They never get access or control of how the money is spent.
I did some research on this company and they seem 100% legit. They did not solicit me, I called them. They manage several foundations that have assets over a billion dollars each. The reason I'm asking TD about this, is because I'd really rather not have an outside company involved, but most lawyers and accountant I've spoken to just told me to donate to another charity basically to absolve myself on the work involved. But I want to make this my passion. I am already retired. I want this to be my job, so I'd like complete control of how the money is spent. I also don't want to go to jail for breaking laws I don't even know exist, hence the thread. I wanted people to poke holes in my ideas, before I go off and bite off more than I can chew with this thing.
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