Personal Finance & Money Asked by liebs19 on December 3, 2020
I am considering forming a business for a charitable purpose. We already have a website and Facebook page to get people to spread kindness for our cause. We’d like to start accepting donations and doing acts of kindness as an organization. I understand that a nonprofit will allow donations to be tax deductible but it seems like there is a higher cost and much more paperwork to fill out. Is an LLC an easier solution? I’m concerned that with an LLC I will have to pay taxes even tho we will not be making a profit.
Were thinking of just running one event (toy donation drive, 5k, etc..) per year at this point.
How do I figure out the best way to do this?
I understand that a nonprofit will allow donations to be tax deductible but it seems like there is a higher cost and much more paperwork to fill out.
A non-profit and a charity aren't the same thing.
A non-profit is a business or organization that is designed to not make a profit. A charity is an organization that is allowed to accept donations and have their donors write-off their contributions.
For example: A credit Union is a non-profit specifically a 501(c)(1); but it isn't a charity which would be a 501(c)(3) organization.
So you have to decide if you want to be a non-profit or a charity. But if you want to accept tax deductible donations you will have to take the further step to be a charity.
This step as you have discovered isn't trivial.
If you are going to only do one event a year it might be better to find a charitable partner. People work with homeless shelters, blood banks, veterans groups, and food pantries to raise money. You would advertise the event, and provide volunteers and an existing charity would benefit. They should have a coordinator to provide you with all the information you need.
Correct answer by mhoran_psprep on December 3, 2020
My #1 goal is to separate this from my finances and not have to pay taxes myself. Would an LLC meet those needs?
To be brief, unfortunately this question totally misunderstands what an LLC is.
It would be beyond the scope of a QA site to offer a from-scratch explanation.
The other question:
How do I figure out the best way to do this?
Setting up charitable organizations is a HUGE amount of work and is not possible without professionals on board.
Were thinking of just running one event (toy donation drive, 5k, etc..) per year at this point.
Unfortunately the answer is there's no way, simple enough, to allow for a small scale of good works.
(User MHoran has given the superb answer: use a charitable partner.)
Answered by Fattie on December 3, 2020
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