Re: Filing the incorporation papers ourselves

On Thu, May 20, 2010 at 5:52 PM, Clark Robinson <robinsonchicago@gmail.com> wrote:

Scott, for when you have time,

Barrett stuff you have not seen is blue.

I have been thinking about filing the non profit corporation papers IRS approval request ourselves.

Barrett is not having much luck finding a lawyer to volunteer for this.

Here are some remarks I sent him earlier today (Thursday) with some later thoughts added-in:

RE: finding a lawyer

I have spent the morning looking at the actual process of creating a non profit charitable corporation in New York, and although it involves tedious steps and filings, it looks do-able:

here are some of the things that are involved:

choose a name that is not in use and can not be confused with one in use, "Project PM Foundation" appears to available

File certificate of incorporation with the state of NY, this will require three individuals to sign as officers of the corporation, need not all be NY residents, but will need a NY mailing address (which will need to be kept current with the state authorities), so probably a PO Box would be best, there is a $75 filing fee

File for charity exemption with IRS (looks do-able)

Register charity with state of NY

At some point after the corporation is formed we will need to open a bank account for the corporation, I would expect that to require a minimum deposit

So, a stable address, a couple hundred dollars and some paper work.

I do not see much risk or potential liability in making these filings, if we do it wrong, they get rejected and we re-file.

However, once the corporation has funds or the ability to enter contracts (even verbal ones) it gets pretty serious, so the three incorporators need to know and trust each other

For instance, if the corporation misbehaves, the incorporators themselves can be liable under some circumstances

Illustration: my condo building was built by some guys doing business as a corporation, and when we, the buyers of condos in the new building, sued over construction defects, the builder moved for dismissal on the grounds that his corporation was liable, not him personally -- however, we found a defect in his corporation and the court ruled he would be personally liable, which as a practical matter harmed his credit, thus he became motivated to settle

I will be sending Scott the forms when I have more time and I will get his input on the wisdom of bulling ahead with forming a corporation ourselves.

(Additional comments:)

Why a non profit rather than a foundation or trust? As I understand it, 'foundation' (in this sense) is a non-legal term that describes entities that are recognized under state law as trusts or corporations. A trust is a more difficult entity than a corporation to create and I would not be willing to tackle it. (I do not know if this is true in all states, but seems to be the case in NY.)

Why NY? If, heaven forbid, someone has to show up in person at an administrative agency or court when something goes wrong, we don't want to travel or hire out the appearance. NY requires an in-state mailing address, which is not unusual, since they may have to pass on service of process. I would not be surprised if there are some states that like collecting fees and make it easier to incorporate, but if the organization is incorporated in, say, Nevada but the officers and activity are primarily in NY, it may look sleazy to potential donors.

Anyway, here are some of the forms to look at in the vastness of your leisure.

Search for a name

Application to Incorporate

501(c) application

Registering as charity in NY

(It looks as if the individual fund raisers may have to register, as a separate matter)

IRS informational links

From things you (Scott) have written, I suspect you are familiar with a lot of this material, moreso than myself.

I will eventually put all this in the Financial document, so others can comment, but I would be glad to get your reaction first.

As discussed, this would be something we would do concurrently with opening a donor-advised gift fund account with a brokerage, so that we would be ready when we reach the point where we are able to wind down the brokerage account.

There are also online law firms that advertise prices for doing these things, which might be OK since this is not an unusual set of transactions. I will to look at that sometime in the coming week.

Clark
217-722-8680