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Notes on Forming a Non Profit Organization for Nightingale

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donbyrd edited this page Jul 26, 2012 · 11 revisions

  • Objective: Have an organization to handle whatever is needed for the Ngale open-source project; at a minimum, to hold rights to the code

  • Summary

    • Should be a non-profit, tax-exempt organization
    • State level: Indiana corporation -- see below
    • Federal level: 501(c)(3)
      • NB: could take years to get IRS approval!: cf. CASH Music blog, cited in our Notes on Forming a 501(c)(3) for Nightingale
      • ...but important to organize in way that's compatible with it
      • Actually, it's very possible we'd never get IRS approval! Adam Dingle/Yorba sez:
      • Info on potential fiscal sponsors
        • Software Freedom Conservancy (http://sfconservancy.org)
          • Services offered to assoc. projects: accept donations, hold funds, hold assets (incl. intangible: licenses, etc.), negotiate contracts, basic legal advice, administrivia, etc.; apparently most are at no cost to the project!
          • Applications for project membership considered only 2x/year; deadlines are 1 Feb. & 1 Sept.
        • Software in the Public Interest (http://www.spi-inc.org)
          • Services offered to assoc. projects: accept donations, hold funds, hold assets (incl. intangible: licenses, etc.), legal assistance, etc.; apparently most are at no cost to the project!
          • A board member must sponsor candidates for assoc. project
        • Apache Software Foundation (http://www.apache.org)
          • Services offered: ?? How to become an Apache project: ??
          • I can't find anything on their website
          • Michel sez "I don't know how amenable they are to hosting projects with stricter license than the Apache license -- I believe the project's code itself has to be APL."
      • Advantages/disadvantages of getting a fiscal sponsor
        • PRO: Would give us instant tax-exempt status
        • PRO: Services some (at least SF Conservancy and Software in the Public Interest) offer should be extremely helpful, esp. if free
        • CON: We'd have to follow the sponsor's rules. Probably not a serious problem.
        • CON: Likely to take much longer to have any formal organization vs. becoming an Indiana nonprofit corporation. This is very serious.
      • RESOLUTION: (1) Become an Indiana nonprofit corporation ASAP. (2) Pursue fiscal sponsorship.
      • Adam D.: "At the Software Freedom Conservancy I know several of the directors and officers (Bradley Kuhn, Stormy Peters and Karen Sandler)"
      • Legal advice available from Software Freedom Law Center (http://www.softwarefreedom.org)

  • NOTE: Everything below is about forming our own organization, and is irrelevant to going with an existing group as fiscal sponsor.

  • Organize in what state? Indiana is easiest, esp. for Don to handle, and seems OK

  • Step-by-step instructions

  • Other information sources

    • Nolo book: "How to Form a Nonprofit Corporation" by Anthony Mancuso, 10th Edition (2011)
    • Indiana form 04162, Articles of Incorporation for a Nonprofit Corporation
    • Indiana PowerPoint presentation, "Starting a Non-Profit Organization in Indiana: Filling Out The Forms"
    • IRS publication 557, Tax-Exempt Status for Your Organization
    • IUPUI Nonprofit Solutions: http://www.nonprofitsolutions.iupui.edu/resources_websites.aspx
    • Hurwit & Associates website

  • Organization

    • Form: for 501(c)(3), must be corporation, trust, or unincorporated association
    • Organizing docs: respectively, articles of incorporation, trust documents, articles of association
    • Q+A: Which one? unincorporated might be the simplest/cheapest; but corporation is probably best, many how-to documents assume it, and it's pretty simple/cheap. Resolution: It'll be a corporation.
    • Organizing docs must:
      • limit purposes to those described in Sec. 501(c)(3) of IRC
      • not expressly permit unrelated activities
      • permanently dedicate assets to exempt purposes (including disposition of assets on disolution -- should/must be to another nonprofit)
    • Exempt purpose: one or more, stated in organizing docs
    • Also classified (by IRS) as "private foundation" or "public charity"
      • Q: According to the Nolo book, rules for private foundations are very complicated and restrictive, and penalties for violations are stiff => important to be a public charity! But it's not completely obvious how we'd qualify as a public charity; can we get info from other open-source organizations?
      • Q: Does this affect application for incorporation? Probably not, so it can wait

  • Other Non-Profit/Tax-Exempt Organizations Non-profit organizations include corporations, trusts, limited liability companies, and unincorporated associations that qualify for tax-exempt status under Internal Revenue Code (IRC) 501(a) as described in Publication 557 (Tax-Exempt Status for Your Organization).

  • Steps to form an Indiana non-profit (according to Nolo)

    • Cf. a more detailed checklist, on the CDROM accompanying their book
    1. Choose 3 or more directors
      • Q+A: (1) Don B.; (2) David G.; (3) Doug McK. if he agrees, else Mike Brockman? Other possibilities: David Alpher (ex-lawyer!), Pam Marshall, Charlie Rose? #3 will be David Alpher.
      • U.S. citizenship/residence may not be required, but clearly desirable!
      • Q+A: Does Indiana law allow long-distance meetings of the Board? If not, it could be a serious problem! Resolution: According to IC 23-17-15-1, unless corporation's own rules forbid it, the Board can allow meetings via any means such that all directors can hear the others.
    2. Choose a name
      • Indiana requirements: not too similar to existing corp. name; must include "corporation," "incorporated," "limited," "company," or abbrev.
      • Q+A: "Avian (or Advanced?) Music Notation Foundation, Inc." (AMNF)? Or... ? Resolution: we'll be "Avian Music Notation Foundation, Inc." unless there's a "too similar" problem. As of 2 PM, 12 July, looks like no problem, and it's reserved!
    3. Prepare and file nonprofit articles of incorporation
      • ??

  • Miscellaneous

    • Q+A: Is it worth talking to a lawyer before filing? Resolution: Very likely not, but double-check Nolo book.
    • Q: Is it desirable to apply for an EIN right away? Any reason not to?

  • Responsibilities (at least for 501(c)(3)): recordkeeping, annual filing, disclosure

  • Forms to file

    • Application for Employer Identification Number (file online)

Questions for obtaining an Employer Identification Number (EIN) (from form SS-4)

1 Legal name of entity (or individual) for whom the EIN is being requested: (see above)

4-6 Address: 1248 E. Wylie St.; Bloomington IN 47401-5086

7 Name of responsible party: Donald Byrd

9 Type of entity: Other nonprofit organization (specify) private foundation

10 Reason for applying: Started new business (specify type) 501(c)(3) nonprofit private foundation

11 Date started: July 2012

13 Highest number of employees expected in the next 12 months: 0

16 Principal activity: Other (specify) software development

17 Indicate principal line of merchandise sold, specific construction work done, products produced, or services provided. software

Checklist: What to Submit

  • Cover letter

  • Articles of incorporation

  • Bylaws or other rules of operation and amendments

  • All other attachments, including explanations, financial data, and printed materials or publications (Q: do we need any?)

  • Filing fee ($30)

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