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I need to create a nonprofit organization so that the donations to our Kickstarter project don't get eaten up by income tax.
I've received an offer of help from Logan Greenlee, who wrote the following.
We should consider setting up an nonprofit corporation. How about: "Climate Data Preservation Society"?
Sounds like us right? This will provide us with a credible image and there are some other benefits. The most basic reason, would be taxes. The money that is received from Kickstarter is income. When the campaign ends and the money is paid out - it will go to someone or an entity. At the end of the tax year, taxes will be paid on it if it is a for profit institution or personally. https://www.kickstarter.com/help/taxes Under current rules this could be as high as 39.6% federally and whatever the state income tax rate is of the individual or entity. Nearly half of our operating capital would be wiped out at years' end. It would be more advantageous for us to have the money paid to a nonprofit where we won't pay tax - preserving the operating capital. Additionally, "contributions" made to the nonprofit are tax deductible. We can pass this on to the Kickstarter individuals. For full disclosure this is advantageous to me as my hardware contribution will be tax deductible. From a control perspective we would become "stakeholders" in the nonprofit and elect ourselves to the Board.
Organizing as a nonprofit has another benefit - it provides some legal protection to us individually and it also allows us to get liability insurance. Liability insurance can provide real financial protection for these activities. Generally, these are the items that we are not individually protected from acting under a nonprofit, but some of these may be protected (up to a limit) by liability insurance.
personally and directly injures someone
personally guarantees a bank loan or a business debt on which the corporation defaults
fails to ensure that the nonprofit deposits taxes (such as payroll and property taxes) or files necessary tax returns
does something intentionally fraudulent, illegal, or clearly wrong-headed that causes harm, or
co-mingles nonprofit and personal funds.
I can provide the necessary financial support for incorporating, obtaining tax exempt status and I can pay for accounting and tax services until such time the organization is no longer needed. I'm also familiar with establishing businesses, bank accounts and the other items that are required for the operation of an organization.