LLC or nonprofit? Legal protection?

[isis297]

What is the name of your state (only U.S. law)? NY

I work with a number of animal rescues and shelters across the nation. I am working on a business that will help all of them to work together more efficiently.

What are the pros and cons of LLC vs. non-profit and what, at minimum, should I have in place to protect myself legally should any of the entities start drama which sadly happens or should one of them prove to be a less than stellar organization as sadly I have seen as well...rescues that are bad news for one reason or another? I know that I will need to meet with an attorney, but right now this is a product of my heart vs. something I have a lot of funds to put into at this time. I am working on raising funds now.

Thank you for your guidance. You all have been invaluable in so many different ways over the years in various ways.

 

[LdiJ]

What is the name of your state (only U.S. law)? NY

I work with a number of animal rescues and shelters across the nation. I am working on a business that will help all of them to work together more efficiently.

What are the pros and cons of LLC vs. non-profit and what, at minimum, should I have in place to protect myself legally should any of the entities start drama which sadly happens or should one of them prove to be a less than stellar organization as sadly I have seen as well...rescues that are bad news for one reason or another? I know that I will need to meet with an attorney, but right now this is a product of my heart vs. something I have a lot of funds to put into at this time. I am working on raising funds now.

Thank you for your guidance. You all have been invaluable in so many different ways over the years in various ways.

If you are hoping for donations or grants, then you are going to want to be a non-profit organization so that your donors can deduct the donations from their taxes.

 

[FlyingRon]

You have two issues here. First an LLC or Corporation will help separate your rescue entity from yourself. Of course you are still liable for your own acts, but if you have other volunteers or employees, it can be very advantageous.

An LLC or a Corporation can be established as non-profit, but getting IRS recognition is an additional step. Right now there's no provision for 501 (c) (3) (or anything like it) status for an LLC. You must form a non-profit corporation in order to get that status. While you can possibly do this based on books and examples of previous filings, it's involved enough that you probably do want a lawyer to set up the corporation. I'm on the board of a couple of non-profits, and I was around when we put one through the 501 procedure. We had to make changes to our bylaws to be conforming. Better to get it right at the outset.

 

[isis297]

I understand that would make their donations tax deductible, but I don't think donations are going to be my main focus since I will not be a rescue myself.

My main goal for the beginning is protecting myself. I would like to keep my family out of the business as far as any liability for anything goes. I understand that if I am not at least an LLC and someone wanted to come after my business for some reason, that would automatically bring my family/home into it. I always conduct myself in the rescue world honestly and with integrity, but I've met some very scary whack jobs unfortunately. One person got mad at a couple of other people because they disagreed about something and that woman used her business to look up those ladies' personal information like SSNs of not just them but their husbands and then publicized those numbers, their addresses, and more. Supposedly the victims weren't protected very well when they tried to sue her because "it's the Internet". That explanation makes no sense to me. I would have thought it would have served as proof of how badly those people were made victims.

So I could file as an LLC in the beginning and then change to a non-profit later...

Thank you for replying FlyingRon. You are one of the members I always great respect the advice of.

 

[FlyingRon]

Well, not quite, it brings YOU into it. But you are brought into it for your own actions whether you have a LLC or Corporation. Of course, the nature asset and where in the country you are, determines how much of your marital/community assets could be sought to satisfy a judgement against YOU. Still it's not a bad idea in most cases. Further, a lot of financials won't deal with newly formed or asset-less entities, so you may end up giving personal financial guarantees even on things the LLC wants to buy/rent...

If you're actually dealing with the public directly or operating shelters, you may wish seriously to get insurance. Nothing will prevent you from being sued (as an LLC, corporation, or personally) but insurance is a good hedge. If you can be allied with a larger organization, you may be able to get their policy extended to cover you as well.

 

[isis297]

Where can I find out what the limitations are based on area? For example, we are in NY now, but we are considering moving to MA, NC, or SC. I know how I conduct myself. but I am looking to reassure my husband as he has heard some of my stories. :-\

What kind of insurance specifically should I be looking into? I am new to this and that isn't something I am familiar with so I'm not sure what to look up.

 

[LdiJ]

Where can I find out what the limitations are based on area? For example, we are in NY now, but we are considering moving to MA, NC, or SC. I know how I conduct myself. but I am looking to reassure my husband as he has heard some of my stories. :-\

What kind of insurance specifically should I be looking into? I am new to this and that isn't something I am familiar with so I'm not sure what to look up.

Business liability insurance.