Q: I am the owner of a private school in NJ. I am considering changing its filing status from an LLC to a 501c3 nonprofit.
Is this possible in NJ? And if so, what are the initial steps that I should be considering?
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A:
Here are the key things to consider when changing a private school in New Jersey from an LLC to a 501(c)(3) nonprofit:
- It is possible to make this change in NJ. You would need to dissolve the LLC and then incorporate as a new nonprofit entity.
- To qualify as a 501(c)(3), the school must be organized and operated exclusively for educational purposes and no earnings can inure to any private shareholder or individual.
- File Articles of Incorporation to formally establish the nonprofit. These must be filed with the NJ Division of Revenue and Enterprise Services.
- Draft bylaws establishing operational rules, board structure, memberships, etc.
- File IRS Form 1023 to apply for tax-exempt 501(c)(3) status. This is crucial for nonprofit benefits like tax deductions.
- Notify the IRS within 60 days that you have ceased LLC operations and transferred operations to the nonprofit entity.
- Apply for NJ state tax exemptions by filing the Property Tax Exemption application.
- Set up accounting procedures to track restricted vs unrestricted funds and allocate expenses appropriately.
- Make sure governance, operations and curriculum align with nonprofit educational requirements.
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