Pennington, NJ asked in Business Formation, Education Law and Tax Law for New Jersey

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?

1 Lawyer Answer
James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Tax Law Lawyer
  • Sacramento, CA

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.

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.