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Can a Florida Non - Profit corporation setup a For Profit LL ?

Boca Raton, FL |

My HOA is Non - Profit and has setup a LLC corp to handle its rental program . The board members of the HOA are the " managers " of the LLC . The money taken into the LLC via the rentals and is then used by the HOA for common expenses . The HOA will from time to time transfer money from the association to the LLC as well . Does anyone know of any way this would not be legal ?

Attorney Answers 4


  1. When a non profit entity has a for profit subsidiary things get complicated. The non profit can lose its status. For example, if there are not separate boards and management staffs. The IRS would probably say that there is a conflict of interest if the same board or management oversees both entities. These hybrid models require the expertise of a tax attorney to determine the implications for both organizations.

    My comments are NOT LEGAL ADVICE. They are for informational purposes only. Actual legal advice can only be provided after you have signed an engagement letter. Answering this question does not create an attorney client relationship. Remember that without attorney client privilege you could possibly divulge information that can hurt your legal rights in the future. I am a tax attorney in Miami Florida. I can help you with your federal tax issues via a secure client portal if required.


  2. This is problematic and can create numerous tax headaches for the HOA. There are also fiduciary implications by keeping the board members as managers of the LLC. It seems fairly obvious that this is being done for insulation of liability from the rentals. While there may not be anything inherently wrong in doing things this way, there are likely better options to consider. However, the HOA's counsel should advise them on that.


  3. This could jeopardize the tax status of the NP if it is not the only member of the LLC for one. Without reviewing the exact arrangement between the entities it is too difficult to guess or give a real detailed reply.


  4. Generally, HOA’s are setup as not-for-profit entities to conduct business for the benefit of the association. While it is uncommon to setup a For Profit LLC for association business it is not unheard of. As far as converting from a For Profit to a not-for-profit, absent a court order, the proper way to establish a not-for-profit corporation is to form it directly not through a conversion.

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