Skip to main content

I HAVE A LLC IN TEXAS AND I WANT TO CHANGE IT FOR NON PROFIT,

Spring, TX |

I open my business less than a year ago, and there is a lot of need for quality and affordable language lessons. how can I switch to LLC to non profit??

Attorney Answers 4


  1. Merely changing this to a nonprofit will not solve the issue if what you hope to do is qualify as a 501(c)(3). Merely becoming a nonprofit does not mean that the entity is tax-exempt. That is left to your filing with the IRS and the business being accepted as a charitable organization, which your venture may or may not be http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements-Section-501(c)(3)-Organizations.

    This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.


  2. I agree with Mr. Murillo, the business entity is not where the "nonprofit" aspect lies, its with the IRS. In fact, you may well be able use your current LLC. Here is some helpful information from the Texas Secretary of State: “Nonprofit” LLCs

    Can I form a nonprofit LLC in Texas?

    Will an LLC with a nonprofit purpose be tax-exempt?
    Does the secretary of state have a form I can use to form an LLC with a nonprofit purpose?
    Which filing fees apply to my LLC? Do I pay the filing fees for a nonprofit corporation?

    Can I form a nonprofit LLC in Texas?

    The Texas Business Organizations Code (BOC) does not recognize the term “nonprofit LLC” as describing a specific type of entity, but the BOC does allow for the formation of an LLC with a nonprofit purpose. Although a for-profit corporation is prohibited from “operating a nonprofit institution” (BOC §2.008), the BOC does not impose this prohibition on LLCs. This is one of the few substantive changes introduced by the BOC.

    Will an LLC with a nonprofit purpose be tax-exempt?

    A Texas LLC that states a nonprofit purpose is not automatically exempt from state or federal taxes. For information on whether the IRS will grant a tax-exempt status to such an LLC, contact the IRS or read IRS Publication 557: Tax-Exempt Status for Your Organization. For information on whether the Texas Comptroller will grant tax-exempt status, contact the Comptroller’s Exempt Organizations Section.

    Does the secretary of state have a form I can use to form an LLC with a nonprofit purpose?

    No. Form 205 (Word 158kb, PDF 98kb) can be used to create a general purpose LLC, but it is not designed to create an LLC with a nonprofit purpose, and it is not designed to satisfy any requirements that the IRS or Texas Comptroller might impose for tax-exemption. You should consult with your attorney if you want to form a tax-exempt or nonprofit LLC.

    If I form an LLC with a nonprofit purpose which filing fees apply to my LLC? Do I pay the filing fees for a nonprofit corporation?

    A Texas LLC that states a nonprofit purpose remains an LLC, as that term is defined in section 1.002(46). It is subject to the regular LLC fees, and it is governed by the regular LLC provisions (§§101.001 et seq.).

    Good luck

    The above comments are made by an attorney at The Rieck Law Firm (RLF). RLF offers free initial consultation to potential clients and more information about this firm can be found at www.riecklawfirm.com. Materials contained within this website and submitted by this user (including the above comments) provide information on general legal issues and are not intended to provide advice on any specific legal matter. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet and online readers should not act upon this information without seeking professional counsel.


  3. A Texas LLC is a poor entity choice for a non-profit entity that intends to seek qualification as a tax-exempt entity under the Internal Revenue Code. A not for profit corporation would be the ideal choice of entity. But, even that does not guarantee tax exempt status will be granted by the IRS. You should look at that application at www.irs.gov.

    DISCLAIMER: This is not specific legal advice and does not establish an attorney/client relationship.


  4. While you can form a limited liability company for nonprofit purposes under Texas law (or convert to that), as the other responders have advised, that won't get you tax-exempt status. Further, if you do that, you need to be very careful about any amounts paid to you as the owner of the converting entity during the conversion process.

    The simpler (and in my opinion better) approach is starting a new entity -- presumably a nonprofit corporation as suggested below. Here is a brief blog post on choosing the nonprofit entity though again, it sounds like a nonprofit corporation would work best for this: http://www.bwwlaw.com/nonprofit-formation-choosing-the-vehicle/. Even then, however, care must be taken in transferring assets, contracts, etc. form the old for profit LLC to the new nonprofit corporation to ensure it is done for no more than fair value.

    Once you have the nonprofit entity set up at the state level, you'll need to apply for exempt status by filing Form 1023 with the IRS.

Public finance topics

Top tips from attorneys

What others are asking

Questions?
An attorney can help.

Post a question and get free legal advice from attorneys.

Ask a Lawyer

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics