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Not-for-profit and Self Employment Tax

Oneonta, NY |

I am the founder of a not-for-profit corporation created under Nevada law but headquartered in NYS. We have not yet achieved 501c3 status due to the limited amount of working capital. First, can we accept donations (I am aware they are not tax deductible), both online and in the mail? Second, when we achieve 501c3 status how do we report donations made pre-501c3 status? Thirdly, how does self employment tax play into this when paying myself and other employees? Does it apply to me? Or am I employed by the corporation?

Attorney Answers 4


  1. You can only be an employee of a corporation. Self employement tax does not apply. Whether you can accept donations is question of New York law - not Nevada law because you are headquartered in NY. Incorporating in Nevada was ill-conceived and may be illegal if you next attempt to solict donations in a state where you are not legal authorized to do non-profit business.

    You need to contact a lawyer in New York that specialized in these matters. You probably could have cheaply formed a non-profit association in NY that could accept donations. Check into this and scrap the Nevada corp.

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is philsmithjr@worldclasslawyers.com.


  2. Yes you can accept donations. If this is a corporation and you work for them you are getting paid with a w2 & self employment tax is not an issue. As for reporting donations made pre-501c3 status you should speak with your cpa who will be doing your taxes.

    I would be happy to speak with you about your case and help answer your questions. If you are interested, feel free to call. Additionally, we offer free consultations on the phone so you do not even have to leave your home to get help.

    I wish you the best of luck.

    Hayley Greenberg
    Greenberg & Merola, LLP
    Attorneys at Law
    521 5th Ave. Ste. 1700
    New York, NY 10175
    (212) 593-6111, facsimile (516) 887-1720 email Hayley@GreenbergMerola.com
    (Additional offices: Brooklyn, Queens, Long Island)
    www.GreenbergMerola.com


  3. I agree with Mr. Smith. You have done this all wrong, and are setting yourself up for major problems. The Attorney General in New York is very aggressive in prosecuting charity fraud, and you are treading that line. First, if you work for the charity, you are an employee. It is fraud to issue 1099s to people that work as an employee. Second, you cannot accept donations unless your status is confirmed. And, taking donations and violating employment law will hurt your status. Finally, the Nevada thing is popular among for profit entities (although I always recommend against it) but makes no sense for a charity that pays no income tax. Call a lawyer and get this right.


  4. I agree with these answers and I suggest the following steps:
    1) register to do business in New York as a corporation
    2) investigate how to register as a charity in New York with the AG's office
    3) clarify whether you are acting only as an officer of your corporation or whether you are also an employee based on a valid employment contract.

    Needless to say, I think you may well need to speak with a lawyer to get this straightened out. I understand many people think that New York is overregulated and so reflexively file in Delaware or Nevada, but for most small corporations the differences in corporate law is too small to be of any consequence to them.

    Disclaimer: We are providing this general reaction to your question for discussion and informational purposes only. Our answer could change depending on the specific facts of your situation. This answer is not intended to be legal advice and providing this answer or your reading it does not create a lawyer-client relationship: we create such relationships only when there is signed a retainer agreement with this Firm. AVVO, other readers and I are all interested in your feedback on the quality of the answers. Please check the “thumbs up” symbol if you find an answer helpful or the “thumbs down” symbol if not.

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