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.
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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.
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.
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.