[hackerspaces] US hackerspaces - corporation formation and 501(c)3 status

druid at stonedcoder.org druid at stonedcoder.org
Thu May 28 20:27:39 CEST 2009

What about spinning up an initial LLC, then creating a 501c3 later?

I have my legalzoom creation of an LLC just about finished. I am going to 
use the EIN I now have to set up a bank account to hold HTINK related 
funds to isolate the tax burden. That was my main goal with incorporating.

Now that I have the LLC, is there a clear path to leveraging the LLC into 
a 501c3? Is this a process others have used?


On Thu, 28 May 2009, nicolle wrote:

> Beth, dr.kaos is correct...i am the lawyer for Pumping Station: One, and
> i am giving a talk at Defcon about the legal concerns of starting a
> hackerspace.  i don't intend for the talk (or anything i say on this
> list, for that matter...) to substitute for consulting an attorney...but
> it's extremely helpful to know what you're getting into, and extremely
> helpful to be able to ask the right questions and be familiar with the
> issues, especially if you're discussing your situation with a lawyer who
> may not be familiar with what hackerspaces entail.
> i definitely echo the thought that it's a good idea to talk to a real,
> live lawyer about legal concerns.  corporate formation is mostly
> straightforward...but the key word there, i think, is mostly.  each
> state has its own requirements for incorporating, and then there is
> certain information that needs to be in the articles of incorporation
> and the bylaws to lay the groundwork for 501(c)(3), if you're planning
> to go that route.
> the need to talk to an attorney goes beyond corporate formation, though,
> because that's not the only legal issue that's going to pop up.  you're
> going to have to deal with zoning and lease negotiation.  you're going
> to have to deal with liability issues for members and guests.  legally
> advising a single hackerspace is obviously not a full-time job, but
> differing legal issues arise frequently enough that it's advisable to
> talk to an attorney to make sure your ducks are in a row.  a lot of
> cities do have resources to turn to...pro bono attorneys for the arts,
> and organizations and clinics that assist nonprofits for free.  search
> online, or ask the local bar association to point you in the right
> direction.
> nicolle
> beth wrote:
>> I agree with jur1st.
>> If you don't have time to find the same info on the web, these kits
>> may be a good idea, but they just get you started and don't answer any
>> questions.
>> Finding a local lawyers for the arts type group offering a clinic is a
>> good idea, check with your local pro-bono org or bar assoc. too.
>> Also, simply finding a local non-profit with a mission that is like
>> yours and asking them how they set up their organization/board and
>> bylaws etc and what issues they ran into can be invaluable. Here in
>> Atlanta, we found an arts organization that was set up specifically to
>> provide old printing presses and offered classes on their use. Their
>> mission was educational and creative. Alot of what they are doing
>> could be translated to what we are doing (providing access to
>> technology and education on how to use it).
>> Look at your area non-profits and ask them if they have someone who
>> can spend some time via email/phone/inperson telling you how they got
>> their 501c3 and how they overcame challenges and even what their
>> bylaws say. Most will be happy to lend a hand and you may find fast
>> friends and great resources too.
>> Filing these documents costs alot of money even without the lawyers,
>> so you don't want to have to do it twice, or be denied status. It's
>> worth a workshop/clinic fee.
>> (Also, dr.kaos, my better half, says there is a lawyer from Pumping
>> Station One in Chicago giving  a talk on this at defcon, go see it or
>> get the recording after.)
>> Beth
>> On May 28, 2009, at 11:55 AM, jur1st wrote:
>>> I recall a commercial for a national tax prep firm which made an
>>> excellent point about products like Turbo Tax. When you get audited,
>>> who are you going to ask for assistance?  The software box?
>>> Outfits like the ones you mention come with forms...that's it. No way
>>> to talk through the issues which you bring up later in your
>>> message...no opportunity to discuss other legal issues or risk
>>> management with an actual attorney.
>>> This culture is very DIY based...but legal and financial issues are
>>> best handled by those that have backgrounds in law, tax, accounting
>>> etc.
>>> You may want to consult with a local or regional law school to see if
>>> they have clinics or professors who could help pro-bono.
>>> -jur1st
>>> On May 28, 2009, at 10:45 AM, dosman <dosman at packetsniffers.org>
>>> wrote:
>>>> Hi, I have some questions for US-based hackerspaces:
>>>> Has anyone used places like legalzoom.com or incorporate.com to form
>>>> their non-profit or any other business for that matter? They seem to
>>>> focus on LLC formation but also do non-profits with 501(c)3 status.
>>>> We
>>>> are working on forming our group and after looking at all the work
>>>> required they seem like the easiest and cheapest way to get something
>>>> up and running (and with fewer mistakes being made). I realize they
>>>> make it look over-simplified, however using them as a guiding hand
>>>> seems reasonable. Comments and suggestions are welcomed.
>>>> Additionally, for spaces that have gone the 501(c)3 route, I assume
>>>> they claim to be operated specificly for scientific purposes? (as
>>>> stated in section 3 of IRS doc p557). Has anyone had troubles with
>>>> this definition during their application process? After reading a lot
>>>> of spaces bylaws we've seen lots of statements like "contributing to
>>>> the international commnity" which is great- except that my
>>>> understanding is that a non-profit needs to give back to it's local
>>>> community. While that is certainly attainable, I am curious if anyone
>>>> has had trouble being qualified since they don't specificly state
>>>> they
>>>> plan to benefit their local community? I'm just playing devils
>>>> advocate here, these are the types of challenges I would expect the
>>>> IRS to throw down to a 501(c)3 application.
>>>> Thanks!
>>>> -dosman
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