A group of 35 meets monthly to study how to use homeopathic medicines
for self and family care.  Should we incorporate or seek a non profit
status for security?

Dear arnica-ga;

Thank you for allowing me an opportunity to answer your interesting question.

Fundamentally speaking, there are a number of reasons to incorporate
an organization and seek non-profit status:

Your Association Makes a Profit From its Activities

You Want to Apply for Public or Private Grant Money

You Want Protection From Personal Liability for the Group's Activities

You Want to Solicit Tax-Deductible Contributions

Your Advocacy Efforts Might Provoke Legal Quarrels

If these are important to your group?s efforts and identification
there may indeed be some benefit to seeking this status. There are
other perks such reduced postage rates, property tax exemptions or
reduced insurance rates so if you use a lot of postal services or own
property collectively these too may be productive for your association
have.

Earned income is probably one of the most common reasons for seeking
the non-profit status. Particularly if your group is accepting
membership dues, money for services, or grants from outside agencies
looking for tax deductions for their contributions. You can read a
great deal about this here:

EARNING INCOME AS A NONPROFIT CORPORATION
http://www.nolo.com/lawcenter/ency/article.cfm/objectID/FB682F05-ADA1-4B8A-ACC2830A855686DB

Potential liability is another reason some associations choose to
incorporate into a non-profit status:

?According the most recent Wyatt Nonprofit Organizational Directors?
and Officers? Liability Survey, average cost to defend a lawsuit runs
between $35,000 and $100,000. The same survey reported that typical
indemnity payments from an adverse judgment average $457,000.?

COMMON LIABILITY RISKS OF NONPROFIT DIRECTORS & OFFICERS
http://www2.austincc.edu/tano/pdfs/LiabilityRisks.pdf

There are other reasons to incorporate of course but these seem to be
the most discussed. On the other hand there are also some
disadvantages to making such a move, such as shared control, cost,
paperwork, continual effort and diligence, and much closure scrutiny
of your activities by both the public and the governing agencies.

I recommend you evaluate the overall mission of your study group to
see if these points are issues of great concern. If so, then it may be
prudent for you to seek legal guidance and perhaps move toward a
non-profit status provided that move is right for you or, if not, to
give up on the notion altogether. With the proper legal guidance of
course the decision is ultimatley yours.

I hope you find that my research exceeds your expectations. If you
have any questions about my research please post a clarification
request prior to rating the answer. Otherwise I welcome your rating
and your final comments and I look forward to working with you again
in the near future. Thank you for bringing your question to us.

Best regards;
Tutuzdad-ga ? Google Answers Researcher



INFORMATION SOURCES

FIVE REASONS TO INCORPORATE YOUR NONPROFIT ASSOCIATION
http://www.nolo.com/lawcenter/ency/article.cfm/objectID/F63DD4C1-456C-418F-A1066A3F3FBE05A5

EARNING INCOME AS A NONPROFIT CORPORATION
http://www.nolo.com/lawcenter/ency/article.cfm/objectID/FB682F05-ADA1-4B8A-ACC2830A855686DB

WHAT ARE THE ADVANTAGES/DISADVANTAGES OF BECOMING A NONPROFIT ORGANIZATION?
http://fdncenter.org/learn/faqs/html/np_pro_con.html

NON-PROFIT OR NOT? DECIDING TO INCORPORATE
http://www.avianrescue.org/non_profit.html

SEARCH STRATEGY


SEARCH ENGINE USED:

Google ://www.google.com


SEARCH TERMS USED:

Advantages, Non-profit, incorporation, liability, grants, earned income

One of the main reasons people incorporate or form some other sort of
limited liability entity (LLC, LLP, limited partnership) is to shield
their personal assets from liability if the entity is engaging in some
type of dangerous or risky activity.  One of the first questions that
came to my mind in your situation was, "What is it that you do?"  Do
you sell homeopathic medicines, do you formulate them for others to
consume, or do you just meet and talk about them?  If the latter, I
cannot see a particularly compelling reason to incorporate.  If either
of the two former, then you should incorporate immediately.

Remember that the act of forming the limited liability entity alone is
not enough to fully shield personal assets.  One must also take care
to always observe requisite corporate formalities and treat the entity
in a "arm's length? manner or you may give rise to facts that would
permit a damaged party to pierce the corporate veil and reach your
personal assets.

Assuming you incorporate, going the next step and obtaining formal
501(c)(3) recognition from the IRS is a long and involved process.  A
lengthy application is required and it usually takes several months to
get an answer.  It may be worth the effort, however, if one or more of
the financial goals tutuzdad mentions are important to you.  One of
the most critical, of course, is the fact that donations to a
501(c)(3) may be tax deductible to the giver, so it makes it easier
for you to raise funds.