[sf-lug] translation please!

Rick Moen rick at linuxmafia.com
Fri Jul 28 17:10:36 PDT 2006

Quoting jim stockford (jim at well.com):

> hahahaha! great idea: charge 'em!
> trouble is, there's no legal "us".

(That and absolutely everything else you said is true, Jim -- and thank 
you!  I'm just following up on all the related questions people tend to
ask.  I've been through this discussion a bunch of times, elsewhere.)

There's a pervasive misconception that a LUG needs to incorporate before
it can (pick any of the following):  own a domain name, accept money,
have a bank account, purchase insurance.  Bollocks.

To misquote Tolkien, "Go not to the computer geeks for your business
affairs, for they will tell you a lot of things that just aren't so."  
(I swear, there's nothing like a committee of LUG activists to totally 
fux0r such things.)

_If_ one wants an unincorporated LUG to own a domain, it turns out that
you just register it that way.  E.g., look at the "whois" records for
NYLUG is New York City.  Similarly, unincorporated associations _can_ 
certainly accept donations/fees, own bank accounts, etc.  The people 
who tell you can't, haven't tried -- and thus fall into the trap of 
"knowing" something that ain't so.

> There's such a thing as an ad hoc group or some such, but getting a
> bank account into which money can be deposited is more fuss.


This is not to say that it's necessarily a good _idea_ for a LUG to have
a treasury and accept fees.  I personally argue against it in the 
Linux User Group HOWTO, which I maintain for the Linux Documentation

> I looked into non-profit corporation stuff, but that's too
> much fuss for too little benefit.

Quite so.  There's an even greater variety of misconceptions circulating
on _this_ issue.  (Disclosure:  No, I'm not an attorney, but in a prior
professional existence was a staff accountant at CPA firms, and passed
the nationwide CPA exam.)  _All_ that incorporation buys you is (1)
existence of a separate legal entity, and (2) ability of the membership
to limit possible liability losses to the extent of corporate assets
only, if the group as a whole acted, screwed up, and got sued.

It is absolutely _not_ true that incorporation protects the officers
from liability for actions they take on behalf of the group, nor that it 
protects the members for actions they take:  Anyone can still sue you
for things you're personally involved in, even in a group context.
E.g., if I, as a LUG corporate officer or authorised volunteer,  carry
someone's SunFire system into a LUG meeting and accidentally drop it in
a fountain, the owner is still going to name me and the corporate LUG
entity as co-defendents in his lawsuit.  I would seek reimbursement of
my legal expenses from the LUG, but this wouldn't do me much good since 
LUGs seldom have more money in their treasury than the price of a couple
of pizzas.

Just in case _this_ matter comes up, too:  IRS recognition of non-profit
status is a separate issue from incorporation:  You can be non-profit, 
you can be incorporated, you can be both, you can be neither.

Non-profit status (for any entity, corporate or not) can be applied for
(there's a fee, and a long delay), and arrives in the form of a
"determination letter":  The IRS "determines" that, yep, you sure do 
look non-profit from your provided financial statements and
organisational paperwork, and therefore they aren't going to be going
after you for income taxes.  It's not necessary to get such a letter,
before asserting that one is non-profit: You can instead act like you're
non-profit, and, if audited, put papers down on their desk that prove
it.  The letter is just something you can show people that says "See?
IRS agrees with our position."

There are several categories of non-profit[1].  The one donors want to see
you have is Internal Revenue Code section 501(c)(3), which is reserved
for charities, because donations to charities are categorically tax 
deductible (as, duh!, charitable donations).  Otherwise, whether
donation to your group is tax deductible, and in what category, is 
more if-ey.  E.g., donations to a group that's 501(c)(6), trade
assocations and professional guilds (like BayLISA) are deductible as
business expenses if the donor's in the same line of business as the
group is.

IRS is willing to send 501(c)(3) determination letters only to groups
that meet very, very rigid requirements about the group's purpose and
activities -- that would, among other things, preclude pretty much any
LUG from being one.

Short of that, the other IRS non-profit categories are useful only if
your group rakes in over $25,000 per year in revenues.  Why?  Because
IRS requires tax returns only of groups pulling in more than that, and
basically doesn't care about collecting income tax for anyone smaller.

So, basically, IRS non-profit status for a LUG?  Make me laugh.  ;->

[1] http://en.wikipedia.org/wiki/501(c)(3) is a pretty good rundown.

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