Guest Post: Laura Kalick, ASAE
Trade associations may have good opportunities to increase revenue by creating affiliated entities or converting to a different tax-exempt status, but the tax rules are complex. Here’s an overview of key issues to consider.
Section 501(c)(6) associations seeking potential new sources of revenue could consider adding a 501(c)(3) organization, taxable subsidiary, or limited liability company (LLC) to the corporate mix. Although adding a new entity will involve additional administrative time and expense—additional tax filings, state compliance, bank and investment accounts, multiple board meetings, sharing agreements, time sheets, and separate website addresses, for example—it may be worth the effort if the new entity would invite government or private grants for research or other programs or if there is a potential revenue-generating activity.
Each type of entity involves its own set of advantages and disadvantages for leaders to consider carefully before making such a move.