- Jurisdiction
- Massachusetts
This is an interesting scenario where I would like some advice on whether to incorporate, and if so, as what, given a complicated scenario.
A group of students (the 'old students') submitted work to an academic/research competition and won an amount of money. There is a also a group of 'new students' (that includes myself) who didn't win that competition, but have pursued similar projects with the same goals and entered similar competitions and want to collaborate with the 'old students' going forward. The award money was to be distributed to the 'old students' to continue pursuing work and research related to this goal. However, since these students created this work as part of a class project and some independent research, there is no existing legal entity or even bank account to put this award money into; currently, the award money is waiting to be distributed once a proper location is settled on. Additionally, the 'old' students aren't really involved in this research anymore and want to pass on the funding and research to the 'new' students who are currently pursuing these similar projects.
The new and old students want access to this money to continue pursuing this project or related projects with similar goals. One suggested solution was to give the money to the university, and then have them earmark and distribute the money to similar projects in the future, but the competition refused, arguing that they want the money in more direct control of the students. Another solution involved incorporating, either as a non-profit or as a LLC or some other corporation. One complicating factor is that the same people who would be on the board (the 'new' and 'old' students), would also be the ones receiving money to support their research, which I believe might make accountability in the eyes of the IRS, especially for a non-profit entity, difficult.
A few other random facts that also help for context:
a) The award isn't too large (less than 20k), and it would likely be used up in a few years.
b) There is the possibility of more funding from random donors who also want to support this cause, but we aren't planning on or directly pursuing this path.
c) The projects/people that continue to use this money for research still need to own their own IP for their own projects, not the corporation (for example, if Bob gets 3k to do X thing because the corporation likes his design goals, in the end, Bob still owns the thing, not the corporation) - so essentially we want to create some intermediary granting-giving body, but that gives grants to ourselves, not an overarching research corporation.
d)The 'old' students are willing to be involved in the corporation (especially since it is their money), but don't really have an interest in using it, rather want the 'new' students to use it for the common goals.
So I have a few questions:
1. Would incorporating as a non-profit or LLC make removing the funds difficult when most of the same people would be involved in receiving the funds that would be the financial approvers?
2. Is there some less messy way of going about this? Is it possible to get a shared bank account or something similar without the legal mess?
3. What are the major tax differences and accountability differences between a non-profit and a for profit LLC? Would an for-profit LLC be easier from a liability standpoint because we wouldn't have to prove our purpose but we'd be taxed for revenues (any funding)? Or would the administrative burden be the same?
Any insight and/or suggestions would be greatly appreciated.
A group of students (the 'old students') submitted work to an academic/research competition and won an amount of money. There is a also a group of 'new students' (that includes myself) who didn't win that competition, but have pursued similar projects with the same goals and entered similar competitions and want to collaborate with the 'old students' going forward. The award money was to be distributed to the 'old students' to continue pursuing work and research related to this goal. However, since these students created this work as part of a class project and some independent research, there is no existing legal entity or even bank account to put this award money into; currently, the award money is waiting to be distributed once a proper location is settled on. Additionally, the 'old' students aren't really involved in this research anymore and want to pass on the funding and research to the 'new' students who are currently pursuing these similar projects.
The new and old students want access to this money to continue pursuing this project or related projects with similar goals. One suggested solution was to give the money to the university, and then have them earmark and distribute the money to similar projects in the future, but the competition refused, arguing that they want the money in more direct control of the students. Another solution involved incorporating, either as a non-profit or as a LLC or some other corporation. One complicating factor is that the same people who would be on the board (the 'new' and 'old' students), would also be the ones receiving money to support their research, which I believe might make accountability in the eyes of the IRS, especially for a non-profit entity, difficult.
A few other random facts that also help for context:
a) The award isn't too large (less than 20k), and it would likely be used up in a few years.
b) There is the possibility of more funding from random donors who also want to support this cause, but we aren't planning on or directly pursuing this path.
c) The projects/people that continue to use this money for research still need to own their own IP for their own projects, not the corporation (for example, if Bob gets 3k to do X thing because the corporation likes his design goals, in the end, Bob still owns the thing, not the corporation) - so essentially we want to create some intermediary granting-giving body, but that gives grants to ourselves, not an overarching research corporation.
d)The 'old' students are willing to be involved in the corporation (especially since it is their money), but don't really have an interest in using it, rather want the 'new' students to use it for the common goals.
So I have a few questions:
1. Would incorporating as a non-profit or LLC make removing the funds difficult when most of the same people would be involved in receiving the funds that would be the financial approvers?
2. Is there some less messy way of going about this? Is it possible to get a shared bank account or something similar without the legal mess?
3. What are the major tax differences and accountability differences between a non-profit and a for profit LLC? Would an for-profit LLC be easier from a liability standpoint because we wouldn't have to prove our purpose but we'd be taxed for revenues (any funding)? Or would the administrative burden be the same?
Any insight and/or suggestions would be greatly appreciated.
