Cohousing-L Mailing List: Re: Setting up a For-Profit Entity

[David Mandel (dlmandel]

Don:
The easiest is not to set up any organization but merely to consider yourself a
group of friends who informally have meals together. Then devise a loose system
to reimburse each other for expenses. That way (you hope) you don't have to
bother with formal accounting and tax issues. If it looks too much like an
organization that is accumulating a lot of funds and selling things, then not
only will you have to get a tax ID number and report income tax; you probably
have to collect and pay sales tax, get a local business license (it costs, too),
.. and who knows what else. Hope that a brave soul will volunteer to open an
account with his or her tax ID number but keep the money in a non-interest
bearing account so no income has to be reported. With this in mind, devise your
system so it doesn't accumulate any large sums and you won't feel like you're
missing out by not having it invested. Some sort of pay as you go system or
mostly just debits and credits on paper with little actual payment. Different
groups have invented many variations, and you can find a lot about them in the
archives. Also, use it only for those items that can't legitimately be included
in the HOA budget -- meals and laundry fees are the most obvious. Committee
budgets for community activities can probably be included in regular HOA.
    Finally, run these ideas and your precise proposed system past a lawyer in
your state as laws -- and enforcement practices -- differ.
David Mandel
Sacramento

DBunnII [at] aol.com wrote:

> Hi all,
>
> I am new to the list, living in River Rock Commons Cohousing and have been
> assigned the task of inquiring about what kind of entity (corporation,
> sole-proprietorship, etc.) is the most appropriate for setting up a
> for-profit organization for a cohousing community.  We have established a
> nonprofit entity for our HOA and now we have been told that we need a
> for-profit entity to handle misc. things like meals, food purchases,
> committee purchases/funding and all other items except those handled by our
> HOA.  We have been told that we need a tax ID number to get a checking
> account and we are questioning whether this entity should be incorporated or
> merely exist as a single unincorporated entity.
>
> I would really appreciate some input on this subject.  I have checked the
> archives and could not really find what I was looking for although something
> tells me that this subject has been discussed on this list.
>
> Thank you in advance for your input.
>
> Don Bunn II
> River Rock Commons Cohousing
> PO Box 830
> Fort Collins, CO 80522
> (970) 484-1711
> dbunnii [at] aol.com