Related Entities and Joint Ventures

Establishing an effective organizational structure typically involves considerations of affiliated entities including title holding companies, fund raising foundations, supporting organizations, taxable subsidiaries, limited liability companies, and joint ventures with other nonprofit or for-profit entities. With the advice of legal counsel as well is our tax expertise, many nonprofit organizations find that they may limit their liability, protect their assets, limit exposure to unrelated business taxable income, and indemnify management and volunteers by having their eggs in more than one basket. Affiliated corporations are common in the commercial arena and serve equally useful roles in the nonprofit sector.

A nonprofit organization may best fulfill its exempt purposes by operating in conjunction with other nonprofit or taxable organizations. An affiliate of a given nonprofit organization may be the same or different type of tax-exempt organization. It may be a regular taxable corporation, a partnership, or a limited liability company. The affiliates may be completely controlled by the organization, or only loosely affiliated. The degree of control has a significant impact on the organizational structure of all the affiliates, the financial statements of each organization, and how the affiliates are funded, and the ability to obtain and maintain tax-exempt status for nonprofit affiliates.

We are thoroughly familiar with these issues and have experience in guiding our clients through them.

©2008 Ronnie C. McClure, PhD, CPA