*Selling Horses*-501c3 or LLC?

[CharismaRJG]

Hypothetically, looking to pull OTTBs, re-school, and sell to new careers. I am not knowledgeable about “setting” it up as a business. If you establish non-profit and you are the founder, are you able to make any profit? (I know that is a dumb question, but there are 501c3’s everywhere and I know the employees/owners have mortgages to pay.)
Or is it a better option to apply for grants and take out a business loan? Either way I would definitely plan on having an experienced accountant involved.

Thoughts/experiences welcome.

[Alagirl]

[QUOTE=CharismaRJG;7726199]
Hypothetically, looking to pull OTTBs, re-school, and sell to new careers. I am not knowledgeable about “setting” it up as a business. If you establish non-profit and you are the founder, are you able to make any profit? (I know that is a dumb question, but there are 501c3’s everywhere and I know the employees/owners have mortgages to pay.)
Or is it a better option to apply for grants and take out a business loan? Either way I would definitely plan on having an experienced accountant involved.

Thoughts/experiences welcome.[/QUOTE]

why bother with an 501? Trying to rake in donations?
You can pay yourself a salary, true, but you also should have a board of directors that gets to look at how much you pay yourself…and other such things.

Business sounds good to me. You just try to make more money than you spend - which a 501 should as well…you still have to run it as a business.

Unless you just want to be another ‘rescue’

what is it you want to accomplish?
Put together a business plan. There should be people in your community who could look at that for you. or COTH…

[Zuri]

501C3 is a non profit designation and closely scrutinized by the IRS.

LLC is a for profit corporate structure

[Woodsperson]

Specifically the IRS says to be tax-exempt under section 501©(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501©(3), and none of its earnings may inure to any private shareholder or individual. The exempt purposes set forth in section 501©(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

[BEARCAT]

Also, 501©3 status can take at least a year to achieve, and you have to jump through a lot of hoops - which makes sense but might not be what you are looking for.
Another thought is from a potential buyer’s standpoint, I think an LLC makes more sense. I would be less eager to pay beaucoup bucks if I were “adopting” from a non-profit.

[HungarianHippo]

Like above poster says, it seems like you’re getting ahead of yourself. You need a thorough business plan, and be very specific and conservative with your numbers. How many horses at a time and per year, list each and every cost, what salary would you need to make it worthwhile, how many employees, what’s your plan for growth. Cash flow: what sale prices will the market support? Who is your competition for the horse buyers?

Have you researched what grants may be available and do you have a clear idea what you’re looking to spend the money on? Most grants out there are for defined projects and capital expenses-- the funds can not be used to cover your operating expenses. Grant writing is difficult and very time consuming. For every grant out there, you are competing with tons of other applications prepared by experienced or professional grant writers.

[Training_Cupid]

And beware the dreaded hobby loss rules! (Your accountant will explain it to you)

[meupatdoes]

If you want 501c3 status you need a good not for profit lawyer.

Basically if you are just buying and selling flip horses it will not fly. That is a for profit activity; calling yourself a charity because you are doing it with ottbs does not get you a tax free existence.

[poltroon]

And of course, if you were to make a 501c3 and pay yourself a salary, which is the only way you could take money out of it, that salary is taxable to you anyway.

The only reason to have a 501c3 is if you want or need to solicit donations. Just selling nice horses is probably easier.

[californianinkansas]

Applying for non-profit status is not an easy process. I’m on the BoD of a local equine rescue; we sent in our non-profit application last April. There is also a $400 or $800 non-refundable filing fee. Our application was kicked back for minor corrections last month. We are hoping to get approval by December. If you want to be a non-profit, what charitable need are you trying to fill?

[Ruth0552]

I have no advice but I do get what you’re saying.

In New England at least, most hospitals are not-for-profit. They are a business when you look at it though, but most end up operating on a loss. They also generally have highly paid administrators (sometimes very, overly, highly paid).

Personally, I think buying OTTB’s and retraining and selling IS a charitable cause!

[Laurierace]

I really have no idea what would make you think flipping horses is a charity so no, you can not be a 501c3. LLC is always a good idea as it helps protect your assets if something went wrong. If you are doing it on a small scale you probably do t need to do anything.

[skykingismybaby1]

I don’t think that what you have described is a charity as defined by the IRS.

But as a PSA, the IRS has significantly reduced the paperwork needed to start a small 501c3 non profit. I do not know if they also reduced the time it takes to obtain the status.

[californianinkansas]

[QUOTE=skykingismybaby1;7727316]
I don’t think that what you have described is a charity as defined by the IRS.

But as a PSA, the IRS has significantly reduced the paperwork needed to start a small 501c3 non profit. I do not know if they also reduced the time it takes to obtain the status.[/QUOTE]

When we filed last April (i.e., four months ago) they told us to expect the process to take a minimum of six to nine months. I don’t know if that is or is not an improvement from what it was before.

[IronwoodFarm]

I guess I wouldn’t be too concerned about the amount of money I could make flipping horses. Sales aren’t that good that I have a tax problem with my sales. In fact, I would love to have a problem with having so much income from horse sales that I need tax relief.

[skykingismybaby1]

[QUOTE=californianinkansas;7727531]
When we filed last April (i.e., four months ago) they told us to expect the process to take a minimum of six to nine months. I don’t know if that is or is not an improvement from what it was before.[/QUOTE]

I met with my accountant who specializes in non profits two weeks ago, and he indicated that the changes went into effect three weeks prior - so just over a month ago. Your submission in April was under the “old” regs.

[Alagirl]

the biggest thing is probably getting a business license…that actually can save you taxes in some places when you can buy whole sale…
(and insurance…)

[californianinkansas]

[QUOTE=skykingismybaby1;7727705]
I met with my accountant who specializes in non profits two weeks ago, and he indicated that the changes went into effect three weeks prior - so just over a month ago. Your submission in April was under the “old” regs.[/QUOTE]

Thank you for the intel! Also, SMH:sigh:

[gottagrey]

There are several ways to establish a business - sole proprietor, incorporate or LLC. Setting up a nonprofit would you really be able to “sell” the horses or rehome/adopt them out as most do? You could start up as sole proprietor which allows you to file taxes under your SSN, otherwise you would need to file personal and business taxes separately. Many who have home-based businesses (for a 2nd source of income say) set them up as sole proprietorships which might be a good avenue to check into for the initial start of your business… as your business grows then convert to LLC or Inc. To add, check w/ an attorney and/or accountant as they would be better to provide the pros and cons of which business type to establish. If your plan is to “sell” OTTB’s that’s not going to fly as a nonprofit IMO.

[skykingismybaby1]

[QUOTE=californianinkansas;7727762]
Thank you for the intel! Also, SMH:sigh:[/QUOTE]

Well today we received our reinstatement letter from the IRS! Five weeks from start to finish. I am duly impressed by the IRS. (it even rhymes)