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7. Legal and organizational issues

7.1 United States legal issues

There is a strong case to be made for formal organization of local LUGs. I will not make that case here. If, however, you are interested in formally organizing your local LUG, then this section will introduce you to some of the relevant issues.

Note: this section should not be construed as competent legal counsel. These issues require the expertise of competent legal counsel; you should, before acting on any of the statements made in this section, consult an attorney.

There are at least two different legal statuses that a local LUG in the United States may attain:

  1. incorporation as a non-profit entity
  2. tax-exemption

Although the relevant statutes differ from state to state, most states allow user groups to incorporate as non-profit entitites. The benefits of incorporation for a local LUG may include limitations of liability of LUG members and volunteers, as well as limitation or even exemption from state corporate franchise taxes.

While you should consult competent legal counsel before incorporating your LUG as a non-profit entity, you can probably reduce your legal fees if you are acquainted with the relevant issues before consulting with an attorney. I recommend the Non-Lawyers Non-Profit Corporation Kit (ISBN 0-937434-35-3).

As for the second status, tax-exemption, this is not a legal status so much as a judgment by the Internal Revenue Service. It is important for you to know that incorporation as a non-profit entity does not insure that the IRS will rule that your LUG is to be tax-exempt. It is possible to have a non-profit corporation that is not also tax-exempt.

The IRS has a relatively simple document that explains the criteria and process for tax-exemption. It is Publication 557: Tax-Exempt Status for Your Organization. It is available as an Adobe Acrobat file from the IRS's Web site. I strongly recommend that you read this document before filing for incorporation as a non-profit entity. While becoming a non-profit corporation cannot insure that your LUG will be declared tax-exempt by the IRS, there are ways to incorporate that will prevent the IRS from declaring your LUG to be tax-exempt. Tax-Exempt Status for Your Organization clearly sets out the necessary conditions for your LUG to be declared tax-exempt.

Finally, there are resources available on the Internet for non-profit and tax-exempt organizations. Some of the material is probably relevant to your local LUG.

7.2 International legal issues


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