Advise on Nonprofit Structure (501c3 with for-profit subsidiaries)
Assist a nonprofit architecture and real estate firm addressing the root causes of mass incarceration by advising on whether their nonprofit structure (a CA nonprofit with DE LLC subsidiaries) is set up appropriately.
Referred by:
- Anonymous Collaborator
DJDS was advised in 2021 to develop an umbrella/waterfall structure with the non-profit organization as a parent organization to multiple for-profit subsidiaries. The non-profit entity is registered in California and the for-profit subsidiaries are Delaware LLCs. There is a top-level LLC, where the nonprofit is the sole member. Then, there is a mid-level LLC that houses shared services for DJDS’s real estate developments. Finally, below that, there is a single purpose LLC that houses one property development. This structure was set up by an attorney at a Lex Mundi member firm who is no longer with the organization. The DJDS team is now seeking assistance confirming that this structure is set up and being managed correctly from a legal perspective, and that the activities performed within each LLC are appropriate under the current structure.
Additionally, DJDS is planning to add additional services to their portfolio, such as fee-for-service architectural offerings. They would appreciate guidance on whether these services can be offered under their current 501(c)(3), or whether it makes sense to set up a separate for-profit entity to house these services. Importantly, they want to ensure they are not jeopardizing their current non-profit status.