Full question:
If I set up an LLC for my website and decide to give out scholarships to students, what are the legal requirements?
- Category: Schools
- Subcategory: Scholarships
- Date:
- State: Arizona
Answer:
To give out scholarships through your LLC, you must follow certain legal requirements. First, any donations made by your LLC need to be authorized according to its operating agreement or governing bylaws.
Scholarship grants from private foundations are considered taxable expenditures unless they meet specific IRS requirements for individual grants and receive prior approval from the IRS. You will need to submit a request for a ruling to the IRS to obtain this approval.
In Arizona, for corporate contributions to a scholarship fund to qualify for a tax credit, the receiving organization must be a 'School tuition organization.' This means it must be a charitable organization exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code and allocate at least ninety percent of its annual revenue for educational scholarships or tuition grants. Additionally, the organization must provide scholarships to students without restricting them to only one school.
Since these matters can be complex, it’s advisable to consult a local attorney who can review your specific situation and documents.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.