To LLC or not to LLC
Hi tax pros— I hope you will forgive this question, but I’m trying to advise a friend, and I’m very much at the limit of my extremely beginner level tax knowledge.
My friend runs an industry newsletter in Florida with a group of other folks. None of them make any money off of it, and have never seen a reason to start a nonprofit or LLC or anything. Now, another larger organization is interested in providing a grant in the low five figures to help offset costs and cover the time that these folks put into this project. Great— except the org wants to write one check to one entity, and it’s unclear who it should go to.
My friend is worried that if one person takes payment of the full grant as an individual, then distributes portions of the money to the others, they would be stuck with a lot of paperwork and potentially more taxes to pay. They wonder if they should start an LLC to try to avoid that. I have an inkling that an LLC is probably more of a headache than not— and that the most correct thing would be to either start a nonprofit to take receipt of the money, or find an existing nonprofit to serve as a pass through. But, maybe I’m wrong!
If anybody has any experience with these sort of questions, I’d love to know if there is any advice to be had on deciding whether to start an LLC or not in situations along these lines…