Corporate Law HS reunion: do we need to create a legal entity?

[kger77]

What started as a typical high school reunion has snowballed into a fundraiser for our school. We are estimating a revenue of about $20k, with $15k for the party and $5k as a donation to the school. At this time, we have $600 in a PayPal account and no legal entity. We're still scrambling to get together $1200 for a deposit on our venue, so using that money for incorporation fees would be painful.

We are thinking this will be a one-time event, so there is no real desire to create an Alumni Association, but it's something we would grudgingly do. I just checked with a bank to find out about getting a separate checking account for the "club" and was told I needed an EIN, which makes me think the estimated $20k revenue would be be flagged by the IRS and that we might need to incorporate as a non-profit. Our revenue will come from ticket sales and donations from local businesses.

Can anyone tell me if we need to create a legal entity and what the quickest and gentlest way might be?

 

[FlaRiptide]

If you feel comfortable doing so, the easiest would be to treat this as a sole proprietorship and report the business on your personal 1040. Provide a DBA name to the bank with your SS#.

Just be sure to spend all you receive and keep records of all transactions. You might even want to keep $100 of the receipts in order to have a tax accountant do your tax return for you. Actually, it would be no big thing. You could easily do it yourself with a copy of Turbotax.

This would not affect you personally, as the business activity would be a wash. But at least the activity is properly reported to the IRS.

You would only need to incorporate as a non-profit if you were a charity.

Not a real problem, yet to be safe I would not refer to the donations from local businesses as "donations". Either sell them tickets that won't get used or sell them advertisements in the event's flyer.

I believe event ticket sales are taxable in Virginia. You should check this out and learn how to redeem the sales tax collected.