Fri, 22 October 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
There are several legal structures to use when setting up your angel network.
Most angel networks form a Limited Liability Company or LLC.
This gives the angel network a legal entity with which it can conduct business.
The members often pay an annual fee to fund the operational activities of the company.
Some angel networks form in association with a university.
Since the university is a non-profit organization, the angel group can work inside the university for its mentoring, networking, and other non-financial activities.
For running a fund or making investments, the angel network inside the university must set up an entity outside the university, since non-profit organizations cannot engage in investment activities.
Some angel networks form a not-for-profit LLC and then apply for non-profit status 501(c)3 with the IRS.
Again, the mentoring, education, and other non-financial aspects can be done within the organization, but the financial aspects such as investing must be done outside.
Finally, some angel networks form a not-for-profit LLC and then apply for trade organization status or 501(c)6.
This structure allows the organization to engage in political activities.
Those angel networks choosing a non-profit or trade organization structure must set up a separate legal entity for any funds they want to raise and deploy.
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