Homeschool Co-op Legal Structure: Informal Group, Nonprofit, LLC or Umbrella?

Most small homeschool co-ops are already an unincorporated association, whether they know it or not: a group of families who've agreed to do something together. From there, a co-op can stay informal or incorporate as a nonprofit in its state. It can also apply to the IRS for 501(c)(3) status, or run under the umbrella of a church or a larger nonprofit. An LLC is possible but rarely suggested for a co-op. HSLDA says incorporating is optional. Carol Topp, a CPA who writes for homeschool groups, suggests that groups with a long-term purpose usually should. This page describes what those sources say. It isn't legal or tax advice, so for your own group, check with your state homeschool association, an accountant or a lawyer.

For what goes in the rules themselves, see our guide to co-op bylaws. This page is about the shape of the group that the rules sit inside.

Can a homeschool co-op operate as an unincorporated association?

Picture 5 families who meet on Thursday mornings in one family's garden. Circle time under the apple tree, a main lesson story, then finger knitting on the grass. Each family chips in for wool and beeswax. Nobody has filed anything with anyone.

That group already has a legal shape. Carol Topp defines an unincorporated association as "an unincorporated group of two or more persons joined by mutual consent for a common lawful purpose." HSLDA says the steps for a nonprofit corporation, like articles of incorporation, an EIN and a state filing, don't apply to one.

The simplicity is the appeal. Topp's advice to tiny groups is to enjoy it, and to avoid a bank account if you can: "When money enters the picture, things get complicated." The cost is liability. Because the association isn't a separate legal body, she says its "members generally can be personally liable for its debts and liabilities." She suggests a group formalise once it grows and starts charging fees, renting space or buying insurance.

What changes when a co-op incorporates

Incorporating means filing with your state to become a nonprofit corporation, a legal body separate from the families in it. HSLDA lists what's involved: articles of incorporation, bylaws, an EIN, and a filing for state incorporation status.

HSLDA says a homeschool group "is not required" to incorporate. It adds that some groups should, "especially if they will be serving many families or offering higher-risk services like sports." It recommends asking a local small-business attorney whether it's right for your group. Carol Topp says "nonprofits with long-term missions should usually incorporate."

Nonprofit isn't the same as 501(c)(3)

This trips up many new leaders. A nonprofit corporation is a state matter. 501(c)(3) is a federal tax status that the IRS recognizes, and it's a separate step.

HSLDA describes what 501(c)(3) brings: the group is tax-exempt, can accept tax-deductible donations and can apply for nonprofit grants and discounts. It also describes what it asks: a board of at least 3 people, a lot of documentation for the IRS, and a yearly Form 990.

Two IRS rules matter for a small co-op:

• The IRS says an organization (other than a private foundation) whose gross receipts are "normally not more than $5,000" a year isn't required to file Form 1023, the 501(c)(3) application.
• Small exempt organizations with gross receipts normally $50,000 or less can generally file the short Form 990-N each year. The IRS says any organization that doesn't file for three years in a row automatically loses its tax-exempt status.

HSLDA also describes a 501(c)(7) social club, for groups whose money comes mostly from members' fees rather than donations. Donors to a social club don't get a tax deduction. Charitable Allies, a nonprofit law firm, says 501(c)(3) status isn't a requirement for homeschool groups, though many consider it.

Should a homeschool co-op be an LLC or nonprofit?

It's one of the most searched questions about co-ops, and Carol Topp's answer is short. Most businesses choose an LLC for limited liability. For a nonprofit, such as most homeschool groups, she says "nonprofit corporation status in your state brings similar protections of limited liability." She notes that the IRS has only recently granted 501(c)(3) status to LLCs, under a list of conditions. She "would strongly recommend" experienced legal counsel before organizing a nonprofit LLC.

There's a related question underneath. Topp says a group that one person owns and runs only with paid staff is a business selling a service to homeschool families. "But then it's not a co-op." She also notes that "a business cannot have volunteers working for it," and that churches and libraries often lend space only to nonprofits. A small Waldorf-inspired group where parents take turns leading circle and telling the story is the co-op kind.

Can a church or umbrella organization cover a homeschool co-op?

Sometimes, and it can save a new group a lot of paperwork. HSLDA says many groups run "under the umbrella of another 501c3, usually either a church or a statewide homeschool group." It notes that the umbrella organization usually sets the terms.

Carol Topp describes how this can work when an established homeschool group sponsors a new one. The new group runs as a program of the older one. It uses the parent group's EIN, 501(c)(3) status and bank account, and is covered by its insurance. In return, she suggests the new group:

• set up a committee of at least 3 people
• pay its share of the insurance
• report its finances to the parent group at least every 3 months
• make a 2 to 3 year plan to become independent

She recommends a written agreement between the two. Charitable Allies calls this kind of arrangement fiscal sponsorship, and says it can let a group receive tax-deductible donations without filing for its own exempt status.

The options side by side

Structure	What it is	What the sources say to weigh
Unincorporated association	Families agreeing to do something together, with no filing	Simple. Members can generally be personally liable (Carol Topp).
Nonprofit corporation	A state filing that makes the group a separate legal body	Optional (HSLDA). Needs articles, bylaws and an EIN. Similar liability protection to an LLC for most groups (Carol Topp).
501(c)(3)	A federal tax status, on top of the above	Donations deductible. Board of 3 or more and yearly filings (HSLDA). Not required to apply under $5,000 a year (IRS).
501(c)(7) social club	Another federal status, for fee-funded groups	No tax deduction for donors (HSLDA).
LLC	A business structure	Rarely suggested for a nonprofit co-op. Get legal counsel first (Carol Topp).
Umbrella or fiscal sponsor	Running as a program of a church or larger nonprofit	Less paperwork. The sponsor sets the terms (HSLDA). Use a written agreement (Carol Topp).

Choosing a name

If you file anything, you'll choose a legal name. The Association of Waldorf Schools of North America (AWSNA) asks groups that aren't its members not to use "Waldorf" in a group's name, web address, page title or tagline. "Waldorf-inspired" in the body of your description is fine. So name your co-op after your place, a season or a tree, and describe what you do in plain words underneath.

A short note for the UK and Australia

In England and Wales, GOV.UK lists four structures for a charity: a charitable incorporated organization (CIO), a charitable company, an unincorporated association and a trust. It says the trustees of an unincorporated association "are personally liable for what it does," and that a charity must register once its income is at least £5,000 a year. Most small home education groups are far below that.

In Australia, Not-for-profit Law says the members of an unincorporated group "could potentially each bear personal responsibility" for its debts. It describes incorporated associations, set up under state or territory law, as a common structure. It suggests many groups seek legal advice before choosing, because the choice has significant legal and practical consequences.

What to ask before you choose

Take these to your state homeschool association, an accountant or a lawyer:

• How many families are we, and do we expect to grow?
• Do we hold money in a bank account, and roughly how much passes through in a year? Our co-op budget guide helps you work it out.
• Do we rent a hall or sign contracts? A venue may ask for insurance, which the US co-op insurance guide covers.
• Do we pay anyone to teach?
• Do we want to accept donations or apply for grants?
• Is there a church or larger homeschool group that might act as our umbrella?

Whatever you choose, set out your fees and how refunds work in writing (our refund policy guide has one to copy). For the bigger picture of starting and running a group, see the co-ops and pods guide.

None of this is legal, tax or insurance advice. The organizations quoted describe their own views. For a decision about your group, check with your state homeschool association, an insurer or a lawyer.