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Can (c)(6) share board members with related (c)(3) charity?

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Can (c)(6) share board members with related (c)(3) charity?

We are a 501(c)(6) trade association intending to establish a separate 501(c)(3) charity for scholarship activity. Can the board of directors of the 501(c)(6) serve as the board for the new organization?

Yes. There is no general legal prohibition on having the same board of directors govern multiple organizations. You have to be careful not to mix the charitable funds with the trade association funds, and may want to have a smaller board for administrative simplicity and to reduce the chance of a creditor piercing the corporate veil. (See Ready Reference Page: “How to Prevent Piercing the Corporate Veil.”) You will also want to assure that you have the proper control over a new subsidiary. (See Ready Reference Page: “Bylaws Function as 'Constitution' of Nonprofit Corporations.”)
If you will be dealing with donor-advised scholarship funds, you will have to institute some significant procedures to comply with the new provisions on advised scholarship funds in the Pension Protection Act. (See Ready Reference Page: “Congress Passes Charitable Reforms.”)
Thursday, September 15, 2011

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