Can a 501 c 3 organization create a 501 c 9 subsidiary under the 501 c exemption?

Question

Thanks?

Answer 1

As we explain in our answer to your other post of this question, this is a complex question which will require you to consult with competent legal counsel to advise your organization with its particular case.

In general, a 501(c)(3) organization cannot "create" a 501(c)(9) organization, simply because neither organization can have an owner, so neither can be a subsidiary.

As you probably know, a 501(c)(3) organization is a "charitable organization", which has a public benefit component. Such an organization has no "owners" and thus no shareholders.

A 501(c)(9) organization is a voluntary employees' beneficiary association, which provides for the payment of life, sick, accident, or other benefits to its members and its members' dependents or designated beneficiaries. It too has no owners or shareholders.

Accordingly, since neither has owners or shareholders, neither can be a subsidiary of the other.

However, two such organizations, having been organized properly, can work in coordination with one another.

Please re-post with additional facts, and we shall provide further information. Furthermore, we recommend that you consult competent tax counsel to advise you.

Hope this helps.

Answer 2

I think a 501c3 can form a 501c9 for its employees. But it will have to file for its own exemption and keep its affairs separate from the parent. It is an auxiiary not a subsidiary..