Becoming a Legal Entity

Do you need to incorporate?

If you are going to create an actual school, yes. To get insured, or get a bank account, you may need the legal incorporation. However, a homeschool group using our tools may be able to operate as an informal association or cooperative.

In the United States there are laws supporting Freedom of Association (backed by the First and Fourteenth Amendments) which typically allow clubs, cooperatives and associations to be recognized as a named entity without officially incorporating. Often you will need to file a DBA (“Doing Business As”) or Trade Name Registration in your state, then apply for a Federal EIN to get a bank account.

How to incorporate

If you decide to incorporate, in most states, you can just submit a business registration online through your Secretary of State to file your initial Articles of Incorporation. On average, states charge about $50 to file. After that you’ll still need to apply for a Federal EIN to be able to open a bank account. If you are running a school, camp, or after school program, you’ll probably want to do both of these things.

Legal Structure and Bylaws

We recommend walking the talk in your legal structure too. Agile Learning Centers are rooted in trust. They are designed to support people contributing their gifts and talents, pursuing their passions, and being inclusive and participatory. As such, we recommend making a legal structure which reflects this participatory nature by including parents, staff, community and when possible, students, in the operation of the school. (Some states prohibit the inclusion of minors on boards or other legal decision-making bodies.)

The following is a thorough example of an Organizational Structure for an Agile Learning Center. It includes a number of optional components (slightly greyed out) which you could remove for a simplified organization.

Sample Organizational Chart

<chart> So, let’s explore the elements in this diagram, why they exist and what they do. We’ll start with the easiest ones to talk about and remove if you want to simplify the model.

Volunteers: Volunteers do not need to be acknowledged in the legal structure of the organization. It is included to show that they are a group of stakeholders overseen by the School Administration and specifically the Staff.

Advisers: You may want to show how advisers will help, but not be liable for, the school. This allows you to include community members while not making them leaders nor making them liable for the organization. You can leave them out of your bylaws, or include the possibility of electing them and just leave that body empty of members.

Charter Council: This is a small group (around 5) of vision-holders who will hold true to the core purpose of the organization.

The Charter Council has only one power: to rewrite the bylaws. They can legally restructure the school to disband the Assembly or any other group. Generally, they probably only need to meet once a year just to make sure the legal structures are still aligned with the school’s vision. Remember: Some people can be members of multiple bodies (e.g. Charter Council, Assembly & Staff).

Assembly: This body operates as the School Board or the Board of Directors of the organization. Assembly meetings have two parts. First, the workgroups make plans, decisions, and schedules and create their summary. Second, the workgroups share their progress and the whole group conducts any other business.

The actual policy-making gets done in those smaller workgroups from this Assembly. As a big group, the Assembly elects its own members, advisers and officers, approves the budget and staff appointments, proposes changes to bylaws, and empowers the School Administration for daily operations.

Work Committees: These are also called “workgroups” in this document. This is where the real work of the Assembly happens. Workgroups are the Finance Committee, Admissions Committee, Marketing & Outreach, etc.

School Administration: In an Agile Learning Center, the School Administration handles the daily operation and facilitation of the school environment. It includes the students, staff, Director, and potentially other Officers. It also clarifies some of the responsibilities of the adults versus the children.

Most other decisions affecting students’ time, attention, and behavior involve the students.

Note: Some people wonder whether ALCs are like Democratic Free Schools. The answer is mostly “Yes, of course.” However, this is a core difference: we don’t use a bureaucratic / democratic meeting revolving around a fixed process (like Robert’s Rules of Order or Butler’s Consensus). We've noticed they make an inflexible culture. Once you’ve spent dozens of hours getting a rule or policy made, you don’t want to change it, even if it isn’t working. We want everyone to test and try changes, undo them, and try again until the environment feels best for all.

Sample Bylaws

It's fairly easy to find sample bylaws for a nonprofit corporation online. Other recommendations that we've made in the this section of the Starter Kit could be used to adapt boiler plate bylaws.

If you choose to become a member the ALC Network, you'll have access to facilitators and Coherence Holders from dozens of other ALCs who can share their organizations' bylaws with you as an even more specific reference.

501(c)3 Tax Exempt Status

Schools as educational organizations generally qualify for 501c3 tax exempt status with the IRS. That status makes donations tax deductible for the donors and may qualify you for special grants or funding. However, the application is long, complex and can take months of back-and-forth to get approved.

UPDATE: In previous editions of this Starter Kit, we suggested that startups consider using a fiscal sponsor when needing to crowdfund and raise money before they are able to obtain their 501c3 status. We've learned if a nonprofit obtains their 501c3 status within 27 months of their incorporation date, all donations they receive before the status is granted will be retroactively deductible. Because you will want to have your own 501c3 status eventually, we recommend taking advantage of this 27-month buffer and begin fundraising from your own entity right away.

The 501c3 application can be tedious and time-consuming. There's also a filing fee (currently $850). You will need time to complete this and runway to work it into your budget. If you join the ALC Network, you will have access to many other ALCs who have completed the process and can share copies of their form 1023 with you to ease the process.