How to make your school a business

While I have lots of experience in education, I have minimal clue about all the “legal stuff” that relates to starting a school/business. The last few months have been a huge ramp-up in learning all of these things.

Here’s an analogy that’s been helpful to me.

In making a business, you are essentially giving birth to a new person. As a human person and U.S. citizen, you personally have a social security number, an address, bank accounts, and insurance. These pieces allow the government to recognize who you are and where to find you, give you a place to store your money, and allow you to be protected in case of any unforeseen accidents. Your business, as a new U.S. corporation person needs all of these things too.

1. Social security number (SSN) → Employer Identification Number (EIN)
   So the government can recognize your school as a business that exists in the United States. You can find a lawyer near you to set this up or you can use LegalZoom to setup your nonprofit. I went with LegalZoom after consulting a lawyer and it was much cheaper (and possibly smoother) than doing it myself or hiring a lawyer. Heads up, the filing costs almost $1,000 for a non-profit, though you can pay this in monthly installments. Make sure you have your pennies ready… Note: Being a nonprofit organization doesn’t automatically make you tax-exempt. See #5 for more info.
2. Personal mailing address → Business mailing address
   Where your school is located. Or, just your house for now ;) Some people choose to open up P.O. boxes or use the address at a co-working space where you’re a member.
3. Personal bank accounts → Small business bank accounts
   You can go to your current bank and open an additional account under your name. Or, you can open a separate account that will have extra features specially designed for small businesses. You can setup these new accounts online pretty quickly, or you can go to a local branch and they’ll happily sit down with you (cuz they want your money!)
4. Health/car insurance → Liability insurance
   Your students are your responsibility when they’re with you, so if anything happens to them, your school could be financially responsible. Just like if you bust your knee playing pickup basketball on the weekends and your insurance steps in to pay a big chunk of your doctor’s fees because you’ve been paying them regular payments, you want the same setup for your school. I haven’t found anyone who makes setting this up for schools/nonprofits super easy. In the for-profit world, I’m excited about the un-brokerage, an online tool that lets you setup insurance quickly and simply online. Maybe they’ll expand into non-profits soon!
5. n/a → tax-exempt
   I don’t think there’s a human person analog for tax exempt status. But essentially, this status means your school is exempt from paying federal corporate and income taxes for certain types of revenue, and that any donations made to your school are tax deductible. You can read more here. And you can apply for tax exempt status through your nonprofit order with LegalZoom — they’ll mail you the documents to sign and send to the IRS along with another big check, so you may want to do some fundraising before you start this process.

This is all my understanding. I’m by no means a lawyer or expert on any of this, so if I misrepresented something or you have a better understanding, please share! Then we can all learn something new.

p.s. This isn’t an advertisement for LegalZoom. I just decided to use them personally and found the process to be pretty straightforward, so I’m passing that “discovery” along to you.

p.p.s. I’m starting a private (high) school. The process may be different for starting a charter school.