# KALI UNAs

### UNA
An unincorporated non-profit association (UNA) is a format for protecting assets and giving a legal identity to projects serving a social purpose. UNAs can be created by two or more members through agreement without the need for state filing, this agreement could be either oral, in a record, or implied from conduct, for one or more common, nonprofit purposes (as stated in the Uniform Unincorporated Nonprofit Association Act). They therefore are friendly alternatives to formal registration as a legal entity with the State with many of the same benefits but also greater anonymity for members.

### DAOs & UNA's

If a DAO is classified as a nonprofit association, then its members would enjoy limited liability protections while avoiding the whole bureaucracy involved with incorporation. However, before opting for a UNA one has to consider that even though UNAs may engage in activities that produce profit so long as they are in furtherance of the non-profit purpose, they have to be careful not to distribute assets to its members since this may prevent it from retaining its limited liability as a non-profit venture.

### Tax Exemption

Given the non-profit nature of UNAs, they could also qualify as Tax Exempt 501(c)(3) organizations. However, there’s some things to take into consideration, that go in hand with the importance of ensuring the non-profit status of the association.

To qualify as such, first of all, the organization has to have a [tax exempt purpose](https://https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes-internal-revenue-code-section-501c3), which includes charitable (used in its generally accepted legal sense), religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

#### Organizational and Operational Tests:
But this isn't the only requirement, the organization needs an organizing document. This document must include three provisions:
1. The organizing document must limit the organization’s purposes to one or more of the exempt purposes listed in Section 501(c)(3) of the Code (Religious, charitable, scientific, testing for public safety, education, etc.).
2. The organizing document must not give the organization the ability or permission to engage in activities that don’t advance those exempt purposes.
3. The assets of the organization, such as the money and property of the organization, must be permanently dedicated to an exempt purpose described under Section 501(c)(3).

This would be enough to pass the "Organizational test", which is one of the two tests the organization must pass to qualify for tax exemption under Section 501(c)(3). The second one being the Operational test. This test covers how your organization works, and to do so it has to:
1. Show that its principal activities will be to further its exempt purposes.
2. Your organization has to limit the participation in certain kinds of activities and [absolutely refrain from others](https://https://www.irs.gov/charities-non-profits/charitable-organizations/the-restriction-of-political-campaign-intervention-by-section-501c3-tax-exempt-organizations).

It's important to point out that although this test is conducted when you're first applying for tax-exempt status, if the balance of your activities gets out of line after you receive your status, or your organization engages in prohibited activities, you can lose your tax-exempt status and be subject to both taxes and penalties.

#### Public Charity vs Private Foundation
Once your organization passes these tests, it has to prove that it's a public charity and not a private foundation. Assuming it's not a statutory charity (church, school or organization providing medical or hospital care), it must demonstrate that:
1. It receives a substantial part of its support in the form of contributions from publicly supported organizations, governmental units and/or the general public or
2. That it normally receives no more than one-third of its support from gross investment income and unrelated business income combined and gets more than one-third of its support from contributions, membership fees, and gross receipts from activities related to its exempt functions.

#### Filing:
First, you'll have to apply for exemption, you only have to do this once for any single organization. To do so, you have to fill out form 1023 or Form 1023-EZ, unless your organization [has gross receipts in each taxable year of less than $5,000](https://https://www.irs.gov/charities-non-profits/charitable-organizations/organizations-not-required-to-file-form-1023).

Second, every Section 501(c)(3) organization should file Form 990 or 990-EZ annually, but if their annual gross receipts are normally $50,000 or less, then they can simply file an electronic notice, [Form 990-N](https://https://www.irs.gov/charities-non-profits/annual-electronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard).