Understanding the Differences in Organizational Structures
Understanding differences between incorporating under state-regulated business entities (like LLCs and corporations) vs. operating as an unincorporated sole proprietorship or DBA under a private, non-governmental organizational structure like a 508(c)(1)(A) Faith-Based Organization (FBO) — along with how limited liability and asset protection can still be achieved through trust structures.
LLC & Corporations vs. Unincorporated DBAs under 508(c)(1)(A) FBOs
1. State-Regulated Business Entities (LLC, Corporation)
Structure & Oversight:
Created under state statutes (Uniform Business Codes) and registered with the Secretary of State.
Governed by state corporate laws and reporting obligations.
Must adhere to annual filings, franchise taxes, and other state fees.
Taxation:
LLCs: May elect pass-through taxation or be taxed as corporations.
Corporations: Subject to corporate tax; owners/shareholders also pay personal income tax on dividends (double taxation in C-corps).
Must file federal tax returns (e.g., 1120 or 1065) and state tax returns where applicable.
Benefits:
Legal entity separate from the owner
Limited liability protection
Good for investors and formal business dealings
Obligations:
Must register with the state
Ongoing reporting and taxes
Subject to state intervention and audit
2. Unincorporated Sole Proprietorship / DBA under a Private 508(c)(1)(A) FBO
Structure & Oversight:
Not created under state business statutes but under common law, God's law, or natural law.
Operates as a private faith-based organization exempt from many federal and state oversight mechanisms.
May use a DBA (Doing Business As) to carry out activities under a mission-focused name.
Taxation:
Automatically exempt under federal law [26 USC § 508(c)(1)(A)] without filing 1023 or 1024.
Not required to file IRS Form 990, unlike 501(c)(3) organizations.
No corporate or franchise taxes in most states if state exemption is claimed.
Benefits:
No state control or registration
No corporate income tax or franchise tax
Freedom to operate based on mission and faith
Can own assets, property, and conduct commerce privately
Obligations:
Must clearly maintain religious or moral purpose
Must avoid substantial commercial activity unrelated to its mission
Must keep good internal governance (Bylaws, Charters, Minutes, etc.)
3. How to Achieve Limited Liability Without Incorporating
Many individuals think the only way to gain limited liability is through forming an LLC or Corporation. But unincorporated private organizations can achieve similar protection by using Trust structures.
Asset Protection via Trusts
Irrevocable Trusts: Once assets are placed inside, they are no longer the legal property of the individual—shielding them from lawsuits or liabilities.
Ecclesiastical or Faith-Based Trusts: Function as spiritual entities, often under the umbrella of the FBO, and can manage property, funds, or projects.
Private Operating Trusts: These can manage day-to-day business operations while remaining private and unregistered with the state.
How It Works:
Establish your FBO as the foundation.
Create a private trust to hold assets (property, equipment, IP, etc.).
Operate business activities through a DBA or PMA (Private Membership Association).
Maintain internal governance and use resolutions instead of state filings.
Keep assets and liabilities in separate compartments to preserve protection.
4. Comparing the Two Paths Side-by-Side
State Regulated LLC/Corp vs. Private FBO/Trust & DBA
Registered with State | ✅ Yes | ❌ No
Subject to State Business Law | ✅ Yes | ❌ No
Franchise or Corporate Tax | ✅ Often | ❌ No (with exemption)
IRS Filing Requirement | ✅ Yes (1120/1065/990)| ❌ No (under 508(c)(1)(A))
Limited Liability | ✅ Yes | ✅ Yes (via Trust structure)
Public Record Exposure | ✅ Yes | ❌ No
Annual Fees & Renewals | ✅ Yes | ❌ No
Tax Exemption | ❌ Optional (via 501(c)(3)) | ✅ Automatic under federal law
Mission-Centered Flexibility | ❌ Limited | ✅ Full (faith-based, natural law)
Private Structure for Greater Control & Protection
Operating under a 508(c)(1)(A) faith-based organization with unincorporated trust-based structures and DBAsoffers greater autonomy, tax exemption, and asset protection—without the burdens and obligations of state-regulated business entities.
This structure:
Eliminates unnecessary taxation
Avoids bureaucratic entanglements
Keeps your organization private
Allows lawful income and compensation while staying mission-aligned
This concise list of business structure definitions and understanding of each structure mentioned, are designed to help visitors (or readers) grasp the distinctions clearly:
LLC (Limited Liability Company)
A state-created legal entity that combines the pass-through taxation of a sole proprietorship or partnership with the limited liability protection of a corporation.
Owners are called members.
Liability is limited to the business’s assets.
Requires state registration, annual fees, and compliance.
Can be taxed as a sole proprietorship, partnership, or corporation.
Corporation (C-Corp or S-Corp)
A state-formed business entity recognized as a separate legal “person” under the law.
C-Corps pay corporate taxes; shareholders pay taxes on dividends (double taxation).
S-Corps avoid double taxation but have strict ownership rules.
Offers strong liability protection.
Requires board of directors, bylaws, formal meetings, and tax filings.
Sole Proprietorship
An unincorporated business owned and operated by one person.
No legal separation between owner and business.
Owner is personally liable for all debts and obligations.
Simple to start, but offers no liability protection.
Taxed on the owner's personal tax return (Schedule C).
DBA (Doing Business As)
A nickname or trade name used by a sole proprietor, partnership, or organization to operate under a different name than the legal entity.
A DBA is not a legal entity, just a registered alias.
Does not offer liability protection by itself.
Often used to run different services or brands under one person or entity.
508(c)(1)(A) Faith-Based Organization (FBO)
A federally recognized religious organization that is automatically tax-exempt and not required to file for 501(c)(3) status.
Exempt under 26 USC § 508(c)(1)(A).
Can receive donations, own property, and operate services without filing Form 1023.
Not required to file Form 990 annually.
Must operate for religious, moral, or spiritual purposes.
Can function as an unincorporated organization under God’s/natural law.
Private Trust (Common Law or Irrevocable)
A private contract-based relationship in which assets are held by a trustee for the benefit of beneficiaries.
Not registered with the state (when private).
Provides asset protection, separation from personal liability.
Useful for transferring ownership of property, money, or intellectual assets out of the personal estate.
Often used within faith-based or financial structures to avoid public claims.
Private Membership Association (PMA)
A private, contract-based association that operates outside of public law when membership is voluntary.
Members agree to operate under association rules, not statutory laws.
Used for health, wellness, religious, or private commerce.
Offers operational privacy and can limit liability through contractual terms.
Often used in combination with trusts or faith-based structures.
This clear comparison of the costs and maintenance between incorporated (state-regulated) and unincorporated (private/non-governmental) structures to help people understand the financial and operational differences:
Incorporated Structures (LLCs, Corporations, etc.)
These are state-created legal entities and come with upfront and ongoing obligations.
Startup Costs:
Filing Fees with the Secretary of State (typically $50–$500).
Registered Agent Fees (often $100–$300/year if not self-represented).
Publication Requirements in some states (can cost hundreds).
Business Licenses & Permits, depending on industry and location.
Corporate Insurance is often required (especially for liability).
Ongoing Costs:
Annual Report Fees ($25–$800 annually, depending on the state).
Franchise or Business Taxes (even if no profit is made).
Bookkeeping & CPA Costs for required annual financials.
State & Federal Reporting: taxes, compliance forms, audits.
Limited liability
High regulatory burden
Recurring costs
Operates in public (no privacy)
Unincorporated Structures (Faith-Based Orgs, Trusts, PMAs, Sole Proprietors)
These are privately formed organizations, often under common law, natural law, or contract law.
Startup Costs:
$0 filing fee — no state registration required.
Private Charter, Bylaws, Affidavits — can be self-authored.
Optional Notarization — often free at banks or under $10.
Optional Mailing/Recording for evidentiary purposes.
Ongoing Costs:
No annual fees to the state.
No franchise/business taxes.
No required public filings or disclosures (if done correctly).
Voluntary recordkeeping and private internal governance.
No registration or annual state fees
Total privacy and internal governance
No mandatory insurance or public compliance
Not state-sanctioned, so you must build your own liability protection (e.g., trusts)
Incorporated (LLC/Corp) vs. Unincorporated (508, Trust, PMA)
**State Filing Required** | ✅ Yes | ❌ No
**Upfront Cost** | Medium to High | Free to very low
**Annual Fees/Taxes** | ✅ Required | ❌ Not required
**Liability Protection** | ✅ Built-in by statute | ✅ Must be structured (e.g., via Trust)
**Privacy** | ❌ Publicly searchable | ✅ Private & confidential
**Governed By** | State & Federal Law | Common/Natural/Contract Law
**Reporting Requirements** | ✅ Mandatory | ❌ Optional/Internal
This is a well-known principle in asset protection and trust law: separating control from ownership.
How Trusts Protect Assets from Creditors (While You Still Maintain Control)
When you structure your life and assets properly through unincorporated trusts, you legally remove yourself from being the owner of those assets. This means:
You can control everything, but legally own nothing.
Here’s how and why that works:
1. The Legal Separation: You vs. the Trust
When you transfer assets into a private trust, the legal title of those assets changes:
Before: You are the personal owner (and liable).
After: The trust becomes the legal owner, and you (as trustee) simply manage the assets.
This separation is what shields you from personal liability.
2. Control Without Ownership
As the trustee, you have:
Full control over trust assets.
Power to buy, sell, lease, gift, or use trust property — per the trust agreement.
Discretion to manage the trust for the benefit of the beneficiaries (which may be family members, organizations, or even yourself in some roles, depending on the trust type).
But because you do not legally own the assets:
Creditors cannot seize them in a lawsuit or judgment against you personally.
Courts cannot order you to sell trust property to satisfy a personal debt.
The trust can remain intact and untouchable — if properly constructed and not fraudulent.
3. What Creditors See: Empty Pockets
Since you don’t legally own anything:
There’s nothing to garnish.
No assets appear under your name on public record.
You’re not liable for trust debts unless you personally guaranteed them.
You essentially become what’s often referred to in the asset protection world as "judgment-proof" — because even if someone wins a lawsuit, there’s nothing to take.
4. Use of Assets Remains Intact
Despite not being the legal owner, you can:
Live in trust-owned homes
Drive trust-owned vehicles
Receive reimbursement or stipends from the trust for managing it
Pay expenses through the trust where allowed
Design your compensation through trustee allowances or separate service agreements
This is all legal and protected as long as the trust is:
Not fraudulent in its creation
Created in good faith, before liability arises
Properly maintained and respected as a separate entity
5. Types of Trusts Often Used for Protection
Irrevocable Common Law Trusts
Unincorporated Business Trusts
508(c)(1)(A) Ministry Trusts
Private Family Trusts
Express Trusts under Natural Law
These trusts operate outside of the state-incorporated system, offering higher levels of privacy, autonomy, and protection.
Can Health Departments Regulate a Tattoo Parlor Operating as a Private Trust or 508(c)(1)(A)?
Yes, but only under- very -specific circumstances — and not always.
This is a very important question for private tattoo parlors operating under trust or faith-based structures, particularly if they’ve restructured as 508(c)(1)(A) organizations or Private Membership Associations (PMAs). Here's a breakdown of how these entities can remain protected — and the limits of that protection — when confronted by public health and licensing agencies:
1. Public vs. Private Jurisdiction
The key protection is rooted in the distinction between “public” and “private.”
Public Businesses (LLC, Corporation, Sole Proprietors):
Operate under state-issued business licenses.
Are open to the general public.
Must comply with public health mandates and state regulatory oversight.
Subject to inspections, fines, mandatory insurance, and specific operating hours or standards.
Private Membership Associations (PMAs) or 508(c)(1)(A) Faith-Based Organizations:
Operate privately via contractual agreement with members (not the general public).
Are not offering services to the “public at large”, but to members only.
Operate outside the scope of public health codes, zoning laws, or state regulatory mandates, so long as:
There is no clear and present danger to the public.
Services are offered only to consenting members.
There is no fraud or coercion involved.
2. Member Consent & Liability Waivers
Members of a PMA or FBO voluntarily waive certain state protections in exchange for services.
Liability waivers and contractual member agreements should be clear:
The member understands this is a private organization.
They consent to receive services (e.g., tattoos) under private trust law or religious grounds.
They acknowledge no public licenses or regulatory guarantees apply.
3. When Can a Health Department Intervene?
Even private structures can be challenged if:
There’s actual, provable harm (i.e., someone is injured, infected, or harmed).
The facility poses a legitimate health hazard to non-members (e.g., cross-contamination affecting the public).
You are secretly operating as a public business while claiming to be private (a violation of trust).
There's no paper trail (trust agreements, PMA charter, membership contracts, etc.), which weakens your legal position.
4. How to Protect Your Tattoo Parlor Under Trust Law
To maintain legitimacy and avoid overreach:
Create a Trust or PMA Charter:
Declare your private spiritual, artistic, or therapeutic mission.
Limit service to members only.
Draft Strong Membership Contracts:
Every client becomes a “member” first.
Use clear waivers and disclosures.
Separate Your Physical Location from Public Identity:
Do not advertise as “open to the public.”
Use appointment-only or member-invite models.
Maintain Clean, Documented Practices:
Even though you're private, don’t cut corners.
Use professional-level sanitation and consent protocols.
Train Your Team:
Staff must understand the private status of the organization.
Interactions with authorities should be handled respectfully, with documentation ready.
5. Can the State Still Harass You?
Yes — but only to the extent you allow them access.
If you invite them in, answer questions, or comply as if you're public, you could waive your protections.
If you stand on private status, present your trust documents, and decline jurisdiction without aggression, you reinforce the legal shield.
Your protection lies in your documentation, member-only services, and disciplined boundaries. A tattoo parlor operating under a trust or 508(c)(1)(A) structure can legally avoid public licensing, but only if it functions truly privately and harms no one. The trust structure removes property and liability from personal exposure, while the PMA or FBO structure limits state interference under religious or private contract law.
If a state actor (such as a health department official or licensing agent) knowingly continues to interfere with a lawful private association or trust without jurisdiction or authority, after being properly notified, they could be acting under color of law and violating multiple federal civil rights statutes.
Federal Civil Rights Protections & Enforcement
Title 18 U.S. Code § 242 – Deprivation of Rights Under Color of Law
Criminal statute.
Makes it a federal crime for any person acting under "color of law" (e.g., a government official) to:
Willfully deprive someone of their constitutional rights.
Includes freedom of religion, contract, and association (which apply to FBOs/PMAs).
Penalties range from fines to imprisonment — and up to life or death if the violation causes serious harm.
Example: A health inspector tries to forcibly shut down a private trust-based tattoo parlor that is not open to the public and harms no one — despite being shown trust documents and waivers.
Title 18 U.S. Code § 241 – Conspiracy Against Rights
Applies when two or more persons conspire to:
Injure, threaten, or intimidate someone in the free exercise of any constitutional right.
Includes threats, intimidation, and coordinated government actions against a private entity.
Example: A city licensing office and health department jointly target your trust for shutdown, even after being shown they lack jurisdiction.
Title 42 U.S. Code § 1983 – Civil Action for Deprivation of Rights
Allows individuals to sue government officials in their personal capacity for violating constitutional rights.
Can result in money damages, injunctions, and personal liability — they don’t get “official immunity” if they acted knowingly and outside the law.
Title 42 U.S. Code §§ 1985 & 1986 – Conspiracy & Neglect to Prevent
§ 1985: Covers conspiracies to violate civil rights (such as interference with private association or religious practice).
§ 1986: Holds any official liable for failing to prevent the conspiracy if they had the power to do so.
These can apply if someone in the system watches unlawful targeting and does nothing to stop it.
When These Statutes Apply
These protections kick in only if:
You are properly structured as a private association or trust (not merely claiming it without documents).
You have clearly communicated that you are not under state jurisdiction (via affidavit, trust charter, notices, etc.).
No clear public harm or fraud is taking place.
You have paper trail evidence and preferably witnesses or recordings of the state’s unlawful acts.
if state or federal actors continue to push past your lawful private trust/association protections, without jurisdiction, they can face liability under:
Title 18 §§ 241 & 242 (criminal),
Title 42 §§ 1983, 1985, 1986 (civil).
These laws exist to protect individuals and private organizations from abuse by government actors misusing their authority.