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  • 1.  Museum Facility Rental question

    Posted 05-19-2017 12:00 PM

    Hi, we are looking forward to adding income by renting out our ballroom.  We have been advised that we need to set up a separate corporation to provide services such as clean up and lights.  Does anyone have a draft or form of agreement between the nonprofit and the for profit entity for supplying these services?



    Tara L. Hitzig

    Executive Director

    The Automobile Driving Museum

    Direct Line: 310-658-5564

    Museum Hours:

    Tues-Sun 10AM-4PM


    ADM_Logo_Tilt signature


  • 2.  RE: Museum Facility Rental question

    Posted 05-22-2017 07:30 AM
    Hi Tara,

    i am am a bit confused by the question but I am in the business of renting out our historic sites so I would like understand your issue and help if I can.

    For cleaning we just hire a 3rd party to do the job as needed. Any additional lighting a client might want is provided by the client and comes and goes on a schedule that we negotiate. 

    Let me know what the specific issues are and I'd be happy to help.

    Good luck!

    Bill Blanchfield
    Functions Manager
    Historic New England
    Waltham MA

  • 3.  RE: Museum Facility Rental question

    Posted 05-22-2017 07:43 AM
    I work with museums across the country on their event rental and visitor food programs. I do not know of any that have set up a separate corporation for this purpose. Happy to chat if it is helpful.
    Tracy Lawler
    732 274 1694

    Tracy Lawler
    JGL Food Service Consultants
    Princeton NJ

  • 4.  RE: Museum Facility Rental question

    Posted 05-22-2017 12:54 PM

    We advise museums, cultural institutions and others across the country and have several hundred clients that we have advised on this exact topic over the years, in fact, we wrote the book on it.   I would be happy to schedule a call with you to discuss. 

    Jeff McNeal
    Manask & Associates
    Arcadia CA

  • 5.  RE: Museum Facility Rental question

    Posted 05-23-2017 01:52 PM

    If I'm understanding your post correctly, you are saying that someone has advised you that you must set up a separate corporation in order to provide services that otherwise might be considered as being in the for-profit realm. Specifically, cleaning and other services associated with rental of your ballroom at a historic house museum. In other words, you've been advised that you might be stepping into a realm that would potentially create some Unrelated Business Income Tax (UBIT) consequences for your (presumably 501(c)3 nonprofit) organization. However I also believe the advice is either incorrect, or has not been properly communicated in this instance.

    Before you seek out advice on setting up a separate for-profit entity, I urge you to understand the tax issues surrounding your museum's getting into the facility rental/rental venue business in the first place. Depending on how your organization approaches this, you may or may not have any income tax consequences. But even if you do end up paying income taxes on some or all of the related income, it's not necessary to set up a separate corporation. You just need an accountant who is familiar with the relevant tax issues. Ultimately you have to be good at booking income and expenses, and knowing which ones have tax consequences and which ones do not. You would only pay income taxes on that portion of the income that falls into the "unrelated" realm, assuming you go down this path. But there are other alternatives as well.

    One thing I recommend is that your organization consider keeping the activity mission-focused from the outset. You are a historic house museum, and you are engaged in the business of preserving that house and interpreting its history and significance to the public. You are not a private events planning firm--there are for-profit corporations and individuals who do that sort of thing (and in the process, this is where "unrelated" starts to come into the picture, because your organization would be stepping into activities that compete with those for-profit businesses). However, if your organization only rents out facilities such as your ballroom (according to a set of policies and procedures that you've developed), and particularly if you provide guests of the renter the opportunity to engage with your house's history via docents and maybe even tour the rest of the house as appropriate during the private rental event, you can avoid a whole lot of other issues. (You can also defensibly count the guests as visitors in this kind of arrangement, which may be important if your overall site visitation is low.) Develop a preferred list of for-profit businesses who you refer renters to for catering, the tables and chair rentals, etc., and you can also forge better community connections and potential fund development prospects in the process.

    Renting out museum facilities will also demand staff time. Potential renters will have many questions, and they'll need to be able to receive prompt responses. You'll need to consider how you'll handle liability issues, and how to tactfully manage events that involve folks who may not be in "museum respect" mode. Getting into any new business line means that someone will need to understand and manage the associated workload. Rental venues often flourish because of their reputation, but this is a double-edged sword. Good luck as you consider this new opportunity. I personally have found it to be not only a good income-producer for the museums that I have worked at and managed, but also a fantastic way of bringing in a wide variety of guests (sometimes quite well-to-do and politically connected) who might otherwise never have visited my museum.

    Paul Hammond
    Executive Director
    March Field Air Museum
    Riverside, California

  • 6.  RE: Museum Facility Rental question

    Posted 05-24-2017 05:42 PM
    My Museum had rented out itself since we opened in 2007.  We did not have to set up a separate corporation to handle rentals, but did consult with our tax personnel.We are a 501(c)3 non-profit Education.  

    After gaining some rental experience, we did develop a preferred vendor list.  The list covered caterers, photographers, separate cleanup services, lighting, video,private security, etc.  We asked that renters use vendors from out list.  If they still wanted to get their own, we asked that they notify us as soon as possible.  A staff member would then contact the "new" vendor and obtain some recent clients info and event schedule.  We would contact the prior customers for their experience.  We would also ask if we could have an observer at one or two of their events.

    This system covered receptions, weddings, sit-down dinners, military retirement ceremonies, etc.  Had very few problems with vendors anyways.  If there were problems, we took photos, if appropriate, to document.

    Actually the biggest problem was dealing with the group wanting to rent.  Some of them thought we were an event center with "neat" props.

    Raymond Meyer
    Safety-Security Manager
    Aerospace Museum of California
    McClellan, CA 95652