In Avengers: Age of Ultron, Captain America made reference to bylaws in stating that there were no restrictions against relationships between members. This of course proves that The Avengers are not only a superhero team that saves the world on a regular basis but also a nonprofit corporation. Here is the way the startup process must have played out:
A group of individuals that will engage in activities may form a corporation to mitigate the risks of personal liability. Without forming a corporation, a group might be characterized as an unincorporated association or partnership. While Thor may be judgment-proof (he could simply fly off to Asgard where our courts have no jurisdiction) and could probably care less, Tony Stark (Ironman) has significant personal assets and would not have let The Avengers operate without the limited liability protection offered by a corporation. Cap might have argued about some ethical obligation to pay for any of the corporation’s liabilities, but he would have been outvoted.
A nonprofit corporation, unlike a for-profit corporation, has no owners and does not make distributions of its net income to any shareholders. Cap’s insistence that the corporation be a nonprofit would have carried the day despite Stark’s preference for the flexibility of a for-profit form like the benefit corporation. These two heroes have been on a collision course from the start … stay tuned.
A nonprofit may be tax-exempt under Internal Revenue Code Section 501(c)(3) if it has a charitable purpose or under Section 501(c)(4) if it has a social welfare purpose. Generally, only a 501(c)(3) provides the benefit of being able to receive deductible charitable contributions, but in return, it’s subject to certain limitations on lobbying and gives up the right to engage in political campaign intervention activities. Because Stark is providing substantial funding, he would have insisted on forming an exempt organization under 501(c)(3) to benefit from the charitable deduction. Cap would have also favored the 501(c)(3) option because it signals that The Avengers exist for charitable purposes, including lessening the burdens of government and relief of the distressed (which includes all of us when the bad guys/robots/aliens threaten to destroy the world).
Because Stark and his company Stark Industries are providing substantially all of the funding, The Avengers will not be able to pass either of the applicable public support tests (509(a)(1)/170(b)(1)(A)(vi) or 509(a)(2)) to qualify as a public charity. Accordingly, it would have been recognized as a private foundation subject to the more restrictive laws applicable to private foundations, including those prohibiting self-dealing, excess business holdings, jeopardizing investments, and taxable expenditures (including those on lobbying and grants to individuals). However, because The Avengers will not be a grantmaking entity, it would have been structured to qualify as a private operation foundation, which is not subject to the private foundation tax on failure to distribute income.
A nonprofit corporation is governed by a board of directors. Initially, it may have been desired to make each of the individual Avengers a board member (director). However, that would not have been the best arrangement, particularly because not all of the heroes were keen on meeting their fiduciary duties and director responsibilities, including providing financial and program oversight, planning how to most effectively and efficiently advance The Avengers’ charitable mission in the near and long-term future, and protecting charitable assets. One very important part of meeting a board member’s fiduciary duties is attending meetings. Bruce Banner (The Hulk) would have abstained from serving as a director based on his inconsistent availability and ability to cooperate with others, particularly when angered. Because directors must disclose their names on the IRS annual information return (Form 990), Clint Barton (Hawkeye), whose personal identity was a secret, would have also declined. Individuals from foreign jurisdictions (like Thor) are permitted to serve as directors, but the IRS may give additional scrutiny to any nonprofit whose board was composed of directors who all resided in a foreign country, planet, or dimension.
Generally, a nonprofit corporation requires three officers: a president (or chair of the board), a treasurer, and a secretary. While many state laws and best practices prohibit the president from concurrently serving as treasurer or secretary, most permit one individual to serve as both treasurer and secretary. Cap would have been elected as president in a unanimous vote. While Stark possesses the financial management expertise desired in a treasurer, the board would have recognized his disregard for following rules would make him a poor choice for such position. Though Natasha Romanova (Black Widow) also has a checkered past, she would have convincingly made the case that she would be the best choice for treasurer. Despite his relative inexperience, The Vision would have been elected as Secretary based on his ability to properly maintain copious records and his computer-like attention to detail.