Why and How to Create an Independent Research Institution

This article collects notes on why and how to create an independent research institution. Note that this article reflects my own current understanding and has not been reviewed or confirmed by legal experts, granting institutions, universities, or really anyone. There’s a good chance that I’m missing some important context. Still, I hope to collect some useful notes here for us both.

I. Why Create an Independent Research Institution?

Mainly in order to receive grants. Research is expensive. As an independent researcher, I don’t mind spending one or two thousand dollars each year on research as a hobby, but once we get into thousands of dollars I begin to wonder how I can offset such costs. One option is to form a business and expense research concerns. This reduces the effective cost to me through beneficial tax treatment, but my benefit here is often small.

In many cases, I’m able to avoid paying income tax on such expenses, and this amounts to a roughly 30% discount on such expenses. Paying 70% of a large some of money is often, still, a large sum of money. The world of grants offers a potentially much lower cost option wherein as little as zero dollars must come out of my pocket to further research that I’m interested in. Better yet, it’s possible that I can spend a negative amount, or receive supplementary income, from my work as an independent researcher.

According to the NIH, a major grant provider, “For the most part, NIH makes awards to institutions, not people,” and I suspect the case holds true for many other grant providers. What constitutes an institution? The NIH defines an institution as “any domestic or foreign, public or private, entity or organization (excluding a Federal agency).” In other cases the term organization is used instead of the term institution to largely the same effect. NIH eligibility statements include:

  1. From Who Is Eligible?
    1. In general, domestic or foreign, public or private, non-profit or for-profit organizations are eligible to receive NIH grants.
    2. Special consideration notes: Reviewers give new and early stage investigators special consideration, and NIH has programs targeted specifically for these populations…NIH may limit eligibility for certain types of programs, such as limitations on the participation of foreign entities or programs for which only small businesses are eligible applicants.
  2. From NIH Grants Policy Statement 2.3.2 Eligibility
    1. NIH grants may be awarded to organizations that are domestic or foreign, public or private, or non-profit or commercial.
    2. Special consideration notes: Individuals can receive an award. Commercial entities include sole proprietorships, partnerships, LLCs, corporations, and more.

These entity delineations for the purposes of eligibility seem to align well with grants.gov and other granting organizations.

II. How to Create an Independent Research Institution?

Based on the NIH eligibility criteria we can see that there are a variety of approaches to institutional formation depending on the kind of institution. Individuals can apply for grants directly or form an LLC with relatively little time and effort to qualify as a small business or a commercial entity.

Forming a nonprofit or educational institution is substantially more difficult. A nonprofit in the US cannot be comprised of an individual, and there are higher standards for compliance compared to an LLC or sole proprietorship, such as regular meetings with minutes.


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