Forums: Discussions for entrepreneurs and small business.

Is it possible to own two separate business entities which consist a non profit and a for profit; and joint venture them together?

You can’t really “own” a nonprofit business. When applying for a 501c3 (nonprofit status) there are number of requirements that reassure the government that individuals will not profit. Ultimately, control is turned over to an elected governing board of directors or trustees who serve term limits. The board is legally responsible to follow the nonprofit`s charter/bylaws/mission as well as review and approve the annual budget, organizational chart, strategic plans, and important new initiatives, hire a director, etc.

Conversely, a nonprofit can own and operate “for profit” businesses (e.g., restaurants, gift shops, casinos, etc). However, these businesses must paid taxes and the proceeds (after expenses) must support the nonprofit organization.

I’m curious…why would you want to consider such a business structure?

I want to benefit from both structures such as:

Non Profit:(Community Benefit with the assistance of the For Profit entity)

• Donation
• Fund Raising
• Charity
  
• Funding- Grants, Federal, State, local, and other organizations
  
• Tax benefits
• Surplus-Excess funds to reinvest in the companies growth
• Postage benefits

For Profit:(Will provide assistance to the non profit more efficiently with the shared capabilities)

• Distribute earnings to owners,shareholders and/or reinvest in the company.

By forming a Joint Venture Both entities will work in conjunction with each other to achieve the same objective with the benefit of combine resources, and capabilities.

I currently own a for profit entity with three other partners and looking to branch off and create a new venture with more flexibility and creativity to surpass the economy.

Thanks Epauley for your response.

 I`m looking forward to hear your inputs.

I think I understand but again, there’s a big price to pay when a nonprofit is created – you lose control of any assets that become part of the nonprofit organization.

Look at it this way; for-profits and nonprofits aim for very different outcomes. While the goal of a for-profit business goal is to make money, the goal of a nonprofit is serve a cause. To earn nonprofit status, and thus avoid paying taxes, a governing board of directors must be put charge. The board controls all the discussion-making within the nonprofit. They are obligated to act in the best interest of the nonprofits mission, which may be in conflict with the for-profit business.

Any donated funds and tax benefits must support the nonprofits mission. They cannot be shared. Essentially, the business and the organization would have to keep separate financial records. They may be a way around this but I don’t see how.  

Have you considered creating a foundation? Many companies and individuals establish foundations so they can donate to specific causes they care about. They gain tax benefits while controlling what their donated funds support. For example: A foundation might grant funding to the arts, or the homeless, etc.  

Whatever decision you make, be sure to contact your State’s (not the feds) Secretary of State well in advance. Talk to someone in that office about you idea and ask for guidance. Their website should also list conditions for nonprofit status. finally, I strongly recommend an attorney review Articles of Incorporation and other documents required to file an application for nonprofit status.