When making a profit is ok

Did you know that a non-profit can actually make a profit.

The best situation for this to happen is this:

1)      A non-profit hires out its services to a for-profit company,

2)      The for-profit is making a small reasonable profit on the transaction where it needed the non-profit as a subcontractor

3)      The for-profit pays tax on its profit.

4)      The for-profit and nonprofit are totally separate entities, without overlapping directors, employees etc.

From a nonprofit’s point of view, all it is doing is entering into a contract to provide services within its nonprofit charitable charter.

If a nonprofit entered into a contract using its connections and nonprofit posture, but then shunted the work off to a for-profit enterprise, it could be considered a “feeder” organization, whose purpose was to provide the for-profit with customers.  That gets closer to the base problem that all 501(c)(3)s face—operations that benefit any private entity or individual.

If you have further questions on this topic, please contact us at the Fisher Law Office.

Best regards,

Randy Fisher

This entry was posted in Business Law, Non-Profit and tagged , . Bookmark the permalink.

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