What is the legal entity for a business where 100% of profits go to support a non-profit endeavor?
paulkim916 asked:
My friend is currently the CEO of an NPO, and wants to launch a for-profit business using the same model as his NPO and donating 100% of his profits to the non-profit. the purpose of the for-profit business is to add financial security to the non-profit and lessen reliance on grants, etc.
also, both the NPO and the for-profit would be under the same parent company. Although the branding of the 2 companies would be under different names.
so what is the legal entity for this? can it still be classified as a non-profit? an L3C? or would it still be billed as a for-profit agency. or something entirely different?
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The IRS will smell something then will call for major audit. Tell your friend to do it right, legal and to avoid doing something unaware of. He better consult with an attorney for this where there will be many papers to be filled for the IRS, secretary of the state.
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I agree with what above answer said !
There is a way to do this for YOUR friend and it will benefit him greatly and it is legal !