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non profit vs. sole proprietorship

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Latest post Sun, Jun 10 2007 8:24 PM by Sharon - Community Moderator (Admin). 2 replies.
  • Fri, Jun 8 2007 7:39 PM

    • neilh
    • Not Ranked
    • Joined on Fri, Jun 8 2007
    • Posts 1

    non profit vs. sole proprietorship

    I am wanting to start an organization that offers academic courses and though some similar organizations that exist now are organized as non profits, truthfully I'm wanting to retain a hierarchical control where what I say pretty much goes. Can I do that as a non profit, or do I have to be a sole proprietor? But since I don't want it to be something for-profit, then can I be a sole proprietor and do that?


  • Sun, Jun 10 2007 7:54 PM In reply to

    Feedback [*=*] re: non profit vs. sole proprietorship

    The term “non-profit organization” is often used by the public to refer to charitable, religious, or educational organizations that have been granted tax exempt status by the IRS. Tax lawyers and the IRS refer to these organizations as tax exempt organizations. There are other kinds of tax exempt organizations, so tax lawyers refer to these charitable, religious, and educational organizations as section 501(c)(3) organzations. IRC § 501(c)(3) is the provision of the tax code that describes these organizations. If an organization qualifies as tax exempt under § 501(c)(3) then donors may deduct the gifts they make to the organization on their federal income tax returns.

    Some state codes have special rules for “non-profit corporations,” which are typically corporations organized for charitable purposes. The definition of what qualifies as a non-profit corporation under state law may be different that what qualifies as a tax exempt organization under IRC § 501(c)(3).

    I mention all this because it’s important to know what it is that you are seeking to achieve here. I am guessing that what you want to do is form a tax exempt organization for these academic courses but have sole control over how the organization operates. You can have considerable control over how it operates, but there are number of rules for the operation of these entities that you need to know. The most important concept you need to understand is that you cannot personally benefit from this organization. That is known as private inurement, and it can lead to penalties for you and the organization, and even loss of the tax exempt status. I strongly suggest you consult a tax lawyer who practices in the area of tax exempt organizations for advice. You need to know if what you plan to do can qualify for exemption and you need to know what the rules are for operating these kinds of organizations.
  • Sun, Jun 10 2007 8:24 PM In reply to

    Ok [+0+] Neil-

    Welcome to the site.

    Should you want to begin your search for an experienced tax lawyer, as suggested, use the "Find a Lawyer" feature to the right of the screen.

    Best of luck.
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