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What percentage of income being used for charitable purposes makes a business non profit?

Tullahoma, TN |
Filed under: Non-profit business

We're starting a business that we believe may qualify as a non profit. I've done some research on it and the only answer i can't find definitively is what percentage of income needs to be used back in the business or as charitable purposes to qualify it with the non profit designation. The business is all about charitable purposes but there are people that will need to be paid, so we need to figure out what percentage we'd have for employees.

Attorney Answers 3

Posted

This should help you get a sense of the multitude of issues you need to understand about a NFP tax exempt entity.....it is a very complex area and not something you should tackle by yourself. The IRS Form 1023 can be daunting for lawyers as well as lay people. Good luck to you.
http://www.irs.gov/Charities-&-Non-Profits/Frequently-Asked-Questions-about-Form-1023

My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a licensed attorney in your State should be obtained.

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Posted

A non profit may hire employees. A non-profit may not distribute income to the founders, although it may pay the founders for services. You need to seek advice of a lawyer with 401c3 experience. This a hyper-specialty, in my opinion. You also need a good accountant.

My advice is to focus on helping other people and not on how to pocket the donations from people who give to the charity.

If any answer on AVVO helps you, mine or someone else’s, please mark it as "helpful" or "best answer" to help AVVO know which answers to show others. Thank you. This response may provide information relating to potential legal issues. Nevertheless, your review of any information contained herein is not a substitute for legal advice from qualified legal counsel. For this reason, you should not rely on this response as a source of legal advice. Your use of this information does not create any attorney-client agreement. In order to become a client of David C. Lee, you must negotiate a specific attorney–client agreement with an attorney from this law office.

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Posted

This is also a question for a CPA. Non-profit lawyers are not too common.

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