# Question about starting a non-profit business **URL:** \ **Category:** Factual Questions\ **Created:** [June 25, 2007, 10:55pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401 "2007-06-25T22:55:07Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![FairyChatMom](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fairychatmom/32/21906_2.png) [@FairyChatMom](https://boards.straightdope.com/u/FairyChatMom)\ **Post date:** [June 25, 2007, 10:55pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/1 "2007-06-25T22:55:07Z")
I’ve googled, but the returns I got are confusing - I’m hoping someone here can give me an answer in plain English or point me in the correct direction. I make ceramic items that I sell at craft shows, but I’m not in it for the money - it’s a hobby that would leave my house full of pottery otherwise. My husband suggested that I should become a non-profit organization in that whatever I take in over and above the cost of materials and booth rental would be given to local charities. I like this idea, but I’m not sure how to make it legal for tax purposes. It’s not like I’m talking a lot of money - at my best show so far, I didn’t even gross $100. But if I can advertise that all proceeds are going to charity, maybe I can sell more so I can make more pieces. So, does this make me a non-profit? Or should I be operating under other rules? Or am I completely out of my mind? ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [June 25, 2007, 11:09pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/2 "2007-06-25T23:09:55Z")
> [@](#): > > A non-profit organization (abbreviated “NPO”, or “non-profit” or “not-for-profit”) is an organization whose primary objective is to support an issue or matter of private interest or public concern for non-commercial purposes, without concern for monetary profit. A nonprofit organization may be involved in a wide range of areas relating to the arts, social issues, charities, early childhood education, healthcare, politics, religion, research, sports or some other endeavor. Source: [Nonprofit organization - Wikipedia](http://en.wikipedia.org/wiki/Non-profit_organization) ---
**Author:** ![C\_K\_Dexter\_Haven](https://avatars.discourse-cdn.com/v4/letter/c/b2d939/32.png) [@C\_K\_Dexter\_Haven](https://boards.straightdope.com/u/C_K_Dexter_Haven)\ **Post date:** [June 25, 2007, 11:29pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/3 "2007-06-25T23:29:50Z")
I’m not a lawyer, but I have been involved in a few small, not-for-profit organizations. Basically, it would be hard to argue that selling your art is “not-for-profit” – there’s no charitable, religious, etc cause. Don’t confuse the terminology. Although we say “non-profit,” it’s really “not-for-proft.” A charity, for instance, can certainly make a profit each year: however, basically, all such profit has to be put back into the organization. So, think of “not-for-profit” – the purpose of the organization is charitable (for instance) – which is different from an organization whose purpose is to earn profit for the owners. Having said that, I am aware of an art gallery that has managed to organize itself as a not-for-profit organization. I personally think it’s a sham, and if the feds ever investigate, the owner will be up shit creek. However, I suppose it’s possible that when the amounts of money are fairly small, the IRS may not care much… Anyhow, it sounds like what you’re doing is donating the profit to charity. That’s pretty easy to do without the need for setting up an organization. You have a business, you deduct your business expenses, you contribute the profit to charity and then deduct that donation as a charitable contribution.You don’t need to go through the expense and hassle of setting up a separate taxpayer ID, applying for non-profit status, etc. ---
**Author:** ![FairyChatMom](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fairychatmom/32/21906_2.png) [@FairyChatMom](https://boards.straightdope.com/u/FairyChatMom)\ **Post date:** [June 25, 2007, 11:40pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/4 "2007-06-25T23:40:11Z")
Well then at the very least, it sounds like I have to set up a real business, in that I’ll need to have a ledger if nothing else. Lucky for me, I have a baby brother who’s a CPA. I foresee a phonecall… Thanks, **Dex**! ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [June 26, 2007, 12:07am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/5 "2007-06-26T00:07:01Z")
There are materials available, and agencies that will answer questions, but it’d be a good idea to talk to an accountant or a lawyer about it. Here’s a previous thread: > **[How hard is it to set up a non-profit business?](https://boards.straightdope.com/sdmb/showthread.php?t=356529)** > > I sometimes wonder whether anyone really looks at charities before they get their operating papers. I’s suppose that they may be allowed to set up before they actually start collecting money and thus providing benefits. Let’s say you were going to... and some other helpful links: [http://www.usa.gov/Business/Nonprofit.shtml](http://www.usa.gov/Business/Nonprofit.shtml) [http://www.ncna.org/](http://www.ncna.org/) [http://www.compasspoint.org/askgenie/index.php](http://www.compasspoint.org/askgenie/index.php) ---
**Author:** ![C\_K\_Dexter\_Haven](https://avatars.discourse-cdn.com/v4/letter/c/b2d939/32.png) [@C\_K\_Dexter\_Haven](https://boards.straightdope.com/u/C_K_Dexter_Haven)\ **Post date:** [June 26, 2007, 12:17am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/6 "2007-06-26T00:17:05Z")
I don’t think you need to set it up as a separate business. Check with your brother the CPA, but my understanding is that any person can sell their art work without the need for incorporation. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [June 26, 2007, 12:20am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/7 "2007-06-26T00:20:16Z")
Mine as well. I’ve set up more than a few corporations but I always had goals and legal requirements in mind when I did so. But for things like my freelance writing and consulting gigs, which I would put on par with your pottery, I just do it and declare the income on my taxes. But do consult your CPA brother. Always best to check. And better if you can exploit family while you do it! ---
**Author:** ![FairyChatMom](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fairychatmom/32/21906_2.png) [@FairyChatMom](https://boards.straightdope.com/u/FairyChatMom)\ **Post date:** [June 26, 2007, 12:38am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/8 "2007-06-26T00:38:17Z")
I’m all about exploiting the bro! 😃 Mr. CPA with his MBA workin’ as a CFO thinkin’ he’s a BFD! Of course, I wouldn’t say that to him till I get to pick his brain. heh. ---
**Author:** ![anson2995](https://avatars.discourse-cdn.com/v4/letter/a/c77e96/32.png) [@anson2995](https://boards.straightdope.com/u/anson2995)\ **Post date:** [June 26, 2007, 12:59am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/9 "2007-06-26T00:59:50Z")
A lot of small business are not-profit… I can speak from personal experience ☹ But what your talking about is what the [IRS calls a 501c3 exemption](http://www.irs.gov/charities/nonprofits/index.html) for a non-profit organization. As you can see on [this page,](http://www.irs.gov/charities/charitable/article/0,,id=122670,00.html), this is an extremely cumbersome process. Again, I can speak from experience. Given the small amount of income you’re generating, I think an accountant would probably advise you just to file as a sole proprietor. If your revenue is consume by expense and charitable donations, your tax liability should be minimal, and that’s probably the simplest approach. ---
**Author:** ![Keeve](https://avatars.discourse-cdn.com/v4/letter/k/f07891/32.png) [@Keeve](https://boards.straightdope.com/u/Keeve)\ **Post date:** [June 26, 2007, 2:43am UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/10 "2007-06-26T02:43:08Z")
[QUOTE=FairyChatMom] … if I can advertise that all proceeds are going to charity, maybe I can sell more so I can make more pieces. [/QUOTE] I think this is a critical part of the OP. In other words, let’s suppose I do no unusual incorporation or paperwork. I’m just an ordinary guy, selling my pottery for a higher price than my cost of materials. I do have to include this profit as income. But let’s say I donate the profit to a legitimate charity. I can certainly deduct that as a charitable donation (presuming that I itemize my deductions, have good receipts, etc etc etc) so that I don’t owe any extra tax. But can I advertise that all proceeds are going to charity? IANAA, but why not? Don’t all sorts of _for_-profit businesses run advertisements to the effect of “Buy our stuff! For each of our items that you buy, we’ll donate one cent to the XYZ Fund!” The OP’s sign would be the same, or even better. ---
**Author:** ![Humble\_Servant](https://avatars.discourse-cdn.com/v4/letter/h/47e85d/32.png) [@Humble\_Servant](https://boards.straightdope.com/u/Humble_Servant)\ **Post date:** [June 26, 2007, 3:02pm UTC](https://boards.straightdope.com/t/question-about-starting-a-non-profit-business/409401/11 "2007-06-26T15:02:31Z")
[QUOTE=C K Dexter Haven] I am aware of an art gallery that has managed to organize itself as a not-for-profit organization. I personally think it’s a sham, and if the feds ever investigate, the owner will be up shit creek. [/QUOTE] Could be, but promotion of the arts is a valid nfp/(c)(3) purpose–lots of art galleries have shows open to the public and sometimes art classes, children’s outreach etc. Not uncommon. The profits from sales get plowed into supporting these causes. Since the “owners” can’t take out any profit, the only way to wrongly benefit is by paying themselves salaries/expense reimburesement beyond reasonable levels, which is indeed prohibited by the IRS, but difficult to quantify. You say gallery, I say museum with a gift shop on steroids.🙂