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Who Really Owns a Nonprofit?

Who Really Owns A Nonprofit?

The concept of who owns a nonprofit organization can be hard for some to grasp, especially given that the answer is, “No one!”  We encounter this confusion with new clients on a fairly regular basis.  And, given people’s understanding of how basic business operates, it is understandable.  In order to fully appreciate the concept of “non-ownership”, it is helpful to first talk about the various types of business entities.  Then, we’ll look at organizational purpose.  By the end of the article, it should make a lot more sense.

For-Profit Business Structures

There are several different types of business entities.  For-profit companies make up most of them.  Here are a few that all have an owner or owners:

Sole Proprietorship: One person who conducts business for profit.  Though a sole proprietorship may have to secure things like a business license, it is a fairly informal structure.  Legally, there is no distinction between the person and business.  The sole owner assumes complete responsibility for all liabilities and debts of the business, and reports income and expenses on their personal tax return.

General Partnership: Two or more individuals as co-owners of a for-profit business.  This is more formal than the sole proprietorship, but even with this structure, there is no legal distinction between the individual partners and the business itself.  A partnership files a separate tax return, but profits are taxed at the partner level, not the business level.

(For-profit) Corporation : Now we’re getting much more formal.  A corporation is a legal person in the eyes of the law, with ownership vested in the shareholders.  When a corporation is formed, an initial number of shares of stock must be declared.  These shares of stock are the mechanism for ownership.  How many shares to declare is up to those forming the corporation.  Usually, more shareholders means a higher number of shares declared. Those shares are divvied up between the owners, usually corresponding to the percentage of initial capital invested by that owner. The corporation itself assumes all liabilities and debts of the Corporation, not the shareholders, providing a significant level of asset protection for the individual owners.

Limited Liability Company (LLC): An LLC is a formal association which combines the advantage of a corporation’s limited liability and the flexibility and single taxation of a general partnership.  An LLC has members rather than shareholders, but the principle is similar.  The percentage ownership any one individual has usually corresponds to their relative investment percentage made into the business.

With the exception of the LLC, none of the business structures listed above can be used for nonprofit organizations.  Even the use of an LLC is extremely rare, because all nonprofit LLC members must be other, existing 501(c)(3) organizations, not individuals or other entity types.

Nonprofit Business Structure

The most popular business entity for nonprofits is the nonprofit corporation, making up well over 90% of all tax-exempt organizations.  This type of corporation is very different from the above-mentioned for-profit corporation.  A nonprofit corporation has no owners (shareholders) whatsoever.  Nonprofit corporations do not declare shares of stock when established.  In fact, some states refer to nonprofit corporations as non-stock corporations.

A nonprofit corporation is formed to carry out a non-commercial purpose, whether that be religious, educational, charitable, scientific or other qualifying purpose.  It is prohibited from acting in a manner that results in private inurement (profit) to individuals.

It is also possible, though not advisable, to operate a nonprofit as an unincorporated association.  A trust structure can also be used.  Lastly, an LLC can be used in specific situations (see above).

No matter which entity type is chosen, none have a mechanism for ownership.  Governance responsibility is vested in the board of directors or trustees.  These individuals are accountable to state and federal authorities to ensure the organization operates in a legally compliant manner and for the purposes outlined at formation.

Also, a nonprofit cannot be sold.  Again, without an ownership mechanism, it simply isn’t possible.  If a charitable nonprofit winds down operations, the board of directors must distribute all of the nonprofit’s assets to another 501(c)(3) after all debts have been settled.  Some other non-charitable nonprofit types, like 501(c)(7) social clubs, distribute residual assets proportionately to the existing membership.

Final Thoughts

It is difficult for some people to wrap their head around this idea of non-ownership.  That’s completely understandable.  We’re programmed to think of business in terms of entrepreneurs, owners, and shareholders.  A nonprofit organization is not “owned” by the people who start it, nor their successors in leadership.  These individuals operate in a position of trust and accountability for the public at large, who, via government, allow nonprofits to operate exempt from the taxes that for-profit businesses must pay.

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

This Post Has 65 Comments
  1. Hi Greg:

    I want to create a non profit organization, but based on what i read after putting all the effort, time and sweat i won’t have any ownership right whatsoever. Which mean the board can fire me at any time. Is there’s a way i can protect myself as a founder?

    1. It’s true that you cannot own the nonprofit, but most states will allow you to create a “sole member” structure where the founder is the sole member and is able to select the board members. This structure must still pass the conflict-of-interest and private benefit test, but it is a structure that provides a good measure of protection to those social entrepreneurs who are risking much for no ownership.

      We can help you put together such a structure. I’ll email you privately about this, Luce.

  2. Hi Greg! Thank you in advance for you help. We have a pool in our neighborhood that is not part of an HOA. It was built later and it was established as a nonprofit corporation and they do file a 501(c). I join our pool every year and we recently asked for a copy of the bylaws and were refused. We were told that only full equity members are allowed a copy (we have never been given the ability to join as “full equity” members.). We were sent the below response about membership types:

    “as I have explained there are three types of memberships – equity (these folks who own the property), annual members and non-voting members (not non-voting equity members). Annual and non-voting members do not have any equity in the pool (that is, they do not own shares of the pool). There are 9, not 8 board members, which I listed in a prior email. Board members are selected by a vote of the equity members. Only equity members may serve as board members.”

    Would this be possible for a nonprofit corporation? As from my research no one can “own” the nonprofit.

    Thanks again for any info you can provide.

    1. This sounds messy. You are correct that no one can own the nonprofit. There are rare situations where a nonprofit corporation can issue shares of stock, but it does not create an equity stake. And, in most states, this is disallowed anyway. I also question whether this group actually has 501c status. It would not qualify as a 501c3 based on its purpose. At best, maybe a 501c4 public benefit corporation. My guess is they filed Articles of Incorporation with the state and nothing else. The IRS certainly would not have green-lighted this method of operation if it were honestly disclosed. Any member of a legit 501c has a right to see the bylaws. The org leadership cannot refuse it legally. First, look up the corporation on the state’s corporations website. Then, go to IRS.gov and click on the charities button at the top of the page. You can search there for nonprofits with IRS status. My guess is they are not IRS approved.

      If you continue to get the runaround, contact the state AG’s office. Good luck!

  3. Thank you Greg for all this information! I’m starting a nonprofit and I’ll have to personally donate funds to cover rent for the facility. Would this type of donation be considered deductible for my personal taxes?

    1. Donations from you are just as tax deductible as they would be from anyone. If you are able to itemize your deductions, your donation should qualify to be tax deductible.

  4. We set up a tax-exempt 527 political organization and want to incorporate purely for liability purposes. Would incorporating as a non-profit corp without pursing 501(c)(3) status be a viable option for limiting our liability?

    1. My opinion is that it probably would be beneficial. Yours is really a legal question, not a compliance one, so I recommend seeking a legal opinion if you are really concerned about personal liability.

    2. Im the founder of a 501(c)3 animal rescue. I drive thousands of miles every year for my charity. Since the non-profit is not considered a business, because it isn’t a money making venture, i would only be able to deduct 14 cents per mile versus 58 cents? Is that correct? A cpa briefly mentioned to me that i could choose to take the deduction or the non-profit can take deduction depending on which is most profitable. ??😣

      1. It’s not really about being a business or not, but rather the nature of the transaction. If you were a paid employee of the nonprofit, then standard mileage rates and potential deductibility apply. But, if you are a nonprofit volunteer, those miles are considered a charitable contribution, subject to the reduced rate. Even as the founder, if you are not paid, your still a volunteer. But, if you ARE paid wages, you may be able to consider them business miles.

  5. Hello, similar to the church situation above, our Ohio non-profit has always been very small, run by founders a husband and wife. Have by-laws but due to actual amount of members no meetings everything was verbal between this couple. Both are now deceased. Last one died recently but prior had turned over leadership (verbally) to myself along with access to all websites, and other items someone of authority would have. She was active until her death in that we could consult with her, so was functioning still in that capacity along with me doing the day-to-day. We assigned someone to do our accounting also. Remaining family (who have never been part of this group) states unless we produce something in writing saying I was given authority they will shut us down. Cannot the remaining active members look to by laws and (formally, now) vote on leadership? Our by-laws state minimum of 3 leaders. Help!

    1. The “family” has no say-so in this at all. The remaining members should fully seat an active board and continue operations if that’s the choice that is made. If it’s a nonprofit corporation, especially with 501c3 status, it can’t be owned and family has to stand down. Sounds potentially ugly…good luck with it.

  6. Currently I am working with a for-profit healthcare entity that has a non-profit Foundation. The by-laws submitted state that the The Corporation shall have and continuously maintain in this State a registered office and a registered agent whose office is identical with such registered office, and may have other offices within or without the State of Illinois as the Board of Directors may from time to time determine. The initial registered agent of the Corporation shall be the CEO of the healthcare facility and the initial registered office of the Corporation shall be the address of the healthcare organization
    ARTICLE III
    Members
    The Corporation shall have one member. The member shall be the healthcare facility,or its successor. The member shall elect the Directors at the annual meeting of the member to be held in December of each year on such date and at such time and place as determined by the Board of Directors.

    This was given a public charity status as a 501c3, but as you can see from the by-laws the for-profit controls the not-for profit. The for-profit votes on the board members based on the way the by-laws read above. Does this sound right to you? it seems like a conflict of interest but legally we are being told it is fine. Just concerned.

    1. Obviously, I don’t know the entire legal setup, but it probably works. This is known as a single member 501(c)(3), and most states allow it. So does the IRS. Since the IRS expects governing accountability to rest with the officers and directors, they don’t put much focus on the membership. As long as the “member” allows the board to do its job per the bylaws, these setups are usually OK.

  7. Greg, here’s a question for you if you’re still following this string: Here in our town is a small, now derelict church in which my wife and I were married many years ago. The church is owned by the 501 and all of the officers of record, including the minister who performed our service are, sadly, dead.

    The county assessor doesn’t care because, although the entity has been suspended for six years by the state of Arizona, there are no taxes due since it was exempt under our statutes. So the property just sits there further eroding. Given the nebulous nature of this situation, and the lack of sentient owners, who has legal authority to convey the property?

    Thanks,
    Joe

    1. I understand you to be saying that there is no longer a church congregation, nor an active legal structure, nor a governing board. The real question is who holds title to the property. I’m guessing it’s the suspended entity. If there are still living members, that membership could appoint new officers and the legal entity reinstated with the state. The new board would have to decide what to do with the property, keeping in mind that 501(c)(3) assets are permanently dedicated to a charitable purpose. It couldn’t be sold and the money pocketed by anyone. If sold, the proceeds would have to used charitably.

      This is a situation where the property could very well become a ward of the state AG’s office if there is no membership that could reconstitute the entity. 501(c)(3)s that wind up abandoned with no stakeholders generally relinquish their assets to the jurisdiction of the AG or possibly the local or state court system. You may wish to seek competent legal counsel or call the AG’s office for advice.

  8. My husband has been working for a non-profit for the last 9-10 years and is considering taking the reigns as the president of the organization. The current president is financially tied to it (having used some of her personal money over the years to cover expenses and payroll during leaner business times). She believes there’s a monetary value to the org and has offered that for a “buyout” number. Considering the org is service-based with minimal tangible property, how could we possibly figure out a true value to the org and/or “buy her out” per se?

    1. There really isn’t a “buy out” valuation that’s possible. In a for-profit small business, infusions of capital by an owner increases the value of the company and, additionally, that owner’s equity stake. It is also possible to structure it as a loan to the company that would be paid back to the owner with interest. In a nonprofit, infusions of cash are either a charitable donation or it is a loan. There are no other choices. A nonprofit has no valuation measurement, therefore contributions by an insider cannot create a valuation stake for that individual. Attempting to monetize that is highly illegal and could result in civil or even criminal charges.

      In this situation, one way for this person to be made whole is for her contributions to be considered a loan. The problem there, though, is one of contemporaneous documentation. Any loan by her to the nonprofit must have been approved in advance by the board and documented tightly with regard to amount, payback timing, and any applicable interest. I know from your question that this isn’t what happened. As such, her infusions of cash are almost assuredly restricted to being charitable donations.

      Taxable salary or bonus is really the only other possibility, but you have to very careful even with that. Any compensation to her must be board approved without her board participation (conflict-of-interest), and must be defendable to the IRS as being reasonable for services rendered and CANNOT be tied in any way to prior cash donations by her.

      This is a longer answer than usual, but it’s a tough situation that we see frequently. There is no good fix for this and real risk to her and the board if done incorrectly. This is another great example of why every small nonprofit needs competent counsel before they made irreversible mistakes. What you don’t know CAN hurt you!

  9. We are a 501c3 non-profit amateur theatre group. Can we transfer our non-profit
    to another group of people who want to start a theatre?

    Charles

    1. I presume from the question that your organization is shutting down, maybe? You can’t simply transfer your 501(c)(3) status to another group. There are many factors, but the primary one is the fact that the status is tied to your corporation, not theirs. You can’t detach it from one and attach it to another. Theoretically, they could “take over” your existing corporation if your group is winding down, but there’s a lot to that legally, AND, it’s something we never recommend. There’s too much liability for all involved. The other group would be far better served to set up their own nonprofit and secure 501(c)(3) status for it.

  10. This is probably a silly question.. but is a college degree or certification of any sort required to create a non profit organization?

    1. Not at all…most anyone can start a nonprofit. Most states will require someone who is incorporating a nonprofit to be 18 or over. Some states even allow minors to serve on a board. Education or certification is never a consideration legally.

  11. There is a local church that a pastor has taken over and sold all the assets. He is using church funds to rehab his personal residence. The house was owned by the church However he did a quick claim deed and transferred it to himself. Is this legal? Thank you.

    1. Is there no board of directors/trustees/elders? If there is, maybe there is more detail you’re not aware of and they have this board-approved and documented. If things are as you describe, however, it is a massive violation of private benefit and inurement rules and VERY illegal. If you’re correct about this being a one-man takeover, the state AG’s office (or Division of Charities) should be advised of the situation.

      Also, even if this was board-approved, it is still likely an illegal private benefit transaction. It’s hard to imagine how any version of this is OK.

  12. A friend started a non-profit to help those battling cancer. She is also someone who is currently battling. Her family and friends would like to use the funds from the next charity event to help her but because she founded the organization they weren’t sure if they could use the funds for her instead. They want to make her the recipient of the funds. They think it may be an llc not sure. I understand based on your article that there is no true owner but if she is the one that normally runs it for other recipients and she founded it they weren’t sure how to proceed to help her. I believe she is not aware of this and they may want to surprise her but they want to do it the right way without jeopardizing the organization.

    1. This is a potentially sticky issue. If the organization is, in fact, an IRS-approved 501c3 nonprofit, and your friend is a board member or key employee (or both), she can’t readily be a beneficiary of funds raised by that organization. It IS possible, but it would have to be completely at arms-length without her involvement…the rest of the board (not including any persons related to her by blood or marriage) would have to make the decision.

      Another solution could be to set up a “Go Fund Me” type account for people to give to, rather than funneling it through the nonprofit. That way, you avoid the whole conflict of interest problem. Donors wouldn’t get tax deductibility for giving to such a fund, but most people don’t itemize their expenses anyway.

  13. Please, what happens to shares and debts of limited liability company that converts to a non profit organizations

    1. That’s really a trick question, of sorts. Technically, a for-profit LLC cannot convert to a charitable nonprofit. The only way that happens is indirectly. A new nonprofit organization would be formed that would take over substantially all of the activities of the existing LLC. The question of whether or not to transfer the LLC assets into the new charity structure would have to be determined. The debts, in most circumstances, could not be transferred without providing prohibited private benefit to the LLC owners. Finally, once everything that can be transferred has been transferred, the LLC could dissolve.

      All of this presumes the activity of the LLC is already charitable in nature and the original choice to be a for-profit entity is being reconsidered.

  14. I have a non-profit client that purchased a restaurant’s assets to help fund their non-profit purpose, It was previously owned by another non-profit. They now want to sell to another non-profit and get out of the restaurant business. It appears to me that they can sell the assets but cannot sell based on a revenue model. Is that correct? If there is a gain, will they pay taxes on the 990T for that?

    1. Tough question to answer without more background. In general, an equity sale is really difficult, because there is no separate entity. By the nature of the setup, an asset sale is about the only way to go here. Most gains on sale of property can be exempt from capital gains taxes on 990T, but this equipment may not be. Gains on the sale of both debt-financed property and Section 1245 property, which I think this would be, can be subject to capital gains taxes on 990T.

  15. Hi, I am a tenant in common owner with my two sisters. The properties are commercial and residential rentals. One sister tells us, that she just got approved for a non profit ministry for children. She claims she will be putting all of her 1/3 ownership of the properties in a trust. Her name will come off of the deed and the foundations name will go on the deed. Can she do this legally? Where does this leave me and my other sister? We want to sell.

    1. From your description, it sounds like your sister if perfectly within her legal rights to do this. It’s not really a nonprofit-specific question, however. You would have the same dilemma if she still owned her portion personally and didn’t agree with selling the property. I think you probably need to consult an attorney about this if your goals are indeed this misaligned with each other. Good luck with it.

    1. Absolutely. You have to be careful in how the two entities interact with one another. The nonprofit cannot directly steer business to or promote the commercial interest of the LLC. But in general, yes, the same person can be involved in multiple organizations.

  16. Knowing what it takes to be successful can reveal excitement to both profit and non profit, it’s not all about competing its about loving and caring for people who are trying to start a business.

  17. RE: ownership of a non-profit. At least in the State of Missouri, the state owns the assets if those assets are not transferred to another charitable entity. In the 1995s, Wellpoint, a for profit health insurance conglomerate, approached Blue Cross and Blue Shield of Missouri. The “ask” the Board to convert the organization to a stock company and then to “sell” it to Wellpoint. The then Missouri State Attorney General, Jay Nixon, challenged that transaction and filed a law suit. The case was settled out of court for stock in Wellpoint and other considerations, cash, etc. That money founded the Missouri Foundation for Health in 2000. In my memory, the settlement amounted to over $450,000. And Wellpoint is still making money, as far as I know.

  18. Good job you are doing here Greg. Let’s say a not for profit entity was started with three individuals with various amounts of contributions made in terms of the money to start with. Since shareholding is not encouraged at this kind of entity, how will their contributions and percentages of contribution be captured ? How will prosperity know that such initial funds with were raised at the inception and by whom, and how much each? Should all these details be part of the bylaws? What is your answer to this, Greg.
    Thank you.

    1. Great question, Isaac. Initial “investments” in a nonprofit startup really only have two legitimate characterizations: either it is a tax-deductible donation or it can be set up as a loan to be paid back. It can never be used as a measure of ownership…it simply isn’t legal. Most startups we work with usually take the donation route, but not all of them. And, if you put in $5,000 and I put in $10,000, that just means I gave a bigger donation or loaned a greater amount. Percentages are really irrelevant in this setting.

    1. We’ll leave for another day the fact that no nonprofit should be investing in “penny” stocks. If the organization is shutting down and has any assets, regardless of how they were acquired, those assets are permanently dedicated by law to a charitable purpose. In other words, the assets must be given to one or more other charities at dissolution.

      1. Yup, which is why I was a year from my doctorate in clinical Psychology and my university was bought by a “non profit” took 50 million in financial aid and GI bill funds, stole or invested it, left many of us homeless and unable to treat our patients and closed with 2 days notice., diagnosing us as F’d 🙁 For more information please google search Satan, or Federal Reciever Mark Dottore and Argosy University. Both searches likely lead to the same page.

  19. Our community privately owned swimming pool was initially operated as a for-profit corporation. People wanting to join the pool would pay a one-time “membership fee” and would receive a certificate stating that they were a shareholder in the corporation which conveyed a share of ownership to the person joining. In addition, members would have to pay annual dues. A few years ago the corporation changed to a non-profit corporation and there was no longer a membership fee nor did new members receive a certificate but they still had to pay the annual dues. Because of that change, what happens to the equity share that all of the previous members (“owners”) had purchased?

    1. This sounds like a legally complicated situation. At the simplest level, the equity no longer exists given that a nonprofit corporation has no mechanism of ownership (stock). But, the devil is in the details. Did the fractional owners (members) approve the creation of the nonprofit and dissolution of the for-profit? And if they did, were they aware that their ownership would go away? What formal steps were taken to transfer ownership of real property from one entity to another?

      These are really somewhat rhetorical questions, Bruce. Frankly, I would consult an attorney familiar with corporate matters to make sure everything is buttoned down.

  20. In my opinion, i (being part of the board) would suggest that the president appoint a committee chairman to gather a committee to deal with the issue…

    I also feel your By-Laws holds the answer, or should… if it doesnt, better speak to the by laws committee chair..

    I have been the by laws committee chair for our non profit for over 10 yrs. a very important position to hold (in my opinion)

  21. Does a Volunteer Fire Department with 501(c)(3) designation and getting a majority of funding through a local government entity meet the definition of “public charity”? Or is another term more appropriate? Some claim to be a “private” organization but that is an ambiguous term. Any thoughts on that?

      1. There is a dispute between a local government and a volunteer fire department over the “ownership” issue. State law says nonprofits can’t issue stock. Local government claims “taxpayers” own it. The board of directors claim they own it. I say they’re both wrong and it seems you do, too.

        The directors control and run the operation. Government provides funding for that operation for the public benefit. Unless that funding is “earmarked” – as in some government grants – it goes toward the general fund and applied within the discretion of the board and management. So long as they’re meeting their general goals, they’ve met their obligation as to application of funds.

        While it plays to the public in a philosophical sense to claim taxpayers own it, it makes no sense at all in actual practice. Taxpayers fund many things over which they have no direct say. An independent corporation of any description is just that. While the hand that feeds you implies a close relationship, there is still that dividing line over who controls what. In this case, a local politician wants to have a line-item veto over how funds are applied in day-to-day operations, claiming he can “save the taxpayers money”. In effect, he wants to manage the corporation. Naturally, the directors dispute his authority to that. I believe funding has been severly curtailed as a result.

        Just like to hear your comments and perhaps get some reference to authoritative sources that might clarify the situation.

        1. Your comments are dead-on, Randall. Saying “the taxpayers own it” is a great turn-of-phrase, but it is essentially meaningless. Local government doesn’t own it, either. If it exists as an IRS recognized, 501c3, charitable entity, then it is an independent corporation governed by a board of directors and accountable to the state under corporate law and to the federal government under IRC 501c3. Any “control” ceded to another body or agency would have to be approved by the board in accordance with the bylaws. Any such agreement should necessarily be contractual in nature and revokable by the board. Reference IRS Publication 557 for all the nitty-gritty.

          Sounds politically messy…

          1. Would there also be some legal concerns to allowing a “proxy” to assert substantial authority over the nonprofit? Seems like by failing to maintain an arms-length independent status could risk losing either corporate status or 501(c)(3) status. And might that proxy be held liable for actions of the nonprofit if there was de facto control by the proxy?

            I’ll look into that publication for more detail. I have some ideas how this ought to be resolved to the satisfaction of both parties but I’d appreciate just an outline of what you feel would be reasonable. Bear in mind, the funder has legitimate concerns as to where the money is going. The corporation has concerns over someone effectively taking over the business.

          2. Another question. Given the scope of an organization being limited to one county with population about 30,000, what would you recommend in terms of satisfying “accountability” to the public at large? Is Form 990 usually sufficient? As a matter of public relations, what more could be done to demonstrate to the public what they get for their dollar? Thanks for any help.

  22. I am wondering what the difference is between a foundation and a non-profit corporation. I want to file for a non-profit and I will be calling ya’ll for some help. I have some money that I would like to use to get started in a Ministry of Helps. I know this is probably a dumb question but I was just wondering the difference.
    Thanks for your time.

    1. Not a dumb question at all. In fact, we answer similar questions almost daily. Many nonprofits call themselves a “foundation” when in fact they are not…at least not technically. In IRS terminology, a foundation is a specific type of 501c3 nonprofit, one that usually has no active programs. True foundations typically raise money to fund the work of 501c3 “charities” that conduct actual programs. And to further confuse the matter, a nonprofit corporation is the business entity type that most foundations and charities choose to adopt. You will learn much more about how this all works once you get started with us.

  23. I am a member of a board that runs a 501c3 housing project. It has been in existance for 35 years. The board wants to sell it. Where do the proceeds go? Can we take a consulting fee? We have never been compensated.

    1. n all candor, there is no way to answer a question of this complexity in a few sentences. I highly recommend that you contact us and reserve some consulting time to discuss your plans. You have way too much at stake.

  24. My Dad and I have invested our lives savings and are working to start a non-profit Adult Daycare Facility. Dad owns the building and the land outright, and I was wondering if it would be smart to keep that in his name and have the business rent from him? That way, since we’re putting everything we have into this, he will still have something left. What are the pro’s and con’s about this, besides saving on property taxes? If we end up disolving some day and the building was part of the non-profit, would they also sell that and give it to another charity?
    Thanks for the help!

    1. Hi, Linda…

      It is interesting that you use the term invested. This is a tricky thing you are suggesting. If you go forward with making the facility nonprofit (presumably 501(c)(3)), then neither you nor your father will “own” it. It is technically possible to have the nonprofit rent the physical facility, but then you have potential conflict of interest problems if you all are running the program and owning the property. I guess I’m failing to see what you are investing in. It certainly isn’t the program, because you cannot profit from that. If it is rental income, the lack of arms-length dealing will be a problem.

      I strongly counsel you to get some professional help before you go much further. There are some serious landmines where you are headed. Given the amount of personal money you are talking about, I would hate to see you all get in over your heads. Our office offers time-based consultation for just this type of situation. Just give our office a ring.

      Good luck to you!

    1. That’s a really broad question, but, in principle, yes. There are lots of 501(c)(3) nonprofits which have as their purpose economic development, job training, etc. The key is making sure that the organization’s activities do not directly benefit for-profit companies, but rather job seekers and/or the community at large.

  25. {Organization Name Hidden} is a non profit 501(c)(3) Public Charity , we have two years of successful operation behind us. My question is when we apply for credit the grantors almost always look past the corporation entity legal status and requires personal liability from a officer of the Corporation. Is this legal in the state of Georgia?

    1. Most likely, yes. It is very common for lenders to require principals of for-profits and nonprofits to “co-sign” for a loan. This is done because the organization itself either is under-collateralized or has insufficient credit history…or both. Given the current lending climate, expect those demands to increase, not decrease.

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