Should a small business entity include both nonprofit and "for profit" companies
in its corporate structure?

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Clarification of Question by daressalem-ga on 06 Apr 2004 13:08 PDT

Please state the reason for the answer.

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Clarification of Question by daressalem-ga on 07 Apr 2004 11:05 PDT

The business owner plans to own 2 separate companies under one
corporation umbrella.  The first, the "for profit", is the actual
business.  The second, the nonprofit, will train people in the skills
needed to work in the "for profit" company.  The plan is for the "for
profit" company to use those being trained by the nonprofit as interns
and thereby reduce, or eliminate, its' labor costs and possibly get a
tax break on its' equipment.

Thank you ipfan-ga for your comments and suggestions.

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Clarification of Question by daressalem-ga on 26 Apr 2004 09:04 PDT

The plan is for one parent, but if two separate companies will work
better, will try it.  Both will be owned by the same person.  Tax
advantages are important, but secondary.  The goal is for the
non-profit to create an education program for the disadvantaged; the
non-profit plans to receive grants for the training of those in its
program.  Therefore no cost to non-profit.

Next, the for-profit company will hire the enrollees of the
non-profit's training program.  The for-profit company will seek funds
for hiring the trainees as part of a work study, or a tax break for
hiring disadvantaged trainees.

In furtherance of daressalem's request for clarification, the question
assumes there is a "parent" organization with at least two
subsidiaries--a for-profit entity and a non-profit entity.  It would
be unusual to form three separate entities when one is forming a
?small business entity? as you say.  If there is just one company that
you are talking about forming, then that entity may be either
for-profit or non-profit, and the reasons for choosing one form of
entity over the other are myriad.  But remember, most states permit
you to incorporate as either for-profit or not-for-profit.  Choosing
the not-for-profit form does not mean that you are a non-profit
organization for income tax purposes, like a 501(c)(3)--that's a
separate and very involved process with the IRS.

So, back to daressalem's request: are you asking because you seek the
most favorable tax treatment, are you trying to create a better
corporate shield against personal liability, are you trying to create
a structure that is better for fund raising, are is there perhaps some
other reason?

I just realized daressalem is the asker and is not asking for
clarification of the question.  Nonetheless, it may help a Researcher
to give you a better answer if you provide some clarification on why
you are asking . . .