your comments solicited on atypical business model

[grasswire]

I'm working on a plan for an atypical privately owned small business. Atypical in that I plan to draw a modest salary from it as part of the cost of doing business, and have all profits go to arts programs in the local public schools. Because of this structure, I plan to ask local groups and businesses for donations to the startup in the form of handyman and other donations in kind, and sponsorships.

Has such a structure ever been used?

You might ask why I don't set it up as a non-profit. The reason is that I don't work well in a committee format. I have an inspiration for this project, and I have spent a lot of time developing it and don't want to make decisions in a group.

Comments, anyone?

[OneGrassRoot]

1. Hey, grasswire...

I'm grappling with the same question regarding Wishadoo!

I'm not a fan of all the red tape and restrictions involved with becoming a 501(c)(3). As a lifelong social entrepreneur, I believe we can be transparent and do business with integrity without that label.

There are a handful of states which passed legislation for a new entity called an L3C, which is a hybrid of a nonprofit and for-profit corporation.

You may want to look into it further. NC passed legislation for L3C over the summer, and I incorporated as an L3C.

Good luck!

http://www.intersectorl3c.com/

[grasswire]

2. thanks for the response

Obviously I didn't know about the trend toward "social entrepreneurship" but that is exactly what describes my idea. Ha! I thought I had a unique model until I went googling several days ago and tripped over that term. The concept is obviously a full-blown trend.

I do not plan to become a 501(c)(3). I do plan to have the books available to any resident of the community I will serve. I plan to draw a salary and expenses, and put all profits into the cause. I will solicit donations and donations in kind as well as generating revenue through services, sales, and branded product sales -- gotta make sure the legalities are in order there.

Thanks for the info about the L3C.

[grasswire]

3. here's the critical question

If I structure this business as a standard operation (not non-profit) but all the profits are going to an entity that is non-profit (public school programs) would donations to my operation then be tax deductible?

[mahina]

5. No, I don't think so,

but I'm not an attorney.

Pretty sure though, unless they pay directly to the nonprofit. You could operate under another nonprofit's umbrella, if they would agree.

[Bonhomme Richard]

4. I think you are in a gray area here and suggest.......

that you talk to an accountant. They may suggest you speak with an attorney. You need to know the legal pros and cons including the landmines you may step on. I'm a S Corp so I am not familiar with non-profit, etc..