Originally Posted by reclaimed.us
#1I already have a non-profit set up.
My ministry partner and I are self-employed, and will always generate income.
We want to do it where the corporation takes the maximum deduction to contribute to a qualified non-profit.
#2What type of corporation would be best for this. The research I have done indicates that C corps are limited to 10%, where the others are up to 50%
Please explain the options, if you can.
The business we are starting does consulting and material supply for builders who work on government contracts.
#1: A non-profit would enjoy some of the same common features such as being a separate legal entity and limited legal liability protection. A nonprofit organization has no need to claim tax deductions because its earnings are not taxed at all unless the income in question is from an unrelated business activity as said below. you should familiarize yourselves with the operating guidelines for charities so as not to run afoul of government regulations and risk having your nonprofit status revoked
I guess you need to know two separate situations; first situation is: in general, your tax-exempt nonprofits often make money as a result of your activities and use it to cover expenses. In fact, this income can be essential to an organization's survival. As long as your nonprofit's activities are associated with the nonprofit's purpose, any profit made from them isn't taxable. For example, say, a group A, Inc. It's a 501(c)(3) nonprofit organized to encourage the appreciation of literature and to raise money for the support and improvement of the local public library. It makes a profit from a lecture series featuring famous authors and from an annual volunteer-run sale of donated books.Because these activities are educational in nature, the proceeds from them are not taxable. The organization may use this income for its own operating expenses (including salaries for officers and staff) or for the benefit of the local library. What it cannot do is distribute any of the income to the nonprofit's officers, directors, or others connected with Friends of the Library.
for the second situation, However, as you can see, when your nonprofit makes money in ways that aren't related to its nonprofit purposes. While your nonprofit can usually earn unrelated business income without jeopardizing its nonprofit status, your nonprofit must pay corp income taxes on it, under both state and federal corp tax rules.
Let's go back to the group A nonprofit corp for an example of unrelated income. Say donors donate many thousands of books to the group A nonprofit for an annual book sale, one of its major fund raising events. Although the sale is always successful, let's say that one year thousands of books are left over, and the group A decides to sell the more valuable of these books by advertising in sources for rare and out-of-print books. The group A finds itself in the business of buying books from other dealers and reselling them to the public. The nonprofit will have to report these earnings to the IRS, which will tax the group A as income from unrelated business activities.In some situations, excessive unrelated business activities can also prompt the IRS to reconsider a nonprofit's 501(c)(3) tax-exempt status. To avoid this, the group A nonprofit should never let its unrelated business activities reach the point where it starts to look like a regular commercial business. For instance, unrelated business activities shouldn't absorb a substantial amount of staff time, require additional paid staff or volunteers, or produce much more income than that generated by the organization's exempt activities. You need to meet with a Enrolled Agent or a CPA ding taxes in your local area for more accurate professional help.,
#2; as said your nonprofit can make a profit. Whether or not a nonprofit's income is taxable depends on whether the activities are related to the nonprofit's purpose. You need to consider this;
Many nonprofit organizations find it difficult to generate sufficient funding to maintain their operations. generating revenue is a constant struggle. One strategy nonprofit agencies may employ to generate additional income is through one or more for-profit ventures associated with the nonprofit organization. While this arrangement is possible, both the law and federal tax code place limits on how nonprofit organizations are allowed to coordinate with for-profit enterprises.aslongas you want to convert your 501c3 corp to another entity type, i guess it is really hard to tell whcih type of biz entity is good for you;there ar e all advantages .disadvantages fo each type of entity i mean a c corp an s corp or an MMLLC.many taxpayer choose an S corp over a Corp or a MMLLC due to the fact that they do not need to pay self employment taxes. And The S corp's special tax status eliminates the double-taxation that can occur with a C corp?s income. A corp income tax return is filed, but no tax is paid at the corp level. Instead, business profits or losses "pass-through" to shareholders and are then reported on their individual tax returns. Any tax due is paid by shareholders at their individual tax rates. You need to meet with a Enrolled Agent or a CPA ding taxes in your local area for more accurate professional help.,