They're both pass-through entities that can't retain earnings, so... Can I set up a non-profit (non-501c3) for anything I want to? I'm interested, in particular, about creating an online business that helps consumers find resources. If there's no functional difference, why wouldn't the non-profit angle be more attractive?
2007-09-25 06:26:43 · 8 answers · asked by aaron p 5 in Business & Finance ➔ Taxes ➔ United States
Please define 'business' if that's the answer. I'm not trying to walk a line here.
I would be absolutely fine donating over 10% of gross to charities, but double-taxation sucks, if that's the case.
2007-09-25 06:42:11 · update #1
You are half correct. An s-corp is a pass through entity where the profit/loss, deductions, credits, distributions, etc pass through to the owners. But a non-profit is not a pass-through entity (who would they pass through to?), it retains it's profits (yes, it can actually make money, but not pay taxes on the profit) for itself to use. A non-profit that doesn't make a profit won't be around for very long. As far as an s-corp versus a non-profit, you can take the profit out of an s-corp via distributions to yourself since you are the owner(s) of the s-corp. No one is considered to be the owner of a non-profit, therefore they can't get distributions from it. Plus the non-profit does have to have a legitimate purpose for it's existence, otherwise the IRS can revoke it's status (which they have done, remember the credit counseling non-profit services that really were for-profit companies?).
2007-09-25 07:20:48 · answer #1 · answered by Anonymous · 3⤊ 0⤋
No.
S-corporation does not pay double taxes because all the money is paid to the employees, shareholders, or reinvested into the company and then taxed. This system has many limitations on size, finances, etc.
A non-profit does not pay any taxes on money kept by the corporation and this money must be redirected right away into operatins of the company or toward a charitable cause. But money paid out to employees is taxed. These companies have extreme limitations in regards to whether one can be formed. I do not remeber the details though.
As far as stock goes, I know a non-profit cannot have stock but I am not sure about an S-corp.
2007-09-25 06:33:51 · answer #2 · answered by coachfolds 3 · 0⤊ 0⤋
What's the difference between a duck and a bicycle? About the same.
An S-Corp is a corporation that is also pass-through entity for tax purposes -- the corporation doesn't pay income taxes, the shareholders do.
Where you get the idea that a non-profit is a pass-through entity escapes me. A non-profit is a legal entity chartered by the state as a not-for-profit organization. Attempting to compare an S-Corp and a non-profit organization is about like comparing a duck and a bicycle.
2007-09-25 06:39:08 · answer #3 · answered by Bostonian In MO 7 · 1⤊ 2⤋
C Corporation Non Profit
2016-12-08 14:46:47 · answer #4 · answered by ? 4 · 0⤊ 0⤋
More attractive? How so?
No functional difference? Based on what?
Explain to me how a non-profit is a "pass through" entity? What is being "passed through" the non-profit? By DEFINITION, a non-PROFIT has NOTHING to "pass through"
2007-09-25 07:34:45 · answer #5 · answered by Craig T 6 · 0⤊ 1⤋
If you are starting a business as way to make income, you will not be eligible for a nonprofit. An Scorp is the way to go, you have all the benefits of a corporation, i.e. limited liability, etc.... But you will not be subject to double taxation.
2007-09-25 12:24:52 · answer #6 · answered by Anonymous · 0⤊ 1⤋
They are the same thing, essentially. In some states, the statutes refer to them as nonprofit corporations, statutes in other states refer to them as not-for-profit corporations. In normal (non-legal) speech, the two terms are used interchangably.
2016-03-13 05:48:21 · answer #7 · answered by Michele 4 · 0⤊ 0⤋
It can't be a 'business' and be non-profit. go directly to jail. just do an S-type.
2007-09-25 06:30:29 · answer #8 · answered by Anonymous · 0⤊ 0⤋