When you say “non-profit” what comes to my mind is operating as a legally and financially advantaged organization with special non-profit status. But a non-profit (especially if you are interested in 501(c)(3) tax status) are more complex than LLCs, with more strenuous reporting requirements, so guessing that you’re operating as an LLC since, I’d seriously consider if there’s any actual benefit from operating as a non-profit. Presumably you wouldn’t be taking donations so you wouldn’t need special tax status to allow your donors to deduct their donations, so unless there is also a reduction in taxes on profits that goes along with whatever status you obtain that could not be gained already from donating the profits of an LLC, then it’s probably not worthwhile. If you’re a C-corp then go ahead; it’s probably similarly complex, if different.
I bring all this up because it’s possible and easy to operate an LLC for public benefit, and you can take whatever measures you like to demonstrate that you are doing this to interested folks, so you should probably consider that the default course and only do something different if you reckon there are clear benefits from operating another way.
Thank you for your reply! I am, as you guessed, operating as an LLC. I wasn’t sure if there would be any advantage in trying to obtain 501(c) status or not. I don’t know very much about it. My thought was two-fold. 1) That I would reduce my tax and therefore would be able to donate more … however from what you’re saying I can deduct up to 50% of my revenue if it was donated to to charity? 2) That there is would be advantage to growing a business by marketing as a non-profit. The distinction being able to advertise my agency as primarily interested in growing to give to charity as opposed to the primary purpose of making a profit and we also give to charity may excel grow and overall revenue by appealing to individuals and companies that are inherently distrustful of the motives of insurance producers and financial advisers.
Another question I had is that if by operating as a non-profit I could retain my profits in the early years and reinvest them in growing the company. Essentially building a trust that long term would be obligated to charity? The downside of donating my profits at this point is frankly I don’t have very much profit and it would be much more difficult to grow if I was giving away revenue in the early stage.
I don’t know the answer to these specific questions, as I’ve not done it. A 501(c)(3) organization is tax advantaged on its “profits”, but only in certain ways and not others, and in my engagement in helping run such orgs it’s never come up (or if it has someone else handled it before I learned about it). It’s probably best to recruit the advice of a CPA or other expert in this area. My main goal was just to warn you that operating as anything other than an LLC (whether passthrough or not) is more complicated, so it’s seriously worth evaluating the options and seeing if you can’t get most of what you want by operating your LLC for public benefit so long as all the partners (so probably just you!) are on board with it.
When you say “non-profit” what comes to my mind is operating as a legally and financially advantaged organization with special non-profit status. But a non-profit (especially if you are interested in 501(c)(3) tax status) are more complex than LLCs, with more strenuous reporting requirements, so guessing that you’re operating as an LLC since, I’d seriously consider if there’s any actual benefit from operating as a non-profit. Presumably you wouldn’t be taking donations so you wouldn’t need special tax status to allow your donors to deduct their donations, so unless there is also a reduction in taxes on profits that goes along with whatever status you obtain that could not be gained already from donating the profits of an LLC, then it’s probably not worthwhile. If you’re a C-corp then go ahead; it’s probably similarly complex, if different.
I bring all this up because it’s possible and easy to operate an LLC for public benefit, and you can take whatever measures you like to demonstrate that you are doing this to interested folks, so you should probably consider that the default course and only do something different if you reckon there are clear benefits from operating another way.
Thank you for your reply! I am, as you guessed, operating as an LLC. I wasn’t sure if there would be any advantage in trying to obtain 501(c) status or not. I don’t know very much about it. My thought was two-fold. 1) That I would reduce my tax and therefore would be able to donate more … however from what you’re saying I can deduct up to 50% of my revenue if it was donated to to charity? 2) That there is would be advantage to growing a business by marketing as a non-profit. The distinction being able to advertise my agency as primarily interested in growing to give to charity as opposed to the primary purpose of making a profit and we also give to charity may excel grow and overall revenue by appealing to individuals and companies that are inherently distrustful of the motives of insurance producers and financial advisers.
Another question I had is that if by operating as a non-profit I could retain my profits in the early years and reinvest them in growing the company. Essentially building a trust that long term would be obligated to charity? The downside of donating my profits at this point is frankly I don’t have very much profit and it would be much more difficult to grow if I was giving away revenue in the early stage.
I don’t know the answer to these specific questions, as I’ve not done it. A 501(c)(3) organization is tax advantaged on its “profits”, but only in certain ways and not others, and in my engagement in helping run such orgs it’s never come up (or if it has someone else handled it before I learned about it). It’s probably best to recruit the advice of a CPA or other expert in this area. My main goal was just to warn you that operating as anything other than an LLC (whether passthrough or not) is more complicated, so it’s seriously worth evaluating the options and seeing if you can’t get most of what you want by operating your LLC for public benefit so long as all the partners (so probably just you!) are on board with it.