Washington, DC asked in Business Formation and Business Law for Virginia

Q: Can a not-for-profit organization exist by just donating all of its profit instead of taking specific actions?

We have a for-profit LLC that we wish to convert it into a not-for-profit organization. We sell physical products and donate 100% of our profits already.

We would like to know if it is possible for a not-for-profit organization to be legal and retain its status if instead of doing the positive actions, they donate to other not-for-profit organizations. In other words, can we keep just selling the products and making the donations and still have the not-for-profit status?

We are registered in Florida and registered in VA as a foreign business operating in VA.

Thank you for your help!

1 Lawyer Answer
Timothy R Johnson
Timothy R Johnson
Answered
  • Berryville, VA
  • Licensed in Virginia

A: If your question is whether it is legal for a donor non-profit organization to donate any potential "profits" (funds received to be used for the organization's primary service objectives) to donee non-profit organizations, instead of the donor non-profit organization performing activities for their mission, then yes. There are no IRS or other external legal restrictions from letting the non-profit basically funnel monies into other non-profits.

There MAY be internal restrictions, however. The donor non-profit organization's donating to donee non-profit organizations must make sure that the donees are appropriate reflections of the donor's mission (ex: donor non-profit "We serve our [local] Virginian community by providing food to the poorest members of our society." would indicate that donations to UNICEF may be inappropriate if UNICEF does not serve to further the donor's purpose and mission)

1 user found this answer helpful

Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.

The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.

Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.