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
  • 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)

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