Conclusion

Deciding on a business model is not easy, but we hope this primer helps you understand the nuances to the decision and allows you to start a deeper conversation about what option is right for you. If you want to read more about what was discussed in this brief primer, feel free to read the longer guide written by Morrison & Foerster for the Thomson Reuters Foundation.

Before you finalize any decisions we highly encourage you to seek out the advice of a lawyer and tax professional. While switching your tax status is possible, it is financially and logistically burdensome. Nonprofits looking to go for-profit will have to determine what to do with any assets, as charitable funds are required to remain in the charitable sector, and it is possible that past revenues could be taxed at a penalty if the IRS decides that the organization’s nonprofit existence was a sham to support the launch of a for-profit entity. Any for-profit seeking to transition to a nonprofit will be required to restructure and will face heightened scrutiny by the IRS to ensure that the venture is not too commercial to be a nonprofit. Therefore, it is important to consider all of your options carefully and with as much information as possible. We hope that this primer offers you a foundation to build upon as you move forward in the process of designing your venture.