Non-Profits: Help others and make $$ at the same time

Most Americans dream of starting their own business. Some dream of building large corporations, while others daydream of small sole proprietorship operations run out of their home. But what most people overlook is the opportunity to make a living by starting and running a non-profit organization.

Non-Profit = Profit

When people think of a non-profit organization, the first thing that comes to mind is a charity or some other great cause that will require volunteer work with no profit. According to federal law, non-profit organizations do exist primarily to fulfill either a charitable, educational, literary or scientific purpose, not to make money. But, a non-profit purpose does not equal a no-profit business.

Under state and federal regulations, non-profit corporations can make a profit if the organization is properly operated for a specific recognized purpose and has obtained the proper tax exemptions. Tax-exempt organizations can make money while participating in activities that are related (or even unrelated) to its purpose and then may use that money to cover any expenses, including salaries to officers and staff.

Taxes

Taxable income is based on how that money was earned. The bottom line is: the government wants to know what activities were used to get that money. If the activity was directly related to the organization's primary purpose, then the tax-exempt status is upheld and the proceeds are not taxable. Related activities, according to the IRS, often include those activities performed by volunteers, the money earned from donated merchandise, and the distribution of items worth less than $5.00 as incentives for donating merchandise or money. Proceeds from unrelated activities are taxed a corporate income paid at the state and federal levels.

Be careful. Excessive income from unrelated activities can endanger a non-profit organization tax status. It is best to steer clear of many unrelated business activities.

Donations and Grants

One benefit of a non-profit organization is the ability to receive donations and grant money. Donations can be accepted if the organization is using them in connection with their primary purpose. If an organization holds tax-exempt status, then all donations that are given and used for the organization's purpose are also tax deductible. This means that the person donating the funds may deduct the donation on his or her next federal tax return.

Another source of funding for non-profit organizations is the grant. A grant is a gift of money from a separate organization used to fund the non-profit's specific activity. Grants are available from the state and federal government, private organizations, groups and foundations that support the purpose of the organization. A well-planned, in-depth proposal is key in obtaining a grant for use in a non-profit organization.

If you are planning to start a business of your own, you may want to consider whether your idea qualifies as a non-profit. In addition to making a difference in an area important to you, there are boundless other benefits as well. There exists the potential to make a great living while working for a cause that's near and dear to your heart.