Non-Profit Company charged "fees" to generate profit

[obfuscode]

What is the name of your state (only U.S. law)? Wyoming

Disclaimer: This sounds extremely sketchy to me. It was suggested by an acquaintance who I barely know.

I operate a company that processes payments online through a merchant gateway for my clients. Everything is done normally with ACH transfers and standard credit card fees.

In a conversation with an acquaintance of mine, they suggested that I form a non-profit in addition to my LLC and process the payments through the non-profit, thereby bypassing the standard credit card fees. The LLC would then charge the non-profit "handling / audit fees" to generate a profit for the LLC.

Would this even be remotely legal? From the way it was described, it would not be bypassing any taxes, just the credit card fees.

 

[Some Random Guy]

So, will you be misrepresenting to the IRS that your non-profit is a charity?

Exemption Requirements

or do you plan on meeting one of their other criteria?

Requirements for Exemption

But if the whole purpose of the non-profit is to trick the credit card company into charging you lower rates, then you are merely defrauding the credit card company. Enjoy being sued.

The handling/audit fees are something that your LLC could charge now if it wanted. Regardless of whether it is booked against the LLC or the non-profit, you would be liable for the taxes on the money you get from the businesses.