Starting an LLC and Not For profit??

[dave26]

Ladies and Gents -

I want to start one business with two branches. One being a "typical" LLC operating for profit and offering services for people that are capable and willing to pay and treat themselves.

The other part of the company would be a Not For Profit branch offering the same services but for little or no fee to youth groups, inner city students, church groups, etc - all funded by donations and hopefully gov't NFP grants.

Do i have to file for both an LLC and a NFP company? Is there any way to start up from the beginning one company with two different branches? I want people to be able to donate money to the NFP branch, with tax write off benefits and a legal license to be NFP.

But i also want to have an operating business that provide the same services for able individuals. If these two organizations are run by the same person, on the same property, am i running into legal trouble with a conflict of interests?

ANY advice on this would be of great help - even if it's just to steer me in the right direction when consulting with an attorney.

Thanks
Dave
chicago illinois

 

[tranquility]

I don't think you could do this with one company. You would be a corporation and then get your non-taxable designation from the IRS with that corporation. Things you do for the purpose of the designation (I'm assuming 501(c)(3)) would not be taxed. There are certain rules requiring how the money is dealt with and a for profit company would not be consistent with those rules unless the income was treated as UBI and the profrofit were treated for the purpose of the designation.

Besides, I could not imagine the accounting nightmare of keeping track of the designated/non designated income and expenses if everything came from the same pile. What a mess. Compliance costs would be enourmous and it would take a person with a heart of gold to not manipulate things a bit.

 

[dave26]

Thanks for the speedy reply.

i guess the real question would be: would it be legal for two companies (one NFP, one LLC) to operate in tandem having been started by the same members?

each organization or company would have their own books, accounts, insurance, etc but they would be owned (or managed) by the same group of people.

The NFP would own the land and the equipment - targeting youth groups and other groups that dont have the means to otherwise use our services.

The LLC would rent out the equipment from the NFP, offering the same services in a private manor to people who can afford to and are willing to use our services on that same land with likely the same staff.

thoughts?

 

[tranquility]

It's hard to answer without real examples of the plan, but there are still problems. The land and equipment rental is probably going to be considered unrelated business income (UBI) on which the 501(c)(3) would need to pay taxes.

There is nothing inherently wrong with what you plan. The same people can own many types of businesses without problems--as long as everything is kept at arm's length.