"light-weight" non-profit status?

[doGooder]

What is the name of your state? MA

I want to start a small non-profit venture which would make money by selling a sticker. The income from sticker sales, over the cost of producing the sticker, would be donated to a 501(c)3 non-profit (through MissionFish and eBay partner).

Is there anyway to have the income used to cover the production of the sticker be considered non-taxable with out registering a 501(c)3? The 501(c)3 has too much overhead for this small - temporary venture.

Thanks in advance.

P.S. I originally posted this question in the "Starting a Business" forum, but was referred to you by seniorjudge.

 

[tdavidl]

one thought would be to create an s-corp to "hold" the business. any taxable income that is generated from sales of these items would then pass thru to the shareholder of the s-corp, presumably you. you could then donate an equal amount of that "taxable income" and possibly claim as an itemized deduction on your schedule A, again, assuming you itemize. the benefit of using an s-corp is that the income that passes thru is not subject to social security or medicare tax.

depending on your ind tax return, there may be a netting effect to taxable income which would basically achieve your goal.

you should absolutely run this concept by a tax professional in your area as there may be some add'l local and or state taxes or filings fees that may shoot the idea down.

there might be some other issues with an s-corp like reasonable compensation for you, so make sure you run this by some one.

i have had one client take this approach here in MD and they were willing to foot the bill for the add'l state filing fees for their worthy cause.

 

[doGooder]

one thought would be to create an s-corp to "hold" the business. any taxable income that is generated from sales of these items would then pass thru to the shareholder of the s-corp, presumably you. you could then donate an equal amount of that "taxable income" and possibly claim as an itemized deduction on your schedule A, again, assuming you itemize.

I do itemize

the benefit of using an s-corp is that the income that passes thru is not subject to social security or medicare tax.

Are there also limited liability benefits by using the s-corp?

depending on your ind tax return, there may be a netting effect to taxable income which would basically achieve your goal.

I have heard that there is some point at which donations to charity can be maxed out on one's personal return.

you should absolutely run this concept by a tax professional in your area as there may be some add'l local and or state taxes or filings fees that may shoot the idea down. there might be some other issues with an s-corp like reasonable compensation for you, so make sure you run this by some one.

Thanks tdavidl I will look into your suggestion more!

 

[tdavidl]

Are there also limited liability benefits by using the s-corp?

generally yes, legal liability can be limited to the s-corp, consult with an attorney to make sure.

I have heard that there is some point at which donations to charity can be maxed out on one's personal return.

yes & no. donations can be limited to 50%, 30%, 20% of agi depending on the type of donation & the type of organization receiving the donation, however, if those limits are hit, you can generally carry-over the excess to use in future years.

 

[doGooder]

So my accounting is a bit rusty (wish I'd paid attention now) but if I do an S-Corp and my sticker doesn't sell can I post losses against my personal income too?

 

[LdiJ]

So my accounting is a bit rusty (wish I'd paid attention now) but if I do an S-Corp and my sticker doesn't sell can I post losses against my personal income too?

Yes you can...but you have to eventually prove that you are engaging in the business with a profit motive.

 

[doGooder]

Yes you can...but you have to eventually prove that you are engaging in the business with a profit motive.

That's the tricky part because I don't actually want to make a profit (I wouldn't be trying to lose money either - I just want to recover my costs).

Also, is an S-Corp easy to dissolve once I'm done with this venture?

 

[LdiJ]

That's the tricky part because I don't actually want to make a profit (I wouldn't be trying to lose money either - I just want to recover my costs).

Also, is an S-Corp easy to dissolve once I'm done with this venture?

Yes, its easy to dissolve.

 

[tdavidl]

That's the tricky part because I don't actually want to make a profit (I wouldn't be trying to lose money either - I just want to recover my costs).

actually you've already stated that you DO want to make a profit, however, you then intend to contribute those profits for charitable purposes. so using this technique (the s-corp) is fine & if you show a loss then so be it...it happens, you have good intentions & you also have a profit motive so you're fine if you generate a loss.

good luck

 

[doGooder]

you should absolutely run this concept by a tax professional in your area as there may be some add'l local and or state taxes or filings fees that may shoot the idea down

Do you have any recommendations in the Boston area? I have posted my case on Casepost and "There are no attourneys pursuing my case"