Food manufacturing company be formed as a nonprofit?
March 13, 2012 9:01 AM   Subscribe

I want to start a food company, similiar to Newman's Own, and donate all profits to charity. Assuming it will be profitable within a year or two, can the company be formed as a nonprofit corporation?
posted by Bushmiller to Work & Money (6 answers total)
There's no reason you can't incorporate as a 501(c)(3) from the beginning. 501(c)(3) corporations include "Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations" and your description fits in Charitable. You can do it yourself but having a lawyer probably is a good idea.
posted by tommasz at 9:10 AM on March 13, 2012 [1 favorite]

The company won't ever be profitable, because you'll donate what would have been your profits to charity.

So, yes, this is more or less what the "not-for-profit" designation is intended for.

Corporations are formed at the state level and the laws for not-for-profits may vary somewhat from state to state. As with a for-profit corporation, you don't need to incorporate in the state where the company has its physical presence, but can incorporate in the most advantageous state.
posted by kindall at 9:11 AM on March 13, 2012

This is definitely something you need legal advice about, full stop. Also, keep in mind that being a "not for profit corporation" (or nonprofit corporation) is a question of state law, and simply being a state "not for profit corporation" does not mean that you are exempt from federal income tax. The two regimes are not coordinated.

You may be able to find a lawyer in your jurisdiction who is willing to assist you pro bono (i.e., for free). Contact your state's bar association, or Legal Aid in your jurisdiction.

Given the issues around both tax exemption, liability, and things like food preparation/resale regulations, I expect you'd need several good lawyers helping you. Regrettably, I doubt that this will be an easy undertaking. Good luck!

IANYL, and this is not legal advice. Consult your own advisors for tax and legal advice.
posted by Admiral Haddock at 9:24 AM on March 13, 2012 [4 favorites]

Depends where you are?

In the UK they have a social economy division in their Ministry of enterprise, trade & development. In British Columbia just created a new type of business license for social purpose businesses.
posted by chapps at 10:25 AM on March 13, 2012

Well, for what it's worth, Newman's Own is a for-profit company that funnels all of their earnings into the Newman's Own Foundation, which is a separate 501(c)3. They're pretty much the gold standard in terms of this method of operation, so I'd follow their lead and simply incorporate your business and open a charity to funnel your profits into.
posted by juniperesque at 11:02 AM on March 13, 2012 [3 favorites]

Assuming you're in the US, it sounds like you need to read the Instructions for Form 1023. Ditto what everyone else said about being a not-for-profit corporation in your state being a totally separate process from becoming a federal nonprofit.
posted by bubukaba at 12:25 PM on March 13, 2012 [1 favorite]

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