When a nonprofit organization makes money, it can run into some murky waters, because by definition, these types of legal structures exist solely to serve a community or specific group of the population. So, as a small business owner or entrepreneur
, what are you to do when your nonprofit pulls in some cash?
As a 501(c)(3), a corporation cannot realistically be expected to survive without a little bit of cash. Therefore, there is a loophole: Tax exempt nonprofit organizations that make funds from a result of activities are able to use it towards expenses, provided the activities were associated with the organization's mission, the website Nolo reported.
"What distinguishes nonprofits is not whether they can make a profit, but what happens to profits," The Maine Association of Nonprofits reported. "Nonprofits are prohibited from distributing profits in the same way for-profit corporations can. All revenue must be earmarked for the organization's mission."
However, if a corporation makes money in some way that has nothing to do with its mission, it is required to pay corporate income taxes so as not to lose its tax exempt status.
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