General Question

timtrueman's avatar

Can a non-profit switch to become a for-profit company?

Asked by timtrueman (5744points) October 2nd, 2010

If so, how difficult is that process?

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5 Answers

lillycoyote's avatar

Yes, I think that some, at least, of the Blue Cross-Blue Shield companies have gone from being non-profits to for-profit companies.

Edit: From the Wikipedia article:

Prior to the Tax Reform Act of 1986, organizations administering Blue Cross Blue Shield were tax exempt under 501©(4) as social welfare plans. However, the Tax Reform Act of 1986 revoked that exemption because the plans sold commercial-type insurance. They became 501(m) organizations, subject to federal taxation but entitled to “special tax benefits”[9] under IRC 833. In 1994, the Blue Cross Blue Shield Association changed to allow its licensees to be for-profit corporations.[5] Some plans[specify] are still considered not-for-profit at the state level.

So it is possible. I just don’t know under what circumstance and what the process would be.

Cupcake's avatar

Well you could participate in lobbying, or not file your 990 form for 3 years…

I think it’s an easier process than receiving tax-exempt status, but you probably need to consult with a lawyer who specializes in non-profits. Or perhaps you have a local organization whose mission is to assist small businesses (like SCORE)?

Response moderated (Unhelpful)
YARNLADY's avatar

Yes, easily. A non-profit has regulations that they must put a certain amount of their revenue into the project they are working with. Some non-profits put as little as 1% or so in, and expense out the rest. If zero money goes to the project/charity they become a profit making company.

Petrovisk's avatar

In the UK, organisations are free to switch between incorporation models whenever they like. It usually also involves a great deal of paperwork and getting their accounts in order, so it’s not something to be taken lightly.

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