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Tax benefits of creating a non-profit business

On Behalf of | Mar 29, 2022 | Business & Commercial Law

If you are planning on starting a company, you likely already know that there are many ways to structure your business. Like many entrepreneurs in the Portland area, you may find the idea of creating a non-profit organization appealing for both philanthropic and practical reasons.

One of the principal benefits of creating a non-profit is the possibility of both state and federal tax breaks as well as a tax-exempt status that may open unique funding opportunities for your enterprise.

Tax exemptions

At the corporate level, your non-profit business may be able to operate without paying federal income tax and, possibly, state income or property taxes as well. By allowing your company to make income and asset gains more quickly, these exemptions may make it more likely your venture will be both productive and sustainable in the long term.

Charitable funding opportunities

Depending on the nature of your organization, your company may also be eligible to apply for IRC Section 501(c)(3) tax-exempt status. This means that individuals or companies can make contributions to your business while enjoying a potentially sizeable deduction on their tax returns. Receiving 501(c)(3) status can mean many more opportunities for receiving income through grants and donations from both organizations and individuals seeking a charitable cause.

Deciding whether to pursue a non-profit structure for your company will depend on both your company’s goals and values as well as your vision for the organization’s long-term success. While the tax benefits of non-profit status can be considerable, keep in mind that you may need to meet certain detailed reporting and operational requirements to be eligible.