zlacker

>>modele+(OP)
There is a lot in here but turning a non-profit into a for-profit definitely should be challenged. Otherwise why wouldn't everyone start as a non-profit, develop your IP, and then switch to 'for-profit' mode once you got something that works? You don't pay income taxes and your investors get write offs.

>>silico+z11
They didn't "turn it into" a for-profit though, they created a separate for-profit arm. This one is unusually successful but that's not an unusual thing for even "regular" charities to do in order to engage in some activities that they wouldn't normally be able to.

>>emoden+P21
And transferred everything they did to that arm. I'm all for tax avoidance, but the rules should apply to everyone equally. Small ma and pa businesses don't have the money to hire armies of lawyers for these legal machinations

>>justin+E31
I guess "mom-and-pop businesses" are probably not started as charities in the first place in most cases so I don't really get what you are trying to say.

>>emoden+b51
He’s making a (valid) point having to do with tax avoidance.

Want to open a bakery in your small town? Start it as a 501(3)(c) and promise it’s a charitable endeavor for the local community. Then invest your $500k into the bakery maybe even from your local community (it’s a tax deductible donation!) to get the bakery up and running.

Then once it’s turning a profit, ditch the original 501(3)c and replace it with a LLC, S-Corp or C-corp and start paying taxes. (And hope you don’t get sued or audited)

His point is mom and pop bakeries aren’t typically sophisticated enough to pull of schemes like this, even if it would save tens of thousands on taxes.