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Comment by jjeaff | Hacker News Reader

Yes, that is the case if you are funding your non-profit from large donations.

But there is nothing stopping a non-profit from selling products and services to individuals and or soliciting small donations from lots of people.

So I don't agree that this is a legitimate reason to go for profit.

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If you would like to give it a try, I encourage it. But if you're not going to raise money except in small donations, then I don't see any advantage in doing a 501c3, and there are a lot of disadvantages. There's also nothing stopping an LLC or a C corp from "selling products and services to individuals and or soliciting small donations from lots of people", and that's a much more straightforward and flexible entity.

Sure there are advantages. If you have retained earnings at the end of the year with a c-corp, you have to pay corporate taxes.

With a 501c3, you don't. Although I think there are some limitations.

Selling products and services would make them a hybrid (for-profit/non-profit) organization. The sales would be subject to sales tax. Without a 501(c)(3) status, they also wouldn't be eligible for many grants to secure larger fundings.

That's incorrect. You can sell products and charge sales tax as a non-profit.

Just look at the American Red Cross, they sell the blood that is donated to them.

You of course can't have a profit that is distributed at the end of the year. But you can keep "profits" in the organization for furthering the goals of the 501c3.

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