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How is it legal for a non profit have a for-profit subsidiary?

Nonprofit just means there are no owners or shareholders. It's still organized like a business, has revenues and costs and salaries and can invest and such. They can make millions and pay millions, they just can't turn it into profit for the nonexistent owners.

Where the profits end up? In the non profit parent.

If the salaries are high enough, you don't have to have profits.

If my company only reaches break even every year, it only takes one bad year and I’m bankrupt. Profits are important for every company.

Not to argue semantics, but nonprofits are still allowed to have more revenue than expenses and bank the rest in savings, investments, or to outright buy other for profits.

They just can't "profit" in terms of paying that extra out to owners. They have to reinvest back in the org, pay it out as salary, or play financial games with it.

It does not mean they have to operate on razor thin margins and struggle to survive every year. They can (and should) have warchests that can cover a few bad years or longer.

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