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Nonprofit Law/Can I sell product to my own Non-profit

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Question
I currently own a "for profit" company that sells blankets.  I would like to open a non profit 501c3 that donates blankets to soldiers over seas.  I plan on purchasing the blankkets from my for profit company from the donations to my non profit.
I want to make sure this is allowed before I start getting the non profit established.

Thanks for any and all help!

Answer
The IRS would not grant 501(c)(3) organization status unless the 501(c)(3) organization purchases the blankets at your cost and, even then there may be issues if they think that your for-profit company is benefiting from the operation.

Internal Revenue Code section 501(c)(3) which is available at:
http://goo.gl/7lFll
has, in part, that the 501(c)(3) organization must be "operated
exclusively for religious, charitable ...or educational purposes
... no part of the net earnings of which  inures to the benefit of
any private shareholder or individual".

That term is defined in regulations 26 C.F.R. 1.501(a)-1(c) "The
words `private shareholder or individual' in section 501 refer to
persons having a personal and private interest in the activities of
the organization."
http://goo.gl/GtQpz on the right column of page 2

I would be willing to work on your matter further, but I would need to spend a substantial amount of time in analyzing the proposed budget and that would be beyond the scope of my offer of free services.  If you want to inquire about hiring me for such work, please contact me directly to the email address below.

Harvey Mechanic, Attorney at Law -
Harvey108@hotmail.com

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic

Expertise

I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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