Non-Profit Business Question

My sister started her own business about 10 months ago. It is a design business. She makes customized jewelry (she has her masters in product design from stanford, has succeeded before in design, should do pretty well). I am thinking of starting a non-profit design business (basically paintings)- that donates its profits to charities. It is a different area of design than hers and think I can build it up pretty quick (faster than she is now). I think both companies can play off of each other and if I have much success it can be a good PR type of thing for her company, and can get exposure for both if we set it up on the same webpage. The question: Is this type of business structure possible? To have a for-profit business, and a nonprofit subsidiary that has its own operations, revenues, expenses and everything?

I am a lawyer but know very little about non-profits and couldn’t answer off the top of my head your question whether your sister’s for-profit business could have a non-profit subsidiary. I think the answer to that is “no”, however. See the page at the link below for example, which rings true to me - the concept of ownership in a for profit context doesn’t seem appropriate in the context of a non-profit charitable organization. That said, why would you want your non-profit to be a subsidiary of your sister’s business anyway? It sounds like you will be the one running it so you can simply organize it and run it yourself and keep it separate from your sister’s business. As long as the substantive activities of the non-profit are in accordance with its non-profit status and are not mixed up with your sister’s business, I doubt that a single website that described and served as a portal for both businesses would be a problem.

yeah - that is what I was thinking as well -the possibility of two seperate legal entities with the same (initial website) for marketing purposes - that would be ok, right? I just have a feeling when I get this up and running it will catch on fire pretty quick, and would be a shame not to take advantage of some marketing opportunities for her business.

I would think it should be OK but you should probably investigate. Presumably you’ll have to get some sort of guide book to non-profits anyway and surely that would shed some light on it. Worst case scenario I can’t imagine there would be any problem with two separate web sites that contained descriptions of and links to each other.

cool - thanks CW

I think you need to register two different names/companies. The non profit will simply have a for-profit as one of its clients. I think having two different websites is also required, but you can have links to each other. i.e. for profit website may say “on April 30 we donated so and so to this non-profit” and the non profit website will say “on April 30 we accepted a donation from from X” Non profits most likely have different tax rules so having a non profit as a subsidiary of a for profit makes problems (i.e. you will try to offload costs/revenues to one or the other for preferential tax treatment)