Not for profit corporations must make money to ‘stay in business’, but how the amount of surplus income and the purposes for which it is made is treated by tax authorities, may vary from jurisdiction to jurisdiction. The distribution/use of profits must comply with applicable corporate and tax legislation. The articles of incorporation must comply with applicable legislation.
The author explains that not for profit organizations often have the idea that in order to be a non-profit they don’t have to make money. Non-profit organizations, like any business, have to make money. They have to be able to meet budgets, including payroll. If you own a business corporation, and there is money left over (quarterly, semi-annually or annually) then, as the owner (shareholder), you can take some or perhaps all of that money as a bonus or distribution. In a non-profit organization, corporate ‘profit’ can only be used for corporate (not for profit) purposes, or ‘given’ to other not for profit corporations.
Takeaway:
- If you own a business corporation, and there is money left over (quarterly, semiannually or annually) then, as the owner (shareholder), you can take some or perhaps all of that money as a bonus or distribution. In a non-profit organization, corporate ‘profit’ can only be used for corporate purposes, or ‘given’ to other not for profit corporations.