Starting a charity isn’t just “nice to have.” Done right, it’s a smart way to create lasting impact, protect your assets, and strengthen your financial strategy—while bringing your family into something meaningful.
It also offers advantages that traditional for-profit businesses can’t, from powerful tax deductions to long-term asset protection and greater public credibility.
Below are eight practical reasons to launch a nonprofit—and how to do it the right way.
Before I dive in, watch the full video here.
Why Should You Consider Starting a Charity?
1. Capture Year-End Tax Benefits You’re Already Missing
Under current IRS rules, donations to a public charity are deductible up to 60% of your adjusted gross income (AGI) for cash gifts. Donations of appreciated assets (like stock or real estate) are generally deductible up to 30% of AGI, with unused amounts carrying forward for up to five years.
This means you can fund your mission while legally lowering the amount of federal income tax you pay each year. For real estate investors, donating property to a tax-exempt organization can avoid capital gains and create an immediate tax deduction.
If you haven’t started a nonprofit corporation yet, you can use a donor-advised fund to start.
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2. Cement a Legacy That Outlives You
Unlike a for-profit organization, a nonprofit doesn’t dissolve when its founders retire or pass away. When you create a mission-driven legal entity, it can continue indefinitely—managed by a board of directors or future board members who share your vision.
That’s how your charity becomes a lasting legacy, not just a personal project.
3. Bring Your Family Into Purposeful Giving
Involving your family in a charitable organization is one of the most meaningful ways to teach values and stewardship. You can appoint board members from within your family, giving them leadership experience and responsibility over real programs.
It’s philanthropy that doubles as family legacy—and helps the next generation understand business, accountability, and annual reporting requirements.
4. Enable Long-Term Projects—Not Just One-Time Help
Charities support long-term programs, not short-term donations. Whether you’re developing a youth sports league, an affordable housing initiative, or a medical outreach program, the tax-exempt organization framework allows you to operate for decades.
This structure separates your personal assets from organizational funds—an important asset protection feature that shields you from personal liability while ensuring transparency in the use of funds.
5. Reduce Estate-Tax Exposure for Larger Estates
For high-net-worth families and real estate investors, charitable planning can reduce estate taxes and create long-term benefits. By donating to a tax-exempt organization, you remove assets from your taxable estate—keeping more wealth working for your mission rather than sending it to the IRS.
Charities’ tax-exempt status allows wealth to grow within the nonprofit without incurring value loss due to federal income tax or capital gains. It’s one of the most effective forms of legacy and asset protection for real estate investors.
6. Respond Faster to Urgent Needs
When emergencies hit—natural disasters, local crises, or community shortages—having a charity support network enables you to act immediately.
Rather than routing donations through large national nonprofits with heavy overhead, your organization can deliver aid where it’s most needed. That’s the power of having your own legal business entity in place: you control the timing, direction, and impact of every dollar.
7. Optimize Every Donated Dollar
When you run a charitable organization, you oversee the finances and direct funds toward the mission. You can maintain low overhead, transparent annual reporting, and measurable results.
There are clear advantages and disadvantages of a nonprofit organization:
- You gain tax deductions, grant eligibility, and public credibility.
- You also take on compliance responsibilities, including attending board meetings, filing Form 990, and maintaining your board of directors.
Handled well, the structure builds trust, maintains your tax-exempt organization’s good standing, and reinforces donor confidence.
8. Encourage Giving Instead of Gifts
Ask friends and family to donate “in lieu of gifts” for birthdays or holidays. When they see how their contribution directly funds your nonprofit’s mission, it builds stronger community charity support and a sense of shared impact.
Those donations are often tax-deductible, meaning your supporters benefit too.
Why Should Real Estate Investors Start a Nonprofit?
Real estate investors have distinct advantages when they integrate charitable planning with a real estate investment strategy:
- Donate appreciated property. Avoid capital gains and claim a tax deduction for fair market value.
- Create charitable housing programs. Provide affordable homes for veterans or families in need through your tax-exempt organization.
- Operate mission-driven properties. Lease below-market properties to partner nonprofits—qualifying for potential property-tax exemptions.
- Build credibility. A transparent charitable organization strengthens trust with lenders, cities, and partners.
Tip: Rules differ by state. Always consult a tax advisor or estate planning attorney to ensure compliance between your limited liability company (LLC) and nonprofit entity.
How Do You Start a Charity?
- Define your mission. Clarify who you serve and how you’ll measure success.
- Choose your structure. Most founders create a public charity (501(c)(3)) as a standalone legal entity.
- Assemble a board. Recruit experienced board members for governance and accountability.
- Draft bylaws and key policies. Address conflicts of interest, documentation, and transparency.
- Incorporate in your state. Formally establish your charitable organization and register for annual reporting.
- Get an EIN. Apply with the IRS.
- Apply for 501(c)(3) status. File Form 1023 or 1023-EZ (if eligible).
- Register for charitable solicitations. Required in many states before fundraising.
- Set up accounting. Separate organizational assets from personal assets.
- Launch and report. Document outcomes, file required reports, and stay compliant.
If you want more information about starting and running a nonprofit, join us for our free workshop. Our team of nonprofit attorneys will walk you through step-by-step everything you need to know about your charitable giving.
What Common Questions Do New Founders Have?
Q. Is a donor-advised fund enough?
A: It’s great for immediate deductions, but your charity gives you full program control.
Q. Can my nonprofit pay me for my work?
A: Yes—your nonprofit can pay you a reasonable salary for legitimate services, but it cannot issue dividends or share profits.
Q. Can I donate real estate?
A: Yes. Deduct fair market value (subject to AGI limits); the nonprofit can use or sell the property for its mission.
Q. How do I issue donation receipts?
A: Provide written acknowledgments for gifts of $250+ and compliant receipts for all contributions.
Q. Can my nonprofit organization qualify for property tax exemptions?
A: Yes—your nonprofit often qualifies if it uses the property for charitable purposes. Check your state laws.
Q. How long does IRS approval take?
A: You can complete Form 1023-EZ quickly, but the full Form 1023 usually takes longer.
What Should Small Business Owners Know About Asset Protection?
If you run a profitable business or hold real estate investments, consider structuring your nonprofit separately to protect your personal assets. Maintain clear contracts and keep financial records separate.
With the right legal entities and governance—your board of directors, accountant, and tax advisor—you can enjoy the benefits of both worlds: asset protection, tax deductions, and lasting community impact.
Ready to Turn Your Idea Into Impact?
If you’re serious about launching a charity—whether to power a local project, donate appreciated assets, or formalize family giving—get expert help before you file. Book a free 45-minute Strategy Session to design your 501(c)(3) organization, align it with your tax strategy, and start creating impact that lasts.
