In this episode of Coffee with Carl, attorney Carl Zoellner explains some of the basic considerations that go into starting your own nonprofit.
Updated August 20, 2020
For this week’s episode of Coffee with Carl, I want to focus on when you should start looking into forming a nonprofit for your own investing portfolio or charitable purpose.
First, my opinion on nonprofits is simple: when starting a nonprofit, you should have a charitable purpose in mind. This isn’t a requirement, but in my experience, this will ensure the long-term success of your nonprofit. While there are great tax benefits to using a nonprofit, there are also additional compliance and accounting requirements that make nonprofits more involved than other entities.
501(c)(3)s and Donations
If you create a 501(c)(3) nonprofit, which is the main type of nonprofit we work with here at Anderson Advisors, you can accept donations. Furthermore, the donator can write off their donations as a tax deduction. It’s a win-win.
What’s less well known is that you can even donate to your own nonprofit. If you have high W-2 income, you can donate extra money to your nonprofit and save a substantial amount in taxes. Currently, the donation limit for individuals is 60% of your income.
Although I just said “your nonprofit,” it’s important to note that nonprofits are not owned by anyone. Technically, nonprofits exist for the benefit of the public and are, thus, owned by the public. What I should have said is: you can donate extra money to the nonprofit in your control and save a substantial amount in taxes.
If you start a nonprofit with a charitable purpose in mind, you can then use the nonprofit for some significant tax savings. If you’re interested in learning more about nonprofit power, we cover these strategies in much more depth at our Start & Run a Nonprofit Workshop.
Watch as Carl covers some of the tax benefits that accompany nonprofits and when to consider starting your own.
Resources mentioned in this video
Check out our Tax & Asset Protection Workshop for more tax reduction strategies
Learn more about our Start & Run a Nonprofit Workshop
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