Tax/Legal Topics for Social Enterprises

By Rolfe Larson on February 11, 2011

Some of the most complex and confusing issues around social enterprise involve legal and tax topics.  Will we get in trouble if we do it that way?  Do we have to pay taxes on that revenue?  Which tax forms do we have to fill out?

Those concerns are made more difficult by the tendency of the IRS to obfuscate some of the issues (although they are getting better), and the high price to access quality legal advice from lawyers.

To help address that problem, the 7500 subscriber npEnterprise Forum listserv has included dozens of postings about US tax and legal issues for social enterprises, mostly from lawyers working directly on these issues.  As editor, I recently compiled many of those postings into this legal/tax frequently asked questions file.

Here are the topics that currently appear in that FAQ:

  • How much earned income can a nonprofit generate?
  • Is income earned by a thrift or book store subject to UBIT?
  • Are sponsorship and advertising fees subject to unrelated business income tax?
  • What is private inurement – and why should social enterprises be concerned about it?
  • Should I structure my new social enterprise as a for-profit or nonprofit?
  • What about nonprofit – for-profit joint ventures?
  • Can nonprofits do consulting?
  • How should I structure my incubator?
  • Should I set up a for-profit subsidiary?
  • Is there an exemption from minimum wage if certain requirements are met?
  • Do volunteers who sell our products have to claim this on their federal tax forms?
  • Purchase an existing forprofit venture?
  • In what state should we incorporate?
  • How to set up a for-profit/nonprofit partnership?

I hope you will find this information useful.  To my knowledge, this is the most comprehensive collection of legal and tax information about nonprofit social enterprises available anywhere on the web.  While I am not a lawyer, I have found this collection useful as a general guide when exploring options for social enterprises.  Good luck!