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I am based in the US, and I really like the idea of starting a non-profit organization that I can use to do good in charitable areas that I would like to contribute to. Unfortunately, one of my only lucrative skills is software development, which is typically a job performed for-profit. I would like to do paid software development contract work and get paid a salary, except through this organization. I would then like to use the rest of profits kept at the organization level toward charity work and re-investment into the org.

I really don't even know where to start with the questions. Here are a few to start:

  1. What is this type of organization called? I'm having a hard time searching due to only knowing more common terms to describe this.
  2. If money and/or my time is spent doing charitable work through this organization, are there any tax advantages VS donating my personal post-tax income and free time?
  3. Would I be able to do free work for other non-profits, free community teaching, etc while still being considered "on the clock" / paid by the org? eg If my salary from the org dictates that I must work at least 40 hours per week, could I legally consider my charitable time towards those 40 hours?

Charity work is important to me, and to that end I would like to be able to perform it in the most efficient and tax-advantaged way possible to maximize the impact I can have. Thanks in advance.

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    Looks to me like you're trying to minimize your payroll tax obligations under the guise of charity. Perhaps you would have better luck at outlining a solution if you start by listing your goals, instead of assuming your method is the best way to achieve those goals. – Grade 'Eh' Bacon Apr 3 '18 at 18:46
  • The united way and goodwill industries have paid employees. – Pete B. Apr 3 '18 at 19:30
  • Are you looking to write software free-of-charge for other non-profit organizations? Are you hoping to solicit donations to fund your software development activities? What would the mission of your non-profit org be? – Ben Miller Apr 3 '18 at 19:37
  • It's certainly possible to set up a nonprofit whose mission is to provide professional services to other nonprofits. Consider greeninfo.org as an example. – Beanluc Apr 3 '18 at 23:00
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    Reinvesting into the organization is exactly what For-Profit companies do, that is just plain business and not considered Non-profit. – ssn Apr 5 '18 at 7:58
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Profit reinvested in to the organization is already a valid expense. You're free to do with your time whatever you'd like, but you don't get to deduct the time you donate.

Non-profit simply means that the company spends everything it earns/receives toward a charitable mission. The Red Cross, as an example, is a maaaaaaasssssssssive non-profit that has a huge payroll. The CEO of the Red Cross is paid a salary of half a million dollars annually. The employees of the Red Cross are sent places to do things and they're paid for their time and the costs incurred to get them to those places are expenses of the organization. Payroll taxes are paid just as they would be for a regular corporation. The Red Cross also donates huge amounts of supplies and runs various clinics for the specific benefit of people other than the employees/directors of the non-profit. You can run whatever business you want at non-profit levels by incurring expenses against any excess income you have.

The major difference is a non-profit can solicit donations that are tax-deductible to the donor. And, in some cases non-profits receive preferred tax treatment on their spending.

You don't need to be a registered non-profit to develop software for your clients for a fee then donate your time to charitable causes. In fact, anyone can just go volunteer at a shelter or develop the website/communication materials for the shelter. You need to be a non-profit for people to deduct their cost of simply handing you money to do your charitable work.

I think you could make the argument that costs incurred by you (excluding your time) to offer a free community seminar is a valid marketing expense for your business; cost being something like renting a space. I'll just point out, reinvesting in to your own software development organization is not a charitable endeavor, that's just business.

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You need a 501(c)-3 organization to be a charity. Charities can take tax-deductible contributions from others. They can do things that compete with for-profit firms, and can pay market salaries to employees and officers.

What they can't do is pay shareholders dividends or issue stock.

There are lots of hybrids. REI - the outdoor equipment retailer - is, I believe, non-profit. Like a credit union, any net profit they earn gets re-distributed as 'dividends' to members based on what they bought - not to outside investors like hedge funds.

Probably the most unusual non-profit is Vanguard, the fund company. They pay well and run a competitive business. Technically they are a mutual, but it is the same thing is substance.

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