4 ms·

A non-profit can have a for-profit subsidiary?

by debacle 3y ago

stbenjam 3y ago
Yes
deaddodo 3y ago
Yes.
manquer 3y ago
Mozilla has been doing that for 20 years ?
jraph 3y ago
This would be the case of Mozilla (The Mozilla Foundation owns the Mozilla Corporation)
yanokwa 3y ago
Yup! Mozilla uses this very structure. https://en.wikipedia.org/wiki/Mozilla_Corporation https://en.wikipedia.org/wiki/Mozilla_Corporation
- timeon 3y ago
  Even better example is IKEA.
  - nicce 3y ago
    Wait, what?
whimsicalism 3y ago
yes, common and why not? i dont think most people here know what non profits are or actually do
deleted 3y ago
[deleted]
alickz 3y ago
I had the same question: https://news.ycombinator.com/item?id=38332460 https://news.ycombinator.com/item?id=38332460 Apparently a non-profit can own all the shares of a for-profit
Kranar 3y ago
Absolutely, Mozilla is another relevant example where the Mozilla Foundation is a non-profit that owns the Mozilla Corporation, which is for-profit. Furthermore many non-profits also buy shares of for-profit corporations, for example the Gates Foundation owns a large chunk of Microsoft. You can imagine a non-profit buying enough shares of a for-profit company that it can appoint the for-profit company's board of directors, at which point it's a subsidiary. Heck a non-profit is even allowed and encouraged to make a profit. There are certainly rules about what non-profits can and can't do, but the big rule is that a non-profit can't distribute its profits, ie. pay out a dividend. It must demonstrate that their expenditures support their tax exempt status, but the for-profit subsidiary is more than welcome to pay out dividends or engage in activities that serve private interests.
biccboii 3y ago
why doesn't everyone do this? take all that sweet investor money without having to give anything then have a for profit subsidiary....
- deaddodo 3y ago
  Because most corporate investments aren't managed by complete morons. This works when there's an obvious non-profit that has a monetizable product. The latter conflicts with the former, so it requires a disconnect. Meanwhile, if Apple tried to do the same, investors would look at that as obviously shady. In addition, non-profits are more heavily restricted by the government. Lastly, you can't just "take the money" and "do what you want"; fraud, malfeasance, fiduciary responsibility (in the corporate entity), etc still exist. It's not some magic get out of jail free card.
jiggawatts 3y ago
A surprising one I came across was a group of government departments that collectively controlled a "shell" government agency that ran a non-profit that owned a for-profit Pty Ltd which had over 1K staff. It was a "legal fiction" to sidestep union rules, government employment regulations, etc... This let them hire IT staff at market rates, because otherwise they couldn't pay them a competitive wage as normal public servants working directly for the departments.

A non-profit can have a for-profit subsidiary?

stbenjam 3y ago

Yes

deaddodo 3y ago

Yes.

manquer 3y ago

Mozilla has been doing that for 20 years ?

jraph 3y ago

This would be the case of Mozilla (The Mozilla Foundation owns the Mozilla Corporation)

yanokwa 3y ago

Yup! Mozilla uses this very structure. https://en.wikipedia.org/wiki/Mozilla_Corporation https://en.wikipedia.org/wiki/Mozilla_Corporation

timeon 3y ago
Even better example is IKEA.
- nicce 3y ago
  Wait, what?

whimsicalism 3y ago

yes, common and why not? i dont think most people here know what non profits are or actually do

deleted 3y ago

[deleted]

alickz 3y ago

I had the same question: https://news.ycombinator.com/item?id=38332460 https://news.ycombinator.com/item?id=38332460 Apparently a non-profit can own all the shares of a for-profit

Kranar 3y ago

Absolutely, Mozilla is another relevant example where the Mozilla Foundation is a non-profit that owns the Mozilla Corporation, which is for-profit. Furthermore many non-profits also buy shares of for-profit corporations, for example the Gates Foundation owns a large chunk of Microsoft. You can imagine a non-profit buying enough shares of a for-profit company that it can appoint the for-profit company's board of directors, at which point it's a subsidiary. Heck a non-profit is even allowed and encouraged to make a profit. There are certainly rules about what non-profits can and can't do, but the big rule is that a non-profit can't distribute its profits, ie. pay out a dividend. It must demonstrate that their expenditures support their tax exempt status, but the for-profit subsidiary is more than welcome to pay out dividends or engage in activities that serve private interests.

biccboii 3y ago

why doesn't everyone do this? take all that sweet investor money without having to give anything then have a for profit subsidiary....

deaddodo 3y ago
Because most corporate investments aren't managed by complete morons. This works when there's an obvious non-profit that has a monetizable product. The latter conflicts with the former, so it requires a disconnect. Meanwhile, if Apple tried to do the same, investors would look at that as obviously shady. In addition, non-profits are more heavily restricted by the government. Lastly, you can't just "take the money" and "do what you want"; fraud, malfeasance, fiduciary responsibility (in the corporate entity), etc still exist. It's not some magic get out of jail free card.

jiggawatts 3y ago

A surprising one I came across was a group of government departments that collectively controlled a "shell" government agency that ran a non-profit that owned a for-profit Pty Ltd which had over 1K staff. It was a "legal fiction" to sidestep union rules, government employment regulations, etc... This let them hire IT staff at market rates, because otherwise they couldn't pay them a competitive wage as normal public servants working directly for the departments.