Nonprofit or LLC: What Distinguishes One from the Other?

Are you trying to decide whether to start a nonprofit or LLC? It’s important to know the differences between the two types of organizations. Answer the following question first. Do you want to serve individual and/or community needs or are you looking to make a profit? Either choice is an exciting prospect that holds the promise of a bright future for entrepreneurs. As such, GrantWatch is here to light the way. Our database provides a great deal of information about these two options. In addition, GrantWatch has specific categories devoted to business-related grants and a list of thousands of grants for nonprofits.

Nonprofits and LLCs

Nonprofits bring people together to work for the common good. In short, they are purpose-driven entities. They offer exclusive advantages like management flexibility and access to specific grants and in-kind funding opportunities. As a result, they accomplish tasks like feeding, educating, and sheltering underserved communities. So, if your goal is to have a positive impact on your community. A nonprofit organization is for you. To find out more, read this GrantWatch article about nonprofit organizations.

In contrast, if your goal is to offer your community beneficial products and services that in turn help you make a profit, an LLC is the better fit. To be clear, profit is the primary reason to establish an LLC. This makes the question of tax-exempt status frustrating but worth the effort. This is both a per-state and federal concept and filing articles of organization with the IRS does not guarantee tax-exempt status. However, it is possible. If approved, incorporation as an LLC shields individual company members from personal liability for any debts incurred by the LLC. For more details about LLCs, here is a link to the IRS definition of a Limited Liability Company (LLC).

Four Key Differences between Nonprofits and LLCs

  • Tax Status: Nonprofit organizations registered as 501(c)(3) are exempt from federal and state income taxes. As a for-profit business, an LLC is liable for all applicable taxes.
  • Purpose: Simply put, a nonprofit cannot make a profit, while an LLC can make a profit. This doesn’t mean that a nonprofit can never earn revenue. It just means that any excess profit needs to be put back into the Nonprofit. Staff members may earn salaries, but board members and other key donors do not share any of the proceeds. With an LLC, it’s common practice to disburse surplus revenue to the individual members of the LLC.
  • Governance: There are federal requirements to consider. Nonprofits must have a board of directors with at least three members who meet one or more times a year. Want to be a board member for an existing Nonprofit? GrantWatch has a great article on how to become a member of a nonprofit Board of Directors.
  • Ownership: No one can own a nonprofit organization. IRS requirements dictate that nonprofits must be non-stock nonprofit corporations or ownerless entities. With an LLC, there are a variety of ownership combinations. People, partnerships, corporations, trusts, or other commercial entities own LLCs.

So, the choice is yours. Whether it’s a Nonprofit or an LLC, follow the rules that apply to the one you choose. Read on for a selection of currently available grant opportunities listed through GrantWatch for nonprofit and for-profit organizations!

Grants and Loans For Nonprofits or LLCs

  1. First, grants and in-kind support for state and local government entities to develop renewable energy projects. 
  2. Next, there are also grants to IHEs, nonprofits, for-profits, and others for research projects to improve pain relief therapeutics.
  3. In addition, there is funding for nonprofit and for-profit organizations, government agencies, IHEs, and other organizations, for research projects related to health information technology.
  4. Cooperative agreements with agencies, nonprofits, for-profits, and IHEs for the assessment, prevention, and removal of waste and debris in marine environments.
  5. Grants of up to $10,000 exist for Saskatchewan nonprofit community organizations for sports, cultural, or recreational programs and events that benefit residents.
  6. Grants up to $5,000 and up to $10,000 are earmarked for Manitoba music artists looking to promote recently-released or soon-to-be-released music.
  7. Competition for nonprofits, for-profits, IHEs, government agencies, and individuals to raise the nutritive value of foods and develop previously underused crops.
  8. Grants to USA agricultural and livestock producers for research, education, and demonstration projects. Funding supports producers who are protecting natural resources, enhancing communities, and boosting profitability.
  9. Additionally, nonprofit and tribal organizations can apply for a grant to provide supportive housing services for homeless individuals.
  10. Finally, there are grants of up to $50,000 to nonprofits, commercial organizations, government agencies, tribes, and IHEs for educational programs related to ocean and coastal health.

GrantWatch hopes this information helps you decide between starting a Nonprofit or LLC!

GrantWatch does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

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