Nonprofit vs For-Profit: Which should I start? - YouTube

at a very high level the difference between a non-profit and a for-profit a

non-profit any of the assets that are in the nonprofit have to stay in the

nonprofit space assets in the for-profit business can exit the business and go

into shareholders hands so at a high level that's gonna be what it is if you

as a non-profit are donated a million dollars and then your nonprofit it has a

building and then you cease to exist as a non-profit you decide you're gonna get

rid of this nonprofit it's dissolving that million dollar asset has to stay in

the nonprofit space so you have to give it or sell it and give the money to

another nonprofit so the money is trapped basically not in a bad way but

it's in the nonprofit space sometimes you've got an idea you're not sure if

you should do it as a non-profit or a for-profit or why or maybe you know what

to do there I think in reality there are some specific differences and in reality

you can likely pursue either path with just about any idea it really is a

matter of what are the motivations and then maybe there's some strategics

around picking one versus the other so if you're looking to get donations in

order to pursue this thing then being a non-profit 501c3 nonprofit you can offer

a tax deduction to those that donate to you so there's like a good reason to go

this path because you'll be able to get donations and give tax write-off and

then you can go pursue this thing it gets a little tricky for the nonprofit's

that don't need to raise money so there are a lot of

nonprofits that don't raise money a thrift store now they're given goods but

let's say it's a coffee shop or they where they are actually buying and you

know wholesale coffee beans and they're selling coffee it's like their mission

as far as why they want to be a non profit might be

we're buying these beans from overseas and it's an impoverished area and they

grow opium crops and we're getting them to convert opium crops to coffee crops

but the reality is you're buying the beans and then you're selling beans

so should that be a for-profit or nonprofit

it really can be either it if you're not looking to raise any donations then it

really could be either you know there was one nonprofit that I was you know I

helped that was actually a for-profit that we took or I'm sorry it was a

nonprofit that we took to for-profit that did just that and did coffee and

one of the reasons there was the business motivations around being a

business it's not about hey I can pocket money the reality is is for profit to

for the difference between a for-profit or nonprofit there has to be a profit in

the first place before that ever even comes into the equation as far as do

those profits stay in the entity or do they get distributed to the owners if I

make my business makes a hundred thousand dollars and I spend a hundred

thousand dollars there's zero dollars to distribute anyways if I make a hundred

thousand dollars I spend eighty thousand there's 20 thousand left a lot of

businesses just leave that money in the business so they can spend it the next

year so the money still was not distributed it all just stayed inside

this mission that you're pursuing to try and grow this big

thing so if there are no profits if all profits are just reinvested then

essentially they're still operating very similarly you can also set your

compensation as a non profit you can choose what your compensation is or your

board can so this is an example of maybe a non profit that might behave

inappropriately but it's still is legal where my business makes a million

dollars we spend a hundred grand there's nine hundred thousand profit we

distribute it all it goes to me I made nine hundred grand alternatively I could

form a non-profit my business is now and non profit we made a million dollars and

so I'm gonna set my salary at a million dollars so we spent a million dollars

and there is no profit so we're a non profit there is no profit to distribute

to owners because we're you know chasing this good thing but I made a million

dollars in both cases I've made a million dollars in this case I did it as

salary and in this case if it is a distribution so I think ultimately

consider the energy structure as a as a a tool to try and accomplish what you

want to accomplish if it's a you want to collect donations you may want offer tax

deductions if you on the example where we took a coffee company from a

non-profit to a for-profit the nonprofit was losing it was losing a hundred

thousand bucks a year we would buy these beans from Thailand we would pay staff

they would sell the coffee once it's roasted and at the end of the day at the

end of the year we would be a hundred thousand dollars in the hole so they

would do a fundraiser they would raise a hundred thousand dollars and then we do

it again the next year and so every year the thing is upside down by a hundred

thousand dollars we're donors have to come out of pocket or choose to come out

of pocket donate money to keep this thing afloat to pursue this mission

sometimes in the nonprofit space you can end up

thinking not needing to analyze the business side of things in an entity

that runs like a business you're buying beans you're selling beans you need to

weigh what your unit economics are how much am i buying them for how much

should I sell them for so there's enough money to buy the next shipment of beans

if you blend that with we're a non-profit we're per we we can raise

money we can raise donations then a lot of times you don't have to it's a it's a

the ability to not have to calculate that stuff it's a well we have a golf

tournament fundraiser coming up at the end of the year we fall short we can

just raise the money we need just raise more donations or we need to raise more

money if you're a business and it's a entrepreneur that's running it then you

don't sell enough you don't have enough money you don't get a paycheck you don't

get food so we moved a nonprofit to a for-profit for that exact reason there's

never been a dollar of profits distributed to the owners but the fact

that it's a for-profit there is no ability there is no we burn the ships

there is no ability to raise money at the end of the year and give tax

write-off if there's not enough money to pay all the bills so you are forced to

live every month by did we make enough money to pay the bills or not if not we

need to cut a salary we need to cut an expense or we can't do by this other

thing so in my opinion I I think they're both tools you can pursue the same exact

mission whether it's through a non-profit or for-profit it's pick which

one you want to ride to pursue the mission the financial impact in either

path it does not mean that they're different they can be the same depends

on who's running it and what their motivations are and why they're doing it

but you can have a profit if we ever do turn a profit we're just gonna buy more

beans the mission is the mission statement essentially for this Kabhi

Gham means by as many beans as possible so if we turn a profit or buy more beans

and that's what it's going to be so there will never be dollars to

distribute to the owners even though it's a for-profit

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