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I am thinking about starting a small charity to help find and support the "untapped Genius" in everyday people or people that might otherwise just end up in a dead end job or unemployed. The concept is to offer services that we help these people develop to companies and individuals that are looking for these services. We use the money to further help these ordinary people grow and establish their businesses in the hopes of create trajectory changing ventures and jobs in their communities.

I have thought hard about this and need help with one important factor: "tax incentive". The idea is to offer these companies the services and being a legal 501 c 3 charity, allow them to write these expenses off. Now I know that corporations and even smaller entities like LLC's and sole proprietorships can write off business expenses...but the question is this: Is there a benefit I can provide tax-wise because I am a charity vs these companies just paying for a given business expense and writing it off?

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Would you please try and clarify the question? In particular who are "these companies" mentioned in the second paragraph? Are you planning on providing free services to startups and getting donations from other, profitable companies? – JonnyBoats Mar 21 '12 at 5:58
Ok, The "Companies" would be any private sector company that we could offer our collective services to. In the process we would be training and using the individuals that we are aiming to help. NetTecture seems to think that charging for this in a donation format would be a problem so i am rethinking this a bit but yes the idea is to gather donations form profitable and established businesses to help the upstarts. – Amin Brodie Mar 21 '12 at 6:08
I do not htink charging in a donation formatis so much a problem as it is a simply totally useless approach because you can just CHARGE THEM AS A NORMAL SERVICE. – NetTecture Mar 21 '12 at 6:20
@JonnyBoats please excuse the sidetrack...the question is: Is there a benifit from a companies point of view tax-wise becuase i am a charity vs just paying for a given business expense and writing it off? – Amin Brodie Mar 21 '12 at 6:31
@AminBrodie The amounts you can write off are limited by the IRS in case of the US so there is only so much that businesses can pay you before it becomes simply an expense. Secondly If a person want to run a business it's much more advantageous to provide financing to business. Thirdly How many times do you think someone will provide you a service for free? – Karlson Mar 21 '12 at 22:07

2 Answers

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Is there a benefit i can provide tax-wise because i am a charity vs these companies just paying for a given business expense and writing it off?

Well, aside from your buiness model being fundamentally flawed in that most of those dead beat people ARE dead beat people, not untapped geniuses, and you will have problems having a typical work drone establish a business and make some USD on the side for yourself,

no.

The idea of a charity is to allow people to write off an expense that normally does not further their income, and businesses write off all expenses. That is as far as the tax allows to be normally reduced.

Point.

No government likes to be screwed by some startup wannaby because it thinks it is cool, so no, there is no magic hole that allows you to magically make income and have your customers have a magic advantage over running a normal busienss.

And sorry, you being a charity is totally useless. Either you provide a service for people starting up a business - then you are a business expense already - or you dont provide a valuable service, then being a charity wont save your start up. Plus being a charity is not "oh, i am one", it is paperwork and costs and thus takes you down a hole to start - without any gain.

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wow...ok first of all...i think you might want to re-read what i wrote. I am going to list all the items that you mentioned and think about them...so i thank you. Any other points of view are appreciated. – Amin Brodie Mar 21 '12 at 5:42
Ok mate, may i ask you some questions? – Amin Brodie Mar 21 '12 at 5:56
#1 You mentioned "No government likes to be screwed by some startup wannaby becasue he is cool..." My intention was never to screw over the Govt but obviously in order to help people, i would need to raise funds. Can you please elaborate on this point so i can address it or rethink my plan of attack in this regard. – Amin Brodie Mar 21 '12 at 6:02
@AminBrodie If the sole point of your charity is basically help businesses write off expenses you will be found and <insert your favorite form of torture here>. – Karlson Mar 21 '12 at 22:03
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I think you either misunderstand the way that charity works or you misunderstand what is actually necessary to run a business or both.

So let's start point by point:

  1. If someone wants to run a business they need to have an idea of what it is they are going to do and who will pay them for this stuff they will do, so the question is what's your role here?
  2. If someone started a business manufacturing/writing software/selling widgets they need some sort of capital to do it, so what's your role in this?
  3. If a person is unemployed or have been an employee his whole life why would he or she need a reason to strike out on his/her own, so what's your role here?

Now given all that people need to start or run a business the only thing that you seem to offer is a possibility of a tax write off for the services that they will provide you, which is actually worse then the situation of you actually paying them for their services because come to think of it: your expenses are A your possible revenue is B so you pay taxes on B-A and in your case A is an expense that still remains and B is a donation to your 501(c)3 which I can write off a part of(maybe whole) as a charitable contribution against revenue that I already received.

So as a starting business it seems to be a bad way to go since I have all these expenses (B+A) and $0 in my pocket.

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