Legal Question in Business Law in California

can I convert my One owner S-Corp to Non-Profit. We have filed a loss since we started in 2019.

Asked on 7/13/21, 10:05 am

1 Answer from Attorneys

Timothy McCormick Haapala, Thompson & Abern, LLP

Just because you have not turned a profit does not make your endeavor a non-profit entity. There are various types of non-profit, the most well known being a charity. Whether an organization qualifies as a charity is covered by section 501(c)(3) of the Internal Revenue Code. It is HIGHLY doubtful that an entity that was originally set up to try to make a profit could ever qualify as a charity. Other types of non-profit are covered by other sections, each with their own set of qualifications. Examples are religious organizations such as churches, fraternal organizations such as Oddfellows, and amateur athletic organizations such as Little League and US Sailing. Without knowing what your corporation was set up to do, it is impossible to say whether it could be converted, however if it was set up to be a business, it is doubtful it would qualify under any of the non-profit categories.

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Answered on 7/15/21, 3:34 pm

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