Nonprofit

Profit Status is a financial and legal determination that the convention should establish early in its formation. Among other things, it will determine how the money is handled, and how taxes and other government documents are filed.

In the US, there are three primary profit states:

• For Profit. This is the status of the vast majority of businesses. Products and services are sold, money comes in, debts are paid, and the profits, if any, are divided among the owner/investors. Typically, taxes of varying kinds are owed on any income and profits.
• Not-for-profit. This is the status of many social and community welfare organizations. They are very similar to For Profit organizations, except there is no profit distribution divided among the owners\investors. They stay with the enterprise as ongoing assets. Taxes may still be owed, but typically less than in the case of for-profit, and there are more rules concerning how money is handled.
• Non-profit. This is the status of charitable organizations. Much like a not-for-profit, except that donations to the Non-profit are often tax deductible for the donator. In the US this a very strictly controlled and checked status. More regulatory requirements than the other two.

Your status is largely determined by your business practices or financial dealings. If those are determined to be contrary to your desired profit status, you may find yourself facing liabilities you are not prepared for.

The US Federal Internal Revenue has a significant amount of law, regulation, and advisories concerning each of these statuses. Individual states (and localities) often do as well. Careful selection among them early in the formation process can lead to good results. Poor selection can lead to fines and jail. Research well, get legal advice, Choose Wisely.