Commercial Kitchen advice

well this might not be your favorite post but i think the attorney has something there

 

a non-profit is not defined by how much money they make--it's just about tax exemption

 

and unfortunately i think it's a valid argument that if a non-profit is 'harboring or hosting' a for profit it risks it's tax exempt status to do so

 

i know first hand the story of another church bookstore (i launched & managed one) that got a nice write up in the local paper for it's renovation job including that they were going to be serving starbucks coffee in the store

 

whoa ho ho--the state clamped down on them hard and wrapped them up in some serious legal mumbo jumbo that was mucho unpleasant/scary for them for some time not to mention financially ruinous if the state had prevailed

 

of course they got out of it eventually because they were only brewing and serving starbucks brand coffee not a real starbucks kiosk or anything like that--

 

so i think the attorney is right

 

sure non-profits make money for weddings and whatever--but a for profit cannot really be umbrella-ed under a non-profit because the state can take away their tax exempt status--most churches would go under if they had to pay property tax etc.

 

every church in the country would have more businesses running in them if it were allowed--

 

not to mention the building fee for a wedding goes to pay a lot of people to do thier jobs before during and after weddings, the lights, the heat/air conditioning, the parking lot, maintenance and everything else--i'm not saying they did not profit some from your wedding

lots of churches sell lots of things--i managed a bookstore--we sold snacks, doughnuts, pastries that i made, coffee, drinks, books and gifts, jewelry etc. but it was all under the umbrella of the non-profit--everything had to be done very carefully--the store was never advertised outside it's little place within the church confines

 

a bakery like this operating in the building is not under the ministry of the church

churches can have only have so many 'fund raisers' a year without getting penalized or taxed or smitten by god or something----i can't remember the consequence but what a tangled mess taxes and all that stuff is--even for non-profits who don't pay them!

 

there is no loophole--but people can get away with it for a while and maybe forever but the risk is genuine--it all depends on who the tax & legal people are in that area

 

i'd recommend avoiding advertising if you continue

 

no easy way huh

 

wish it were different--you might could get away with it but might as well do it at home for all that

I don't see how this is a problem. The church will be making money on renting your facility, not getting a cut of your business. I know of a chocolatier in my town who rents a church kitchen. She has to pass a health department inspection separate from the church's inspection...same kitchen, inspected twice. Double the fees for the city...go figure.

As far as the attorney is concerned, I'm guessing his biggest concern would be liability. You need to have liability insurance for your business and have a clear contract stating that the church is not responsible for your food products. I think that would be a much bigger issue than money. Churches are businesses, after all. They may not be for-profit, but they certainly need (and have) revenue.

Non-profit organizations can still make a profit and retain tax exempt status for the generated profit as long as the profitable activities are related to the main purpose of the tax exempt organization. They can even pursue other profit-generating activities that are unrelated to the main purpose (e.g. a church renting out its kitchen to a bakery)...the net income for those activities would be taxable, but this would not affect the tax exempt status of the organization.

http://www.irs.gov/Charities-&-Non-Profits/Unrelated-Business-Income-Tax

IMO the church's attorney is either being overly cautious, is worried about liability, or is not up to speed on the rules for tax exempt organizations (or all of the above).

Also, make sure the church kitchen can actually pass a health inspection before you make any commitments. There may be a lower bar for the kitchen's use for church activities than for commercial use.

it doesn't work that way here

 

the non-profit needs to own the unrelated 'for profit' businesses here in tn or they'll loose their tax exemption- bam!

 

ex. day cares, after school care, houses, private music lessons, stores, cafeterias, gyms, concerts, theatre, etc all church owned for profit biz under the non-profit umbrella

 

all the risk is on the church opening themselves up to for profit standards--fire & health inspections and zoning compliance issues--often they are in residential zoning ruh roh

 

so long as the church does it's church thing they're fine -- it's a pandora's box otherwise

simply said, the property the 'for profits' reside on will be legitimately taxed unless the 'for profit' is owned by a non-profit

 

think of a mega church somewhere having a food court with a pizza hut and a gigi's cupcakes and a yogurt mountain and a dunkin donuts--this doesn't happen

In the US it does not matter if the church owns the for profit business or the for profit business is an outside company, if the income is unrelated to the church's primary mission it (meaning only the unrelated income) is taxable. OP can clarify this with the local IRS office.

This shouldn't be a problem since it doesn't affect the tax exemption for the exempt activities.

if only it was that easy

 

i don't claim/want to know tax code by any means

 

1. but i mean tell that to my friends who almost lost their church and had to fight in court about the starbucks situation i outlined up thread--guess everybody didn't read see that part of the tax code huh?
2. why doesn't every church have lots of viable unrelated profit businesses owned by others located on their property--all churches want/need/could use more income --this would be an easy peasy way for them to make tons of money-
3. guess church lawyers over react

 

i firmly believe it does not work that way based on my years working in a non-profit and the problems i know others have endured

 

and i guess the biggest reason of all is one weeny link to the fathomless tax code is just a drop in the bucket to the working reality of all this

 

I can't speak to the Starbucks-related legal trouble since I don't know the details, but it's possible the church was not paying tax on the income they received from the Starbucks kiosk. It's also possible that the state's lawsuit was unfounded.

Many churches do have for-profit enterprises that bring in money. For example, the mormon church makes more than a billion dollars a year from its for-profit businesses:
http://en.wikipedia.org/wiki/Deseret_Management_Corporation

 

  yes sure because the church owns them

 

sure, day cares, book publishing, printing companies, music sales etc etc etc, family homes, vehicles, thrift stores, retail stores like i listed above--tons of for profit businesses under the non-profit umbrella owned by the non-profit--then retail sales are taxed but property is not taxed--(very confusing--my eyes are crossing floating back into my head aghhh)

 

the states and localities will get their tax dollar

 

the particular thing with the starbucks dealio is that their setup was exactly like mine in my bookstore

 

except i (the store) did not get written up in the local newspaper--just the church paper--

 

and the starbucks coffee was just the beans that just anyone can buy to serve out of their pump coffee pots

 

they did not have a starbucks franchise or anything--it was just 'good' coffee --

 

those two items combined --and the state clamped down hard because of it

 

the appearance of 'evil'--of not staying within your tax exempt footprint

 

and yes the church did eventually prevail but not after spending a ton of money and coming very close to loosing it all

 

nothing i'd ever wanna mess around with

 

even on line activities/sales have to be closely carefully monitored--to much minutiae--far too much minutiae

 

for ex.--if only church members could log on to the store we could have an on line sales presence--but if it was open to the general public no that's getting out from under the umbrella

 

but we could sell say for example--sermon tapes and our own music cd's on line

 

crazy head ache inducing detail