What is the difference between an LLC and a Non-Profit?

Answer 1

Some statesdo allow non-profit LLcsIt is my understanding that some states allow non-profit LLCs. I'm an attorney in Missouri, and a friend at the local Secretary of State office made a passing comment one day that he was seeing more and more non-profit LLC filings, which was the first I had heard of them.

I personally am still researching the issue, but I find the idea of a non-profit LLC very enticing. One distinction here in Missouri is that the non-profit corporations statute in Missouri requires 3 directors, while the Missouri LLC statute allows for single-member LLCs. As such, I think you could actually create a non-profit LLC with only one director and avoid the 3-director rule under corporations.

As LLCs are much less formal and have less meeting structure and such, a non-profit LLC would be a good thing for those looking to form a non-profit without some of the structures required of corporations. I have no knowledge of how the IRS handles non-profit LLCs, though, in regards to filing for 501(c)(3) status.

Non-Profit OverviewA non-profit corporation is an incorporated organization that is not intended to distribute profit to its members or owners, but instead uses them to pursue its goals. Non-profit does not literally mean that a non-profit corporation cannot make a profit. A non-profit can take in more many than it spends, as long as the non-profit is organized and operating from a non-profit purpose. Tax-free profits may be used for the benefit of the organization or for operating expenses (including officer, director and employee salaries. However, profits, in the form of dividends, cannot be distributed to its officers, directors or employees.

Answer 2

An "LLC" is a "limited liability company" selling shares to its members who generally intend to make a profit for themselves, similar to a partnership or a business corporation.

A "non-profit" entity (which is often a corporation) is prohibited from passing its profits along to its members, although it may have huge profits, and must spend it on a non-profit purpose (education, research, charity, church, etc).