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It's more than just a ticket. Have you ever been sitting there at tax time, staring glumly at your business tax return, looking at the number on that little line called "total tax due" and wondered if there were another way? After all, wouldn't it be cool if you could start a corporation that didn't owe any taxes?

Ever? Well, there is such a corporation, and it's called a not-for-profit corporation. Interesting idea, huh? Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets. Today is Thursday, February 5, 2015. Today we talk about not-for-profit corporations as compared to for-profit corporations. Not a deep attorney-type conversation. We're going to stay big picture and general, but we're going to talk with a businessman who has operated within both environments and get his perspective.

My guest today is a man named James O'Neill. James is a former police officer, former 911 dispatcher, and call to--what do they call him in that? Not the dispatcher, the person that takes the call. The dispatcher is the one who sends the people, but now is involved with a company called Training for Safety.

As you'll hear in the interview, they had a choice some years ago, and their choice was whether or not to organize as a not-for-profit corporation as compared to a for-profit corporation. This is a very interesting planning idea. I'm glad that James actually emailed me with the idea, and I'm glad that he approached me.

It's something that was on my radar screen as a topic of further research, but I haven't made the time to research it yet. I was glad when James emailed and I said, "Hey, would you just want to come on and talk about it?" I love that he came on as a businessperson from a business perspective to talk about the various benefits and disadvantages of a not-for-profit corporation.

I hope you find this interesting. I hope you find it enlightening. I hope you learn something, and I hope you can get some ideas that you can apply to your situation. Here's the interview. Enjoy. James, welcome to the Radical Personal Finance Podcast. I appreciate you making time for me today.

Joshua, thank you for inviting me. As a listener, when you reached out to me and how we've come to do this interview today, you reached out to me, and among some other dialogue that we were having, you mentioned that you have experience and thought I should do a show on the topic of the not-for-profit entity as a potential planning idea.

In our dialogue, I'm not an expert in this area, and you've had some personal experience. I thought the best way to handle this would be to invite you on and we have a discussion about it together. I'll just let you kick it off. What's been your experience and your path in the business world as pertains to for-profit entities and not-for-profit entities and your own personal experience with that?

A little bit about me. I was always the kid that had the side hustle going on. I didn't know what to call it back then, but always doing something to earn a buck, to sell something to my neighbors, to wash their cars or mow their lawns or what have you.

That continued on into my adulthood where I started a business, and it was always something that was on the side. It was always something that I could fall back on if my primary career, something to happen with that. I found myself back in 2001 teaching for a living. I was teaching at a regional public safety training academy.

That's where rookie police officers and firefighters and 911 dispatchers and medics come for their basic academy training. Then they come back periodically for in-service or advanced type of training. I noticed that the standards of the education that we were providing were slipping. There were some issues and the executive director had this alleged open-door policy to come and talk to him any time there was something that you felt needed addressing.

I went to him and he was not receptive to hearing anything about what I had to say and went so far as to invite me to go and apply somewhere else if I was unhappy, which was not really the point I was trying to get across. I was thinking about that and muttering to myself a bit about it and was talking with a couple of the other instructors.

Lo and behold, independent of what I was doing, they had done exactly the same thing and had gotten exactly the same reaction. It turned out there were five of us who were a little bit disgruntled with what was going on. We all went out to lunch one day. The conversation turned to, "Well, we do this now for those people.

We could do a better job and do it for ourselves." One of the members of this lunch group said, "If we are going to do it, we should definitely do a non-profit." I knew nothing about non-profits, but I went to the only resource at the time that I knew of, which was Nolo Press.

I called them and I said, "Do you have any books on non-profits?" They said, "We sure do." I gave them my credit card number and they sent me a very nice book that had a CD that went with it that walked me through the process of how to set up a non-profit.

The five of us did just that. In 2002, we formed it. We've been running it. Some people have retired, but those of us that remain have been running it ever since. We do mostly training for public safety officials on how to do their jobs better, how to do it smarter, and how to help people who are calling 911 on the worst day of their life.

What were the factors in that conversation that led to the person saying, "Oh, you should definitely do a non-profit"? He had been doing some research on an entirely different idea. He also was somebody that always had multiple irons in the fire. He was researching this for another perspective idea.

But there were parts of it that appealed to him. Once I got into the book and started to learn and read, and then get out in the world and actually start providing a product as a non-profit, I realized that there are some substantial advantages to being a non-profit, especially in the educational role and especially in the non-traditional educational role.

We're familiar with colleges being not-for-profit entities, but private training providers are usually for-profit. As a non-profit, it gives us perhaps a little bit more legitimacy up front when people are first introduced to us. It gets us in the door of places that we would not normally get into. For example, since 2002, we've never paid for a training site.

All those sites have either been given to us as a donation or given to us because it's in a public building, and they have meeting space for public entities and for non-profits. There's probably the best example is the Kindler and Gentler Internal Revenue Service that you deal with. If you're a non-profit, the IRS assumes that you are doing good, and if you make a mistake, they assume it's an honest mistake, and they allow you the opportunity to correct it.

There isn't the punitive aspects of the IRS in the non-profit world unless you're clearly running a criminal enterprise as a non-profit, but most aren't. I was very surprised when I turned in the original IRS form to apply for the non-profit that I got a letter back from an individual with his actual name and his email address and his direct phone number to call him if I had any questions or if I needed any help.

That's not what I normally would expect from the Internal Revenue Service. The entity itself is registered as a not-for-profit corporation, but what about your personal income? Do you feel that you're making the same as simply an employee of the not-for-profit corporation as you would be as an owner of a for-profit corporation?

Probably. Non-profits have employees just like for-profits do. Because we're not paying corporate income tax, there sometimes can be a little bit more money floating around a non-profit than a for-profit. And there's other income-generating opportunities in the non-profit world that you don't see in the for-profit world, grants and donations and volunteers that want to help.

So if the non-profit is run as a business and the focus is on running a successful business, the non-profit can be just as financially successful as a for-profit can. Look at the United Way. They have adequate financing, or so it would appear. But one of the challenges within the non-profit world is that sometimes the non-profit gets so focused on what its non-profit goal is, whether that is feeding the hungry or housing the homeless or finding lost puppies, that they forget that somebody needs to be in the back room doing the accounting and making payroll and paying the rent and keeping the lights on.

And both of those have to be going on at the same time. If you're running an animal shelter, for example, you're going to have a lot of people that want to interact with the animals, but you're going to have many fewer people that want to sit in the back and keep the books balanced.

This is one of those areas where it almost feels like the ethics are quite tricky. And that's why it's an appropriately radical idea to bring on a radical personal finance podcast and talk through. Because this meme circulates in social media, it goes off and on, but you see this meme often that talk about how much the leaders of some large not-for-profit organizations make.

And usually it's things like Goodwill Industries, the American Cancer Society, the American Red Cross. I looked up the Goodwill here in preparation for this. It says, "There's a lot of money." Where is it? Okay, so just pulling from a Huffington Post article here, the CEO of Goodwill Industries, Suncoast, makes $440,000 per year.

The CEO of Goodwill Industries of South Florida makes $316,000, and there's a bunch of others of the local Goodwill organizations. The American Red Cross has a statement on its page that indicates that--and they were combating emails going around saying erroneous numbers, but the president and CEO of the American Red Cross is Gail McGovern, and her base salary has remained $500,000.

And what's interesting is I actually--maybe later, I don't want to interrupt our interview with going down this rabbit trail, but I actually don't necessarily think that large compensation packages are out of line for not-for-profit organizations. I used to think that until I was exposed to some deeper thinking in it with the Chartered Advisor Philanthropy coursework that I completed, and it really challenged my thinking on it.

So I don't particularly have a problem with it in the same way that many people seem to when it's shared on Facebook. But the point of those numbers is as an executive at a not-for-profit organization, you can certainly earn a substantial salary, and you are, I assume, just simply responsible to your board of directors.

So how do you work that out of setting up the board of directors for governance of the organization to figure out the executive pay and all of those issues? What has been your path through that? So when we originally were applying to be a non-profit and we were looking at who we were going to have on our board, we ran it through a very simple filter.

If I'm sitting at a table with this board member, how can they help me versus how can they not help me? And amongst the original five of us that originally formed this company, we had people in our sphere of influence that, "Wow, if this person was sitting across the table from me, they would teach me a lot about advertising, marketing, technology, budgeting, whatever it is." And I was amazed when I approached these people and asked them if they would volunteer their time to be on our board, they all said yes, and they were all very complimented.

Part of it too is, when you talk about compensation, and let me be clear, I am not one of these highly compensated executives that you just rattled off. Bummer. We'll get you there. But yeah, I would like to have that problem. And I'm certainly not here to defend the Red Cross as an example, but if you look at the Red Cross not as a charity, but you look at it as an organization which is nationwide and maintains a fleet of vehicles in every community designed for disaster response and emergency preparedness and first aid and water safety and all the other things they do, what would you pay a CEO who was in charge of that organization if it was for profit, being that they have such a wide charter?

And why is it not acceptable to pay someone in the non-profit world the same basic salary for the same set of problems? Right. You make a valid point, and that was exactly what I was alluding to. I've heard many people when you're trying to say, "Well, how do I identify which not-for-profit to donate to?" And one of the metrics that, usually the first metric that most people go to is, "Well, look to see how much of the organization's income is going to program costs versus administrative costs." And administrative costs would generally include the salaries of the employees of the company.

And so when you see these emails go around with allegations against the CEO of the American Red Cross, that's what they're focusing on. And most people say, "Well, they should be making $100,000 a year." But the point, and I originally saw it, it was a TED Talk by a man named Dan Pallotta.

I'll link to it in the show notes and an accompanying article where he talked about the work and the size of an organization that a CEO of that capacity is running. And the point was, if you had those skills to run a massive, multinational corporation, does it make more sense for you to go, and if the equivalent salary that you could earn working in the for-profit world is $3 million, or $1 million, $2 million, somewhere in that millions of dollars, let's say $2 million for a nice round number, or for you to go and work for the American Red Cross and be paid a salary of $200,000, what makes more sense for you?

Well, I gotta say, if I were making that decision, I would probably go with the $2 million and I would just give $300,000 to the American Red Cross if I cared about their cause, because that amount of money is gonna do more for the organization than the $200,000 that they're paying me, and I still am gonna have more spendable income in my pocket.

And that argument really made me think. Now, many people in the not-for-profit, I wanna represent the other side, many people in the not-for-profit sector would strongly argue against Pallotta's argument. GuideStar and Charity Navigator, those organizations, that's why they publish the information, and I think there probably is a balance.

But when I heard his argument, it was something I had never considered, and I had to sit back and say, "Wow, I don't think I'm ever gonna first go to somebody and say, 'You need to look at CEO compensation,' or, 'And I'm not gonna share that meme on Facebook about how much the American Cancer Society CEO makes.'" So what you find in the non-profit world, I think more so than the for-profit corporate America, is people that truly believe that doing what they're doing makes a difference in their section of the non-profit world, or in their community, or what have you.

Going back to the Red Cross example, your $300,000 donation, although I'm sure they would accept it, is not nearly as good as that team of a half-dozen people who are going to respond into a disaster area. So, although that team of people may be employees, they may be compensated, they may be compensated very well because they may be very educated and experienced individuals in dealing with whatever situation they're dealing with.

They know, at some level, that they are making a difference. I can bring this back to the non-profit that I work for. Our employees are people who have either retired from public safety, so they're getting a retirement income, therefore they don't need a whole lot of money from us, which, once again, they're giving back to the career that they were in, or they are people who are outside of public safety but who have dedicated a large chunk of their professional life to helping public safety respond better to emergencies and sometimes traumatic calls.

I'm thinking about a couple of our instructors that teach classes in how to deal with the stress that come with certain incidents that public safety respond to, or the dealing with people who are just not quite right. You have somebody who has some sort of mental illness or somebody that has had post-traumatic stress or traumatic brain injury, and how to teach public safety to respond to that person and understand that they're probably not the threat to you that you originally think they are, and that here are some other ways that you can deal with this person that are going to have better outcomes.

Normally, these people are doing this because they've seen their work has made a difference and has made a positive change in whatever community they're in. If you look at your local animal shelter, the people that are there volunteering and working for pay are doing it because they truly love animals and they want a better world for animals to be in.

So, in the non-profit world, it's not all about the finances, and in my personal case, I'm one of these people that you've done a number of shows on that has sort of semi-retired and I'm financially independent at this point in my life, or at least mostly so. I do draw a small salary, but it's very, very small, and it's because I want to give back to the community.

What about the restrictions that come with a not-for-profit entity? Meaning, there are, and I'm not an expert to know exactly what they are, but I have an impression that if I were to, so I could set up my business as a for-profit enterprise, or I could set it up as an educational mission, but I prefer to have full control over everything, and so I prefer to function as a for-profit.

What about giving up the restrictions that you might have in a not-for-profit over certain things that you can do, certain things that you can't do? And there are some sizable restrictions on non-profits. Generally speaking, the non-profit has to have a recognized non-profit goal, and that goal has to be charitable or educational or religious or literary or scientific.

Those are the big five. There's a few other outliers out there, but that's a little bit too much in the weeds. When you look at the Radical Personal Finance podcast, for example, clearly that's educational in nature. Now, where you're going to get a potential benefit being a non-profit is going to Comcast and saying, "This internet service that comes into Radical Personal Finance headquarters, that needs to be a donation because we're a non-profit." And when you are looking for a meeting room, then you go to the local library and say, "Here's our non-profit status.

We'd very much like to use one of your meeting rooms." Those kinds of advantages and other advantages that exist within the non-profit world, there are non-profits that exist solely to provide liability insurance for other non-profits. It was never on my radar that there was a non-profit insurance company until I started a non-profit and tried to find insurance.

And I was running a for-profit company and starting a non-profit at the same time, and I looked at the two insurance bills because they came in about the same time, and I thought, "My non-profit is actually doing things that are probably a little bit more risky in the liability area, yet I pay half as much for insurance." So there's that.

There's also this idea that if you're a non-profit, you're just sort of by default trying to make the world a better place. And there's a little bit more acceptance sometimes, and that attitude of people is a little bit different. But there are some hurdles to get in. There's some paperwork that has to go to the IRS.

I think it's a $400 filing fee, and you have to have one of these non-profit goals. But even then, there's some wiggle room there. If you think about it, for example, there's a non-profit that's close geographically to where I am that runs an ice cream store. And you wouldn't think that running an ice cream store is a non-profit because it's not charitable and it's not educational and it's not religious and it's not literary and it's not scientific, except that the non-profit's mission is to teach inner-city youth how to run a business.

And they use the ice cream store as a training ground for these teenagers so that they get the experience so that as they get a little bit older, they can go out on their own, start their own businesses, and be successful people in the world. I kind of have a love-hate relationship with the idea.

And it's not that I don't see the place for it, but I guess I just don't like... I was talking about this with a friend of mine here in town. And he's a friend who's very interested in urban farming, basically of the Curtis Stone variety. And so he's working to set things up.

And he was corresponding with Curtis Stone after hearing him on my podcast to try to bring him to town, to West Palm Beach where we lived, to build a, to do some seminars locally so we can try to get our local food movement going here in West Palm Beach.

And I'm not ready to allocate the limited time I have towards major help, but I was trying to help out a little bit where I could. And he was saying how difficult of a time he was having finding a meeting room, exactly what you said. And because he doesn't have a non-profit entity and he was thinking about, "I might just have to start a not-for-profit educational entity just simply to be able to negotiate the local environment to find a meeting room at a reasonable price." And my issue with not-for-profits, I guess, is I have this idea that capitalism has done a major amount of good in the world and I don't like asking people for money for donations.

And I don't, I think that things should stand on their own. But it's kind of a real problem for me because I have this idealistic perspective of not wanting to ask people for money, for donations. I think that's not so good. But yet I like to donate money and I like to give money.

And I see the work that some things do, but then I think, "Why doesn't somebody just do this and solve it in a better way?" And so I have this real conflict of emotion surrounding the ethics of it and what I want to be involved in and what I don't want to be involved in.

I talk myself in circles over it. So that's a common misconception of the non-profit world is that we are donation driven. There are many, many non-profits, including the one I'm with, that we get less than 1% of our funding from donation sources. So we're in the business of doing training classes and we do 50 to 60 training classes a year.

We've been doing this since 2002. We have never paid for a meeting space. They've always been a type of donation or a public building. But the idea that a non-profit can't charge for its services is not correct. When a student wants to come to our class, their agency pays for it.

And we make a sufficient amount of money from the agencies that are fiscally sound that we then turn around and donate about one-fifth of the student seats to agencies that perhaps need to come to the training but can't afford it or have some sort of budgetary restriction in the year.

So we're kind of taking the non-profit donation model, kind of turning it on its head, in that we're donating back based on what people that can kind of afford to pay do. And that's hundreds of thousands of dollars of savings every year to local government entities that just don't have the budget that some of the other agencies do.

So a question on that, and I'm glad you corrected that because I didn't mean to give that impression. I'll tell you, one of the best classes I took was recently, a couple years ago when I went through those philanthropy courses. And at the table was a number of leaders and executive directors of not-for-profit corporations.

And man, I learned so much about a world that I had little experience in. And one of the things was how each organization is very unique. Some are almost entirely donation-driven and some like yours are not. So I thank you for correcting me. My follow-up question though, if that, I guess if the impression of the things like meeting space, that's valuable.

But if it weren't for that, if it weren't for the positive impression, is there anything that you couldn't do just as well in a for-profit corporation? Or is the fact that the advantage of the not-for-profit due to the business and social climate that we live in? So we have a competitor in my area that does pretty much exactly the same thing we do, and they're a for-profit business.

And they are more expensive. And I assume that they are, I've never had access to their books, but I assume they're more expensive because they're paying tax on income. And I assume that they're also paying for other things, other expenses that we don't have to pay for. Clearly we could do exactly the same thing as a for-profit company, and I think it would be okay.

I think we could still have that same attitude that we're giving back and that we're trying to make the world a better place, at least our little tiny sliver of it. But being a non-profit just seems to open doors a little bit easier. And sometimes, too, a non-profit, if you're open to thinking outside the box, being a non-profit allows you to do some things that perhaps for-profit entities couldn't do.

Let me give you an example. I was in a police station the day before a training class, and I was checking out the classroom, and I was getting the tour from one of the people that worked there. And they had just built this new police station. They were very proud of it.

It was a beautiful building, and we were walking around. And in this one corner, there was a very large bank of batteries that provide backup power to the police station if the utility power should fail. And there was a gentleman there, and he was taking batteries and switching them around and replacing some old batteries.

So I got to talking with him, and I said, "Why are you doing this in a brand new building?" And he said, "Well, we actually, to save a little money, we took some of these batteries from the old building, and we're trying to make them work, but they really need to be replaced.

And I'm going to have to pay X number of dollars to get these disposed of properly and put the new batteries in place." And I said, "Well, why? What's exactly wrong with the old batteries?" And he said, "Well, they're technically nothing, but we tend to cycle them after three years just to make sure that there's no possibility that they could go bad because they power the backup power for the 911 center, and you don't want that to stop working." So I got him to donate the batteries to us, and then took them to a local ham radio flea market and sold them to ham radio operators who wanted backup batteries for their ham radio systems.

He got a donation. He didn't need to pay to have them disposed of. There were a whole bunch of happy ham radio operators that got a very good battery that's going to be given extra tender loving care by them, and they got it at 10 cents on the dollar because it was used, and it was all profit for our non-profit.

I don't know if I could have done that within a for-profit business and made it as attractive as it was for everybody concerned. So what about the idea, for example, let's use radical personal finance as an example. One of the things I've thought about is I would love if I could free up time or perhaps develop a curriculum or something.

I'd love to teach more in my local community, and I'd love to just help people with financial education. I haven't figured out how to do it. I've got the same 168 hours in a week that we all do, and I'm pretty stretched right now, but I just look around and I figure out and I try to think, "How could I cross the electronic divide?" And so I could very well set up a teaching not-for-profit entity focused on financial education, and I could develop a curriculum.

I could bring in volunteers. There are some organizations that do something like that around here, but whether we went into schools and taught to students, I would love to do that, or whether we just worked in the local community and teaching people who don't often have access to education until we get their podcast link set up so they can download my show for free.

So something like that. I could set up a not-for-profit entity, and then I could run it alongside my for-profit corporation where I'm selling educational materials, I'm selling show content, things like that. As a more experienced business person, could you see that being a good way to navigate the advantages and disadvantages of each entity?

Possibly. Within the nonprofit community, there are nonprofits who are dedicated to helping other nonprofits become better businesses. I was on a webinar just earlier this week actually for a nonprofit foundation that wants to create online training content for as many, essentially as many nonprofits as they possibly can. And they are offering the entire online platform for free to nonprofits as a grant.

And then also, I think, there is a technical expertise and their employees on the for-profit side of their business to help with the nonprofits. In terms of radical personal finance, that kind of thing would be a fit, perhaps, because all of the infrastructure is already figured out by someone else, and you get the benefit of a staff without having to pay for a staff, because when you're finished with them, they go back to their normal day job of doing this at the for-profit company.

And in reality, if you had these training products that you were going to try to sell on the for-profit side of the business, I don't know why you would do that. I don't know why you would simply just not sell them on the nonprofit side of the business. I don't see a reason why you would need to decouple those two things.

Because selling educational material is one of the things that an educational nonprofit does, because they still have to keep lights on and they still have bills to pay and salaries. I guess, I'm glad I got you on here. I have some friends that are attorneys and they're specialists in the not-for-profit space.

But the problem is, they immediately go so deep. It's hard to get an attorney to describe something from just a simple business perspective. But, I'm glad that you look at it from your perspective. I guess my issue is simply the negative opinion that I have of, in general, most people I think have a positive opinion of not-for-profit entities.

I hold, and this will probably mellow out with more time and more experience, but I hold the opposite. I guess I see so many of the large foundations, the family foundations. When you go and you study the tax structure of something like the Rockefeller Foundation or the Carnegie Foundation, things like that, and I look at it and say, "How would I dispose of $10 billion?" Well, I certainly don't want to keep it out here in the taxable world.

So if I'm going to keep it out here in the taxable world, then it's going to be subject to tax year by year. All I'll do is I'll go ahead and charter my foundation. That allows me to keep my money exercising control over other people and over society with influence without it being taxed.

I always struggle. I know that's a little bit weird for people who haven't thought about it, but I struggle with it because it doesn't seem like a level playing field. Personally, I don't like the state having the ability to dictate what it does, who's agenda is promoted and who's not.

I don't like the tax deduction for charitable donations. I prefer to do it myself. Again, this is weird for someone who's obsessed with tax deductions, but I don't want anyone to know about my charity, including it being listed on my return. I don't want the tax deduction for it.

It's one of those things where you've got to measure the cost of that and see if you're willing, but I just assume that those things are private. That really trips me up, personally, because of that weird philosophy. That trips me up to be able to look at the question objectively.

Within the foundation world, clearly the large foundations are trying to influence areas of interest that they have. The very wealthy that give lots of money create their own foundations and they typically center it around an idea that they want to see the world better in providing technology or healthcare or whatever their interest lies in.

There are other foundations, however, that are extremely broad. They're looking for a good idea and if you have the good idea, they're willing to fund it if they also think it's a good idea. But a lot of non-profits out there get zero dollars from foundations and get very little from donations.

They are simply running a business that has a separate entry in the tax code. To a certain extent, I think it's foolish not to take a tax deduction and to not take a tax deduction if you're entitled to it. Therefore, is it not equally foolish not to form a non-profit if you're eligible to do so?

As opposed to a for-profit corporation. Right. By the way, the reason why I struggle with that is actually, for me, a biblical perspective. The Bible says, "When you give, don't let your left hand know what your right hand is doing." I'd prefer that nobody ever know anything about what I'm doing with charity.

That would be my personal preference. I would prefer that nobody know. That's a very different thing. By the way, this is one of those areas where I, as a financial planner, it would be professional malpractice, I think, for me to give that kind of advice to somebody because charitable planning is a major piece of tax planning.

That's the reason why I have that weird thing about, "I don't like being on record." I don't like how in a presidential campaign, then immediately, "Okay, we've got to publicize the tax returns. Let's see how much money this person gave." It's my personal liberty-minded orientation that causes me that issue.

As with many things in my life, my politics often cause me trouble. Well, and there's a little bit more in the non-profit world regarding privacy because every non-profit- we don't file an income tax return because we don't pay income tax, but we file an informational tax return with the Internal Revenue Service every year, and sometimes to state returns, depending on what state you're in.

The IRS turns around, takes that informational tax return, and puts it up or allows it to be put up on the Internet for anybody to read. So if you are mentioned in that return, if your name is on the board of directors or you're drawing a salary over a certain amount, your name is on that informational return and exactly how much you got.

So the other side of it, not only the donation side of it, but also what the non-profit- how the non-profit pays its bills are very, very, very open to anybody that wants to look. All you have to do is go to GuideStar and put in the name of the non-profit and it will pop up.

So if privacy is a concern from the standpoint of running the business, then that would be a negative to starting a non-profit because you can shield some of that information in the for-profit corporate world. There is no shielding that information in the non-profit corporate world. The other development that I see, and I think this is especially important as my generation, kind of the millennials come, come into the workforce and advance in their careers.

I don't know anybody from my generation that only thinks in terms of dollar profit. Most people in my generation, and I don't know why there's various people that talk about the influences, but I'm concerned partly with dollars but also with impact. And that's changing the business world and that has led, I think, to the development of the B Corporation or Benefits Corporation.

And slowly there's this new- and it's on my research list. I'm totally ignorant as far as the details of it. It's some of the things I need to learn more about. But you see this kind of fusing coming together with the B Corporation. It's just the legislation in Florida where I live was just approved last year.

And it's essentially this merging of and blurring of the lines between for-profit entities and not-for-profit entities. So you certainly see the, even just the legislation is showing the tension between these two approaches. Just go to the internet, type in the name of a Fortune 500 company, and instead of putting .com at the end, put .org, which is the suffix for non-profit world.

And you'll find that many of these companies have a charitable arm or a grant arm or they're providing a similar service that they do on the for-profit world to the non-profit world. And there's a great deal of that mixing. I'll use Google as an example. Google is very generous in the non-profit world, giving non-profits for free what they sell to the for-profit companies.

So in terms of emails, email addresses, in terms of Google Docs and Google Drive, in terms of AdSense and various analytical tracking that they do and that they charge a lot of money for in a lot of places, they will give that to the non-profit world for free. Mostly, I assume, because they make that assumption that the non-profits are out there doing some good and that they want to support them.

So question, as we start to wrap up our conversation here. You have run and been involved in both for-profit corporations and not-for-profit corporations, correct? Correct. If I took away corporate income taxes and personal income taxes... Can you do that? I'm trying. Unfortunately, I'm in about 1% of people. It's like every economist from every major school would say, "Eliminate income taxes." But in the general population, I'm in the tiny, tiny minority.

But let's assume that I... This is what I would vote for. Eliminate tax influence. Eliminate the income tax, both the corporate income tax and the personal income tax. Just completely eliminate it. Do you have a sense of would you still choose... I mean, it's such a hard world to imagine, but would you still look at one entity type versus another if I were to completely eliminate income taxes?

I'm not sure I can really imagine that kind of a world because the tax structure in this country is so intertwined into everything we do every day. If you eliminated all income tax, both corporate and personal, I'm not sure the non-profit world would need to exist because every corporation essentially could be a non-profit, if that makes sense.

Exactly. So apparently we need to get you a magic wand so that you can make this happen. Well, there is this tiny minority of libertarians who do it. And if anyone's interested, it's not... Even though it sounds a little bit nuts to most people, it's really not that far-fetched.

And there are very few things that if you enjoy studying economics, there are very few things that a majority of economists from various schools and philosophies agree on. But there's very little disagreement over the idea of removing corporate income tax. That is one that many people would agree on.

There's more controversy over the idea of eliminating personal income tax, although I'm on the weird fringe where that would be my proposition, is eliminate income tax. It just does not make sense to me because then it forces... If you eliminated income taxes, it would free up people like me to do more useful work than simply helping rich people avoid tax.

And that's how I see it. It's fairly simple. It allows people to focus on enterprise and just simply their ability to focus on what they're actually trying to do. And again, that's a very complicated discussion to go to actual numbers and look through. And you have an incredibly large ingrained industry that would not like that idea.

No, but that's the problem is it'll never happen. Because even, for example, I'm for the... Personally, it's my personal political opinion. I'm for the elimination of every single tax credit and deduction. So I'm for the elimination of mortgage interest deduction. And that's the one that gets everyone upset. Well, it'll never happen.

I don't see any possible way where it will happen barring some dramatic change in the political environment we live in simply because you say, "Well, we're going to get rid of the mortgage interest tax credit." Well, all of a sudden now the National Association of Realtors flips out. Or if we're going to get rid of clean energy tax credits.

Well, all of a sudden now these people flip out. And I just simply don't think it's a good practice for the state to dictate policy through the tax code. And that's what happens is certain organizations get funded and certain ones don't. And it's all a matter of manipulation. And so if you're going to go and...

It's incentives. And the incentives work. That's the thing is we all align ourselves with the incentives. And I don't particularly like that way of running a society. I would prefer each individual person to simply be allowed to make the decisions for how they run their life and without having to deal with going counter to the incentives that are established.

Feel free to comment if you... I'm sorry. We got into a political discussion there. I'm not sure what to say other than when you make that happen, please send me an email. I would like to come and visit and perhaps move. I live in this very strange world of idealism in my head.

But that's all right. It doesn't bother me very much. We'll see. You never know. Maybe you would be happier with tax policy if some of our elected officials were just a tad bit smarter. I would probably be that way. But unfortunately, I don't see much barring... We'll see. Again, the only change happens is political change only happens when the pressure gets great enough.

For example, as we record this, it's the 5th of February. And if you watch what's happening in Greece and in the Eurozone and the Greek government, if you look at the political pressure that's been exerted on the Greek government by people saying, "This is ridiculous. Why are we going to mortgage our futures to pay this debt?" It'll be interesting to see what Greece does.

And my personal prediction, please don't do anything with this, but ultimately, I think they'll just say, "We're not paying the debt," and they'll default. And what's interesting is when the pain gets great enough, the government responds. But unfortunately, it usually happens when the pain is great enough. And so, I don't see any possible way for my ideal little slice of the world to exist.

But you can at least sit and think about it and see how it would be more advantageous, which is generally what I do. As we go, I'd like you... We have an outline here in our notes of the pros and cons. Would you take a moment and just reiterate the notes from your outline as a good concluding summary and then give people some suggestions on where they can go for more information?

Sure. If you're an individual that is thinking about starting a business, especially a corporation and not just a sole proprietorship business, but you want that legal structure, you want that perhaps personal protection that a corporation offers, a nonprofit is something to consider if it is within that charitable, educational, religious, literary, or scientific purpose.

It has worked well for us. I know that we're only one data point. I would encourage people to look to the nonprofit community locally. Go to an event where they are doing a training class or a mixer or what have you. Look around. See if it's the kind of industry that you would be comfortable in.

Don't get caught into the idea that you have to always be soliciting for donations. You can absolutely charge for services just like any company does. If you're the kind of person that writes well and perhaps has had some grant writing experience, the nonprofit world can be very lucrative. There are some cost savings in the nonprofit world in terms of...

I gave the insurance example earlier. Many municipalities, the business license is free for a nonprofit because they assume we don't have any money. Rarely do we pay full price for anything. Almost every business, large business, has a nonprofit discount. That includes when I go down to my local office supply store to buy a ream of paper, there is a nonprofit discount because I took the time to register as a nonprofit.

And you see that across the entire industry. When you're a nonprofit, you are a real business. People can go look you up, see what you do, find out about you, independent of what you might put on your website. That may be a big advantage to somebody depending on the type of business that they're running.

It's also a good venue for volunteers. If you see that something that would be good for whatever you're thinking of doing, volunteers like to come to nonprofits to come to work. And some volunteers put in a remarkably large amount of hours. You'll find that sometimes people will come in, volunteer full time, and become full-time employees for you.

But there are some clear disadvantages to nonprofits. You might not have a nonprofit goal that's compatible. You may not have the time or the you may not want to deal with the amount of paperwork and dealing with the IRS and filling out the forms and reading the book and following the sometimes detailed step-by-step instructions.

There's definitely a delay. Paperwork takes time. It takes time for the IRS to process it and get back to you. That's going to be weeks, probably months. But if time is not a constraint, then that might be okay for you. There's definitely shared control. You have a board of directors.

Now, that board of directors might be three people. And you might be one of those people on the board. That's not necessarily a bad thing, but it's definitely something you have to think about. Can these people contribute meaningfully? Can they give you ideas? Can they give you guidance? Can they introduce you to people that you normally would not be introduced to?

I frequently do this with my board. I ask them if they know someone in a certain industry or job. Frequently they do. They're happy to make the introduction. And it's a different kind of introduction when they're saying, "I am on the board of directors. This person works at this company.

Please talk to him." It's a very different experience than, "Hey, I've got a friend and he wants an hour of your time to talk." The book we used is from Nolo Press. The title of it is "How to Form a Nonprofit Corporation." It's written by a nonprofit attorney named Anthony Mancuso.

I've never met the man, but he wrote a really good book with lots of step-by-step instructions. Clear, concise, fill out the forms, do what the man says in the book, and the rest is history, as they say. Or, of course, you can just put advantages of a nonprofit into your favorite search engine, and you will get a lot of hits from a lot of large nonprofit entities that exist to help nonprofits.

But you do have to have the idea. You do have to have the desire to do something positive. Making money is probably a secondary thing in the nonprofit world, but it definitely needs to be a thing. But if you find you're passionate about something, maybe the nonprofit road is the road you might want to take.

>> I'll reaffirm your recommendation of Nolo Press, both there with the specific book you recommended, and also in general. They're actually one of the few companies that I've thought about that I could wholeheartedly endorse and advertise for on this show. I haven't gone and approached them to see if they want to sponsor the show.

But for the large contingent of DIYers that are in the audience, I have never been dissatisfied with a Nolo Press book that I've looked at. Obviously, some are limited in scope, some are broader in scope, and you need to choose the book that is going to serve your needs.

But they do a very excellent job with all of their books. And as far as I've been able to find, they've been accurate, they've been well-written, and I just love what they do. So check out How to Form a Nonprofit Corporation, or check out any of their other titles if you are looking for information on various aspects of financial planning.

And check at your library. My local library has a large number of their books in stock. Let me amplify that for just a minute. When we went through this book, and there was an accompanying CD that had all the forms on it to fill out, we went literally step-by-step through this.

I had no knowledge of the nonprofit world prior to this. And then I sent this package off to the Internal Revenue Service, and it was obvious that someone at the IRS read through this line-by-line because we got a letter back asking a couple of very specific questions about something that we had put on this form.

So it was very obvious that a human being sat down with this and studied it. And once we answered those questions, our nonprofit certification came in the mail. So if it's good enough for the IRS, it's probably good enough for the rest of us. Absolutely. James, thank you for A) coming on, B) listening to the show, and C) suggesting the topic.

I really appreciate it. I've enjoyed our conversation. Josh, it was my pleasure. Now obviously your proper step from here is research. Because again, there are many factors that go into any entity selection decision. There's many factors that go into choosing between a C corporation and an S corporation. LLC versus partnership versus proprietorship, and for-profit versus not-for-profit.

Even as I mentioned there at the end, what about that B corporation? It's legal in 28 states. Frankly, I don't have a clue about it other than just a brief nagging of my mind saying, "Joshua, you need to go and research that." So that is something that is on my list that I need to do and prepare some information because frankly, I don't know what I'm talking about when it comes to that.

So do your research. But I do think that for some of you, this could be an interesting idea that you could apply in your situation. So consider that. As we go today, I am not going to play the normal ending music. Rather, I'm going to mention, I'm going to play for you a very brief story that I think you'll enjoy.

This is in line with what James and I were talking about there at the end regarding tax policy. This is an NPR story. It is 4 minutes and 16 seconds. It was broadcast on Morning Edition on October 19, 2012. I'm going to put the full 4 minutes and 16 seconds of audio here for you to listen to.

This was back when Mitt Romney and Barack Obama were vigorously debating for that election. I thought it was a really well done story. This was part of a larger Marketplace Money story, podcast episode for them. It was episode 387 of that show. I will link to that in the show notes as well so that you can listen to that on the NPR blog, on the NPR site.

If you're interested, that's a full 30-minute Marketplace Money episode on how different economists from different backgrounds tend to actually agree on a lot of things and how utterly unpalatable it is from an economic perspective. I'm done for the day, but I'll leave you with this 4 minute and 16 second excellent story on Morning Edition from almost three years ago.

Enjoy. When you watch a presidential debate, it's easy to think that the nation is deeply divided over economic policy. But when you talk to the experts, to economists, it turns out they agree on an enormous number of issues. Our Planet Money team wondered what it would sound like if you could take some of those academic ideas about the economy and put them in a candidate's mouth.

NPR's Robert Smith finds out. To create a dream candidate, you need a dream team. We took five leading economists of all different stripes, conservative, liberal. You could probably describe me as left of center, it'd be fair. Pro-market, but not necessarily pro-business. I'm a pretty hardcore free market guy. I'm a professor of health economics at the Harvard School of Public Health.

I think of myself as a radical pragmatist. And we said to this team, put all your differences aside and tell us what can you actually agree on. In an ideal world, what should the presidential candidates be talking about? Luigi Zingales from the University of Chicago Booth School started off with something pretty uncontroversial.

The United States tax code is a disaster. All the loopholes and differences and in particular, the deductions. Now, politicians say this all the time and they rarely give a solution, but our economists all agree on a pretty good way to fix it. The United States, they all said, needs to get rid of a giant tax deduction that unfortunately millions of Americans love and enjoy.

The mortgage interest deduction. The mortgage interest deduction. Mortgage interest is extremely perverse. If you own a home, pay a mortgage, you can write off the interest on your taxes. And if you're one of the lucky ones, it's awesome. A little help from Uncle Sam to live the American dream.

But to an economist, a tax break is a multi-billion dollar gift to a very particular group. In this case, a group that doesn't always need the money. Here's Dean Baker. He's a liberal with the Center for Economic and Policy Research and a conservative, Luigi Zingales. It just makes no sense that, you know, if we have Bill Gates or whoever, some very wealthy person, we're subsidizing them to get an expensive home.

So because rich people receive a much larger subsidy, the price of houses increase so much that it actually makes less affordable for the poor people. If you totally eliminate this deduction, the U.S. government would have an extra $100 billion a year to pay down the deficit or maybe lower overall taxes.

Why wouldn't a politician at least float the idea? Well, we wanted to see how it would sound. So we hired an actor, we wrote him a stump speech, and put him in front of a fake audience. That's why, when I'm elected president of the United States, I have a special plan for the middle class.

All of you Americans who own your own homes, I promise to raise your tax bill by thousands of dollars a year. And that's why no one elects economists. Katherine Baker from Harvard says as painful and as unpopular as eliminating deductions would be, there is an upside. The system would be more fair, and it would bring in all this extra revenue to the government.

So I asked the panel, "Any chance with all that extra money you could maybe lower some tax rates too?" Well, our economists did agree on one tax that has to go. Read my lips. No taxes for corporations. Zero, nada, nothing. This is not going to go over well with the middle class either.

Right now President Obama and Mitt Romney are advocating lower corporate taxes, but no one said get rid of them altogether. But our conservative and liberal economists agree, in principle at least. Here's Dean Baker. We don't want to prevent Microsoft or General Motors or whoever it might be from investing more and improving their product line.

That's a good thing in my view. Our economists said if you want to tax rich people as part of public policy, tax rich people. Tax the owners of the corporation, but don't tax the profits from the corporation that are reinvested in creating jobs. Now before you think that our economic dream team has nothing but unpopular ideas, there is more to the plan.

Later today on All Things Considered, our economists say there might just be a way to get rid of income taxes altogether. And they unveil their big plan to combat illegal drugs. Make them legal. And other economic wisdom you won't hear in the debates. Robert Smith, NPR News, New York.

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