Changing a not-for-profit into a for-profit?

trap4

We have a not-for-profit company operating in the education market.

It has been an advantage to us in previous years as we secured funding that we would not have done had we been a for-profit.

However, things have changed dramatically in the last several months and now we'd have more funding opportunities open to us as a for-profit.

Is it possible to change a not-for-profit into a for-profit? If so, what is the procedure?

smeharg

Is it a company limited by guarantee or shares?

Normally a not-for-profit company is limited by guarantee, whereas a "for profit" would be limited by shares.

I don't think you can change from one to the other so I think it would be matter of establishing a new company and transferring the business to the new company.

There could be tax and legal implications in doing this so you'd really need to get professional advice.

You'd also need to look at any conditions attached to previous funding recieved as a not-for-profit organisation.

Tangled

smeharg wrote: »

You'd also need to look at any conditions attached to previous funding recieved as a not-for-profit organisation.

This was my first thought, you may have to refund grant money if it was given for a not-for-profit company.

dbran

Hi

When you say not for profit do you mean that the company was registered with the revenue as a charity. If so I can only see problems in changing the status of the company to a profit making entity and I dont see how it can be done.

You could of course register a seperate company and trade as a profit making venture alongside the charity. However again I would wonder if this would impinge on the charitable status of the previous company.

So then you be best off closing the charity down and reregistering a new company as a trading entity.

There would also be certain exemptions which would no longer apply to you as a profit making organisation. This would possibly negate any benefits from switching over.

So I would consider carefully the costs and benefits before you procede.

Best Regards

dbran

antoinolachtnai

There are a few other technical things that can be done.

Are you registered as a charity with the revenue commissioners? That makes a big difference and puts you into a whole different world. What you can do will then basically depend on what is written in your Articles and what the Revenue will allow you to do. They are unlikely to allow you to simply transfer the assets out of the company into another company with no shares.

Be sure to read the articles of association and check the rules there. These are important.

It also depends who the other members are.

It is not necessarily the case that you can simply transfer the assets (like intellectual property and brand) from the guarantee company to another company that the directors own. It may be that simple, but it may not be. Effectively you are talking about liquidating the guarantee company. If you do this, you really need to follow the procedure for this in the articles (which may require the proceeds to go to some charitable cause or some cause with similar objectivess).

Another possibility is to incorporate a subsidiary of the guarantee company which has shares. This is quite a technical thing to do and is probably not worth your while. But it is a possibility.