LAW OFFICES OF RL JOHNSON
Disclaimer: The information provided herein is provided for informational purposes only and does not purport and is not intended to solicit, initiate, or form an
Attorney-Client relationship. Moreover, while some of the information found on this site is based on laws and court rulings, it is not intended to be legal advice and must
not be relied upon as legal advice on specific facts.
Attorney-Client relationship. Moreover, while some of the information found on this site is based on laws and court rulings, it is not intended to be legal advice and must
not be relied upon as legal advice on specific facts.
Law Offices of RL Johnson | Copyright © 2007 All Rights Reserved.
Member of Michigan Business Directory
Legal Services for Businesses
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LOCATIONS
MAIN OFFICE
Livonia Michigan
39111 Six Mile Road
Livonia, Michigan 48152
Tel.: (734) 521-2501
Fax: (800) 597-0284
Our Other Locations
- Southfield Michigan
Call for an appointment: (800) 597-0284
Bloomfield Hills Michigan
Call for an appointment: (888) 443-4146
Novi Michigan
Call for an appointment: (800) 545-8930
UNRELATED TRADE OR BUSINESS INCOME (“UBIT”)
The Internal Revenue Service (“IRS") defines unrelated business income is income from a trade or business that
is regularly carried on by a tax-exempt organization and that is not substantially related to the nonprofit’s
exempt purpose. See IRS Publication 598.
Successful nonprofits are no different from any other business. That is to say, the focus is on a delivering a
product or service. The difference, if any, may be that while a for-profit business aims to create customers, the
nonprofit works to neutralize weaknesses and to make strengths effective through performance.
In difficult economic times, dollars dropped into collection plates are scarcer and nonprofits must always
compete with other charities for ever-dwindling public dollars.
Consequently, successful nonprofits become social entrepreneurs and develop earned-income strategies in order
to diversify their funding and guarantee sustainability. Ideally, the earned-income strategy is in perfect
alignment with the charity’s core mission. For instance, a hospital pharmacy may sell pharmaceuticals to the
general public without losing its identity as a charity.
However, when a 501(c)(3)’s earned-income strategy drifts away from its core mission, it risks the IRS
classifying the activity a “trade or business.” The tax consequences can be devastating for a creative and well-
meaning charity.
We are nonprofit specialists with years of experience in this area. Whether you’re considering the benefits of
forming a nonprofit or looking for legal support for an existing organization, we can help. Please give us a call
to discuss your business needs. Please give us a call to discuss your business needs.
The Internal Revenue Service (“IRS") defines unrelated business income is income from a trade or business that
is regularly carried on by a tax-exempt organization and that is not substantially related to the nonprofit’s
exempt purpose. See IRS Publication 598.
Successful nonprofits are no different from any other business. That is to say, the focus is on a delivering a
product or service. The difference, if any, may be that while a for-profit business aims to create customers, the
nonprofit works to neutralize weaknesses and to make strengths effective through performance.
In difficult economic times, dollars dropped into collection plates are scarcer and nonprofits must always
compete with other charities for ever-dwindling public dollars.
Consequently, successful nonprofits become social entrepreneurs and develop earned-income strategies in order
to diversify their funding and guarantee sustainability. Ideally, the earned-income strategy is in perfect
alignment with the charity’s core mission. For instance, a hospital pharmacy may sell pharmaceuticals to the
general public without losing its identity as a charity.
However, when a 501(c)(3)’s earned-income strategy drifts away from its core mission, it risks the IRS
classifying the activity a “trade or business.” The tax consequences can be devastating for a creative and well-
meaning charity.
We are nonprofit specialists with years of experience in this area. Whether you’re considering the benefits of
forming a nonprofit or looking for legal support for an existing organization, we can help. Please give us a call
to discuss your business needs. Please give us a call to discuss your business needs.
Use the following form to schedule a free consultation or to get more information about our company or services.
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