Building the right business structure for your farm.
Can I structure my farm as a nonprofit?
Yes, although many farms will have trouble meeting the requirements to receive 501(c)(3) tax classification, which is necessary to receive tax deductible donations and be competitive for grant funding. Most nonprofits are formed in two steps: (1) form a nonprofit corporation through the state, and (2) receive tax classification as a 501(c)(3) from the IRS. A nonprofit corporation can’t be owned by any one individual, sold for a profit, sell shares of stock, or have its assets used to benefit any one person or group. To receive 501(c)(3) classification, the organization must have—as its exclusive purpose—an eligible charitable, religious, or educational purpose. Farming is not easy to classify as an eligible purpose. Further, 501(c)(3) organizations are not supposed to compete in the marketplace with for-profit businesses. Because of these restrictions, sustainable farmers don’t often use a nonprofit model, although there are some nonprofit entities with components of farming in their purposes and operations.
FOR MORE INFORMATION: Farm Commons’ Choosing a Business Entity: Flowchart has many questions to help farmers decide whether a nonprofit model is the right way to go. For detailed steps and requirements to create a nonprofit, read chapter 6 (pages 261–270) of Farm Commons’ Farmer's Guide to Choosing a Business Entity.