Quote Quoting geneiusxie
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My question involves business law in the state of: Texas

Can a non-profit organization get most of its funds by selling things it produces (and donate the profits to a charitable cause)?

Can it also own patents and license them?

I want to start a business and donate the profits to help reduce world poverty - can I register it as a non-profit?
First, understand that the terms nonprofit corporation, charity, and tax exempt organization do not all mean the same thing. It may be that an entity would qualify as all three, where others might meet just one or two of them. The entity you describe might qualify as nonprofit corporation if set up properly under the Texas nonprofit corporation act and assuming it conforms its activities to the requirements of that act. But it would not qualify as a charity or as tax exempt charitable organization with the IRS if it is selling commercial products like any other company and simply donating the profits to organizations that fight world hunger.

Let me use a well known example to illustrate how one organization handles this. Newman’s Own Foundation, the charitable foundation that qualifies as a tax exempt organization with the IRS, owns 100% of the stock of Newman’s Own Corporation, the company that makes the Newman’s Own line of food products like salad dressing, popcorn, cookies, etc. Newman’s Own Corporation is a regular corporation that competes in the commercial market place selling its goods for a profit and cannot qualify itself for tax exempt status. As a result, it pays income tax on its profit like any other corporation does. It then pays up it profits to the Foundation in the form of a dividend. Because the Foundation is tax exempt, that dividend is not taxable to it. The Foundation then uses the money it receives to conduct its charitable activities.

I suggest you see a tax attorney who practices in the area of tax exempt organizations for advice on how best to set up the structure for what you wish to do. It may be that something different than what Newman’s Own did would work better for you. The details matter.