The simplest difference between a not-for-profit theater and a for-profit or commercial theater is that the former uses a majority of its margins to further its purposes, while the latter is a business that uses its profits to make a financial gain for its owners, which may include stockholders. Nonprofit theaters provide enrichment for communities through art and education. For-profit theaters provide business and employment to a community.
Significance of a Nonprofit
A nonprofit theater may be in an old building with historical value and use its ticket sales and donations for the restoration and preservation of the building. Some nonprofit theaters that are not in a notable building will use their margins--the excess after expenses--to further enrich the community through educational classes and better productions. A nonprofit will pay its base staff, but depends greatly on volunteers who work purely for the love of the arts.
A for-profit theater is a business as well as an asset to the community in which it performs. It is privately owned and operated with paid employees instead of community volunteers. A for-profit theater company is ineligible for grants from foundations and relies on ticket sales and possibly dues from its members to operate.
Benefits of Nonprofit Status
The benefits of a nonprofit include eligibility for financial grants from foundations, federal income tax exemption, reduced postal rates, and exemption from sales and even property taxes in certain cases. Nonprofit benefits vary according to state. Some financial donors will only give to a nonprofit so that they know that the money is going toward the public good.
Benefits of a For-Profit Theater Company
An entrepreneur with a solid business plan may start a for-profit theater as a business designed to make money. Owning your own theater company provides an outlet for your dreams and passions, as well as the ability to guide the direction of the company. A nonprofit is made up of a group of people that may have different ideas on the direction of the company. Once your for-profit theater company is established, you may consider incorporating as a nonprofit.
Incorporation as a Nonprofit
To incorporate as a nonprofit, you need to determine the goal of your group. The IRS tax code will only give the 501(c)(3) status to an organization that is "exclusively for religious, charitable, scientific, literary or educational purposes" in accordance with its definition in the Internal Revenue Code of 1986. Community theaters fall under this category because of their contribution to the good of the community they are involved with.
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