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Should My Assisted Living Be a For-Profit or Non-Profit?

By March 23, 2024May 8th, 2024No Comments
non-profit assisted living

Another reader is making plans to start their first assisted living facility.  They asked whether they should set up a for-profit or a non-profit entity.

I have seen many online ads promoting setting up a non-profit for your assisted living business.  The benefit, some claim, is that you may qualify for certain grants and loans.  That may be true, but it’s essential to consider all the pros and cons of this decision.

Non-profit or For-Profit: Which Is Right for You?

If starting an assisted living facility, you might consider setting up a legal entity as a non-profit or a for-profit organization.  There are several factors to consider, including your goals, the type of business you want to run, and the tax implications.

In a recent client conversation, we discussed the pros and cons of each type of organization.  Here’s a summary of our discussion:

Non-profit Pros and Cons

  • Pros:
    • Tax-exempt status
    • May be eligible for grants and donations
    • Can issue tax-deductible receipts to donors
  • Cons:
    • More paperwork and regulations
    • You may have to disclose more financial information
    • You won’t be able to sell your property and keep the proceeds

For-Profit Pros and Cons

  • Pros:
    • More flexibility
    • You can keep all profits, including when you sell 
    • Usually, it is easier to raise capital
  • Cons:
    • Subject to taxes
    • Not eligible for as many (or any?) grants and donations
    • May have to pay higher insurance rates

Ultimately, the decision of whether to set up your organization as a non-profit or a for-profit is a personal one.  There isn’t necessarily a right or wrong answer, and your best choice will depend on your specific circumstances and goals.  If you, like the client I visited with, want to build a business that you will one day sell to help prepare for retirement, then a non-profit won’t be the choice for you.  However, a non-profit is an excellent choice for those who want to start a needed service in their community and leave it one day as part of their legacy.

If you’re unsure which type of organization is right for you, speak with a lawyer or accountant.  They can help you understand each option’s legal and financial implications and make the best decision for your business.

 

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