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This question is inspired by the website https://elementary.io where you can set the amount you want to pay to download the product, which is by default set to $20, and you can even set it to $0 in which case, if you look closely, the button to the right will change from "Purchase elementary OS" to "Download elementary OS".

This makes it confusing to me, if I set up a similar business model, are users really "purchasing" my product? Or can I say in my About page that we are a nonprofit who users can donate to if they want, but it's not required to download our app? I don't want donations to be a separate element or page because... if it's more streamlined, maybe one or two more users will consider donating.

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    Who or what are they 'donating' to? If you are pocketing the money, you should not claim to be a non-profit. 'pay-what-you-want' and non-profit are not the same thing, and really don't have much if anything to do with each other. Feb 14 at 15:59
  • This is not a request for spercific legal advice and should not IMO be closed as such. Feb 14 at 23:21

2 Answers 2

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Being a "non-profit" organization, in the US at least, does not mean you don't make a profit. There are plenty of for-profit companies that don't make a profit.

What it means is that you have filled out the paperwork with the IRS and other interested parties in your city, county, or state, that says your organization is a non-profit. That invokes certain rules as to where and how the funds you receive must be spent. It also relates to your purpose as an organization. If it's to "sell some software" then you likely don't qualify as a non-profit. If it's to reduce illiteracy in your community, that likely does.

If you intend to pursue becoming a non-profit, you should consult a local attorney who is experienced in these matter so that you do it properly.

I also caution you about using the term "non-profit" or "not-for-profit" or any variation of this as you may run afoul of various laws governing such organizations. Presenting yourself or your company as something that it's not is likely to cost you dearly.

What you are describing is more commonly known as "shareware" where users pay for the product, usually software, if they want to. In some cases paid users get more functionality. How much users pay also falls into this category.

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    All good information and advice, except the bit at the end about shareware. The pay-what-you-like approach described by the OP is a pricing model. Shareware is a licensing / distribution model. Free-of-charge, reduced-function versions of for-charge software is a promotional approach that is sometimes, but not always, coupled with shareware distribution. They may at times be motivated by similar goals and philosophies, but none of these three is the same as any of the others. Feb 13 at 16:15
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The answer by @jwh20 is good but does not summarize the nature of a non-profit organization. There are essentially three kinds of private entities.

  1. A natural person is a human being who is looking out for him/herself and his/her family.
  2. A regular corporation has a fundamental goal of making a profit for the shareholders.
  3. A non-profit corporation has a fundamental goal of serving the community in some way that is recognized by law as a worthwhile charitable service. Examples include feeding the hungry, education, and medical services.

Non-profits may raise money by asking for donations, selling goods (for example bake sales and auctions of donated items), and charging fees for the goods and services that are directly related to their fundamental goals. For example, an ambulance service might be non-profit but still charge for transporting patients to the hospital.

What distinguishes a non-profit from a regular corporation is what happens if they are financially successful. If a regular corporation makes a profit, they pay out the profit to the shareholders. If a non-profit makes a profit, they can use it to expand their operations, use it to lower their prices next year, give it to another charity, or something along those lines. They don't have any shareholders, and are forbidden from giving it to their founders, members, directors, or the like.

A natural person cannot be a non-profit.

I live in the US and my vocabulary is what you will find there. Other countries have similar concepts but may use different words.

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    "are forbidden from giving it to their founders, members, directors, or the like." I don't know very much about business or law, but isn't it a common misconception that non-profits can't pay salaries (including to their founders)? (At least, that's how I'm naïvely interpreting websites like theblueheartfoundation.org/…) Feb 11 at 20:53
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    @JoshuaGrossoReinstateCMs They can certainly pay salaries, but I think this answer is referring to some form of profit sharing. The profits must be used in some legally specified manner, not pocketed by the founders or employers.
    – nasch
    Feb 11 at 21:01
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    @nasch, as I understand from my wife who has worked in the nonprofit sector her whole career, the salaries of the organization's top officers must also be included in their official filing and are subject to public record. Anyone can check up on how much an executive director is making. There is a lot of regulation to maintain non-profit status. This is in the US.
    – Seth R
    Feb 11 at 22:36
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    Cooperatives and partnerships are also private entities, but do not fit into your list above. In particular, cooperatives are allowed (and often do) refund their profits to their members.
    – DrSheldon
    Feb 11 at 23:38
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    Scandals with ostensibly non-profit orgs paying their founders, friends or relatives exorbitant sums, either as salaries or in contracts, are not unheard of. That usually comes to light in one way or another and discredits both the people involved and the org itself.
    – jaskij
    Feb 12 at 0:43

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