Can I frame my app business as a nonprofit if users can choose the amount to pay to download my app?

Question

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.

Answer 1

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.

Answer 2

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.