Why Didnt Toms Shoes Set Up As A Not For Profit Entity?
Whether the general public knows it or not, Toms Shoes, yes, the famous Toms Shoes, is a not a nonprofit organization. In fact, it is a for profit enterprise that makes millions of dollars for its shareholders. Some of you who are interested in “cause marketing” and “social enterprise” may be interested to learn the legal reasons why Toms Shoes did not set up originally as a nonprofit organization.
One could say there was clearly a compelling economic reason which is the shareholder’s can profit this way, but there are also some very good legal reasons. Despite what appears to be a charitable purpose of “giving away shoes”, the IRS analyzes the activity as “selling shoes” and if an organization is selling shoes then this is a commercial activity and not a charitable activity.
Specifically, under Sect
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