I homeschool my 3 children and 3 children of another family. As a project, we learned how to create a school website and as a idea to raise money for curriculum, supplies and hopefully a field trip or two. We’re in NC and also considered a private school.
We thought of an idea to sell Fairy Gardens that we personally make and accept donations on our website. Am I breaking any laws by not being registered as a business or non profit? 100% of profits will be spent on the school, but it goes to my own PayPal account and I state on the website that receipts for the donation being spent on the school and states that the donations are not tax deductible.
It dawned on me that it might not be allowed to do this without some kind of permit. I’m not sure though because I would be allowed to make fairy gardens and sell at a yard sale, so is it different if I sold them online?
Also, can I be a non-profit since I homeschool the children of two families and not just my own? I would greatly appreciate your feedback on this and thank you so much for all of the knowledgeable information you’ve shared on your site!
April in North Carolina
You and the other family are not a nonprofit organization, even if North Carolina classifies your homeschool as a private school. Private school only means you are not funded with public (i.e. government) funds. It does not make you or your business a nonprofit organization. (BTW, some private schools are for-profit businesses.)
In order to be a tax exempt nonprofit, the IRS says you must be operated and organized as a nonprofit.
A tax exempt nonprofit organization “must not be organized or operated for the benefit of private interests” (Source: https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations).
So benefiting only you and the other family is “private interests” and not serving a public good, therefore you cannot be a nonprofit organization with only two families getting all the benefits.
Your fairy garden business is NOT a nonprofit. It is a business, probably a micro business. Stop calling your sales “donations.” They are simply sales of products (fairy gardens in your case) by a business.
You probably need to register in North Carolina as a business and probably get a vendors license to collect and pay sales tax.
Better start googling “Start a small business in North Carolina.”
My books Micro Business for Teens could help your children start this as their business (not yours) and learn a lot too!
Additionally, your comment about selling your products at a yard sale is not quite correct. You can sell fairy gardens at a yard sale, but then you’re running a business and the profit is taxable. In yard sales, you are generally selling household items you bought over many years and used personally and selling them for less than you paid for them. But that’s not true for your fairy gardens. You did not use them personally and you are selling them at a profit, so it’s a business and you should register it and apply for a vendor’s license.
Carol Topp, CPA