Can a nonprofit be a subsidiary of a for profit?
<p>I have seen many results for a for profit being a subsidiary of a non profit, but not the other way around. I know there are some conflict of interest laws and was wondering if any of you can link me to any legal documents regarding this. </p>

<p>My question again is, can a for profit company form a nonprofit subsidiary?</p>

<h2>A for-profit company cannot technically have non-profit subsidiaries, but it can do so effectively by design of non-profit by-laws.</h2>

<p>According to <a href="https://www.iasplus.com/en/standards/ias/ias27" rel="nofollow noreferrer">IAS 27</a>, a subsidiary is an entity that is <em>controlled</em> by a parent. Control is defined accordingly:</p>

<blockquote>
  <ul>
  <li>over more than one half of the voting rights by virtue of an agreement with other investors, or</li>
  <li>to govern the financial and operating policies of the entity under a statute or an agreement; or</li>
  <li>to appoint or remove the majority of the members of the board of directors; or</li>
  <li>to cast the majority of votes at a meeting of the board of directors.</li>
  </ul>
</blockquote>

<p>Unlike a for-profit business, non-profits do not have any shareholders. They are not owned by anyone in particular, although governance responsibilities are <a href="https://www.501c3.org/who-really-owns-a-nonprofit/" rel="nofollow noreferrer">vested in the board of directors</a>, who are in turn accountable to state and federal authorities.</p>

<p>Technical control (ie. points 3 and 4) is exercised through share ownership. Majority shareholders naturally have the right to appoint/remove a majority of directors, and by definition cast the majority of votes at a meeting of the directors. Since non-profits do not have any shareholders, for-profits (or any other kind of organization) cannot exercise technical control over non-profits.</p>

<p>However, <a href="http://www.nonprofitlawblog.com/can-a-nonprofit-own-a-for-profit-can-a-for-profit-own-a-nonprofit/" rel="nofollow noreferrer">effective control</a> (ie. points 1 and 2) can be exercised by for-profits over non-profits. For example, a for-profit could design its non-profit subsidiary's by-laws to ensure that a majority of board seats are appointed by the for-profit.</p>

<p>The best example of non-profits being effectively owned by for-profits are <a href="https://www.thebalancesmb.com/the-history-and-types-of-foundations-2502444" rel="nofollow noreferrer">corporate foundations</a> like the <a href="https://walmart.org/who-we-are/governance-and-our-values" rel="nofollow noreferrer">Walmart Foundation</a>.</p>

non-profit limited-liability-company