Can a company donate to a non-profit to pay for services arranged for before hand?
Donations need to be with no strings attached. In this case, you make the cash donation, a deduction, and then they pay you, in taxable income. It's a wash. Why not just give them the service for free? Otherwise this is just money going back and forth. "When you say ""donate"", it usually assumes charitable donation with, in this context, tax benefit. That is not what happens in your scenario. Giving someone money with the requirement of that someone to spend that money at your shop is not donation. It is a grant. You can do that, but you won't be able to deduct this as charitable donation, but the money paid to you back would be taxable income to you. I respectfully disagree with Joe that its a wash. It is not. You give them money that you cannot deduct as an expense (as it is not business expense) or donation (as strings are attached). But you do give them the money, it is no longer yours. When they use the money to pay you back - that same money becomes your taxable income. End result: you provide service, and you're the one paying (taxes) for it. Why would you do that?" "Can a company say ""StackExchange"" donate to a non-profit company say $5,000 in agreement that they will spend that on paying a designer for a new website? And most importantly is this donation still tax deductible? A non-profit would have to typically create a bucket for IT Services or Website design. As long as ""StackExchange"" specify they employ a profession service to get it done, there would be no issue. If ""StackExchange"" were to specify an individula/company it would be an issue." People put conditions on donations all the time. They donate to the Red Cross for a specific disaster. The donate money to a church for the building fund. They donate money to a hospital to buy a new x-ray machine. They donate money to the scouts for a new dining hall.  It is possible to donate money to a non-profit for a specific purpose. If the non-profit doesn't want to accept the money with those strings they can refuse. Generally these specific projects are initiated by the non-profit. But there is no requirement that the idea originate with the non-profit.  It is also up to the non-profit and their legal advisers regarding how strictly they view those strings. If you donate money for web design and they don't spend it all, can they pay net years hosting bill with the money, or must they hold it for a few years for when they need a designer again? If the company wants to provide the service, they can structure the project to pay their employees for their time. They pay employees for $100 of labor while deigning the website. The pay and benefits reduce profit thus lowering taxes.  Donating money to the non-profit to be given back to the company doesn't seem to be the best way to structure transaction. At best it is a wash.  Donating money to a charity and then directing exactly which contractor will perform the service starts to look like money laundering, and most charities will get wary.
It's wrong in several situations:  One, the business owner counts this as a business expense, which it is not, and therefore reduces the company's profit and taxes. That would be tax avoidance and probably criminal.  Two, someone who is not the sole owner counts this as a business expense, which it is not, reduces the company's profit and when profits are shared, the company pays out less money to the other owners. That's probably fraud.  Third, if the owner or owners of a limited liability company draw out lots of money from the company with the intent that the company should go bankrupt with tons of debt that the owners are not going to pay, while keeping the money they siphoned off for themselves. That would probably bankruptcy fraud.  Apart from being wrong, there is the obvious risk that you lose control over your company's and your own expenses, and might be in for a nasty surprise if the company has to pay out money and there's nothing left. That would be ordinary stupidity. If you have to tell your employees that you can't pay their salaries but offer them to admire your brand new Ferrari, that's something I'd consider deeply unethical. Yes, the business can count that as an expense but you will need to count that as income because a computer = money. An answer from PayPal stated that donations may be turned on only for Business PayPal accounts that are verified for its non-profit status. Such PayPal Business account must be opened in the name of non-profit organization (not a single person) and go through verification process. One must provide the following information: That would mean that one cannot ask for donations as a private person, at least in Croatia, and probably in Europe. not if it's only Bob and a couple others that are having the problem.  The company is spending more money on the wages of the guy helping him out than what Bob brought to the company with his purchase.  There's no sense in paying for a customer. I'm not a lawyer and someone more knowledgeable than I will probably respond to this inquiry.  I worked with nonprofits for years however.  My suggestion would be that the Board would have a resolution allowing the Director to approve any contract below a certain dollar amount. "Anything is negotiable.  Clearly in the current draft of the contract the company isn't going to calculate or withhold taxes on your behalf - that is your responsibility. But if you want to calculate taxes yourself, and break out the fees you are receiving into several ""buckets"" on the invoice, the company might agree (they might have to run it past their legal department first). I don't see how that helps anything - it just divides the single fee into two pieces with the same overall total. As @mhoran_psprep points out, it appears that the company expects you to cover your expenses from within your charges. Thus, it's up to you to decide the appropriate fees to charge, and you are assuming the risk that you have estimated your expenses incorrectly. If you want the company to pay you a fee, plus reimburse your expenses, you will need to craft that into the contract. It's not clear what kind of expenses you need to be covered, and sometimes companies will not agree to them. For specific tax rule questions applicable to your locale, you should consult your tax adviser." To expand a little on what littleadv said, you can only deduct what something cost you. Even if you had done volunteer work for a charity as a sole prop you could only deduct your actual costs. If you paid an employee to do charity work or to learn something related to the business that would be deductible as a normal business expense.  Some common sense would show that if you could deduct something that didn't cost you anything (your time) you could deduct away all of your income and avoid paying taxes altogether. Back to your more nuanced question could 2 businesses you own bill each other for services? Yes, but you will still have to pay taxes for money earned under each of them. You will also need to be careful that the IRS does not construe the transactions as being done solely to lower your tax bill. "Note: I have no experience of attempting what is described below (neither am I a lawyer nor an accountant). The process may range from a ""small bureaucratic hurdle"" to a ""complex legal nightmare"". If it seems a plausible approach, you would probably be well-advised to reach out to others that have established CASCs for help and guidance. According to this HMRC page the two ways a body can claim Gift Aid is if either it is a recognised charity or if it is a Community Amateur Sports Club (CASC). So one option may be to try and establish a CASC. I suspect that this is unlikely to be an easy process, but may be a more likely approach than trying to get the council to establish a charity. The Register as a community amateur sports club (CASC) page on the HMRC site (very) briefly describes the steps; as you can see from their eligibility criteria, to register as a CASC, you would first have to create a ""Sports Club"" of some form that: has a formal constitution is open to the whole community and has affordable membership fees is on an amateur basis provides facilities in the UK is managed by ""fit and proper persons"" You would probably need the co-operation of the local council to allow the proposed sports club the use of the local park. One of the (several) requirements of becoming a CASC is that it must: So it could, in theory, be possible to spend money raised (through both membership fees and Gift-Aid-qualifying donations) on the improving the facilities of the park (tennis courts, bowling green etc.). However, note that How to Register page mentions (among many other requirements) the need to provide ""accounts from the last 12 months"" and ""bank statements from the last 3 months"". It doesn't (as far as I can see) explicitly state that the club must have been in existence for 12 months before applying for CASC status (it might be possible to send only what you have), but be aware that you may need to establish the club – and let it operate under its own steam – for a period before applying." I'm not certain I understand what you're trying to do, but it sounds like you're trying to create a business expense for paying off your personal debt. If so - you cannot do that. It will constitute a tax fraud, and if you have additional partners in the LLC other than you and your spouse - it may also become an embezzlement issue. Re your edits: Or for example, can you create a tuition assistance program within   your company and pay yourself out of that for the purposes of student   loan money. Explicitly forbidden. Tuition assistance program cannot pay more than 5% of its benefits to owners. See IRS pub 15-B. You would think that if there was a way to just incorporate and make your debts pre-tax - everyone would be doing it, wouldn't you? If this is something you plan to continue doing it would make sense to create it as it's own business entity and then to get non-profit status eg: 501c3.   Otherwise I'm pretty sure you have to think of it as YOU receiving the money as a sole proprietor - and file a couple more tax forms at the end of the year. I think it's a Schedule C.  So essentially if you bring in $10,000, then you spend that $10,000 as legit business expenses for your venture your schedule C would show no profit and wouldn't pay taxes on it. BUT, you do have to file that form. Operating this way could have legal implications should something happen and you get sued. Having the proper business entity setup could help in that situation. I see two ways you can handle this. Use the gifts for the purpose of creating more free software.  This is fundraising, and your cause is writing free software.  The language is a little tricky from the PayPal Donate button (emphasis mine): This button is intended for fundraising. If you are not raising money   for a cause, please choose another option. Nonprofits must verify   their status to withdraw donations they receive. Users that are not   verified nonprofits must demonstrate how their donations will be used,   once they raise more than $10,000 USD. You don't have to be a nonprofit; they are only requiring existing nonprofits to verify their status.  You don't even have to account for the donations if they are below $10,000. Give out your PayPal email address and instruct the gift-givers to simply send you money through their PayPal interface.  They can mark it as a gift when they send the money. I think option one is how the various bloggers and other personal users are justifiying their collection of donations, and I think its a valid use of the PayPal Donate button. This is tax fraud, plain and simple. I recently wrote an article The Step Transaction Doctrine, in which I explain that a series of events may each be legal, but aggregate to one transaction and the individual steps are ignored.  In this case, it goes beyond that, by accepting $5/mo you are already outside the tax code. As littleadv noted, you can't work for a legitimate business for free and not expect to have some kind of issue. The $14K/yr gift isn't a bona fide gift, but ties to that work. I think you can. I went to Mexico for business and the company paid for it, so if you are self employed you should be able to expense it. I've been a landlord and also a tenant. I have been able to deposit money in an account, where I have the account number, and/or a deposit slip. In a foreign bank you can deposit by a machine if in the bank or someone is there for you and knows the account number. With regards to cashing a check in another country, it is up to the bank and the time is at least 14 to 21 business days, with a fee is added. As of a winning check, since its in your name, if you are in another country sign the check, for deposit only with a deposit slip and send it to your out of country bank by FedEx - you will have a tracking number, where as regular mail it might get there in 3 months. I hope by now you came to your solution. If it's money you can lose, and you're young, why not?  Another would be motifinvesting where you can invest in ideas as opposed to picking companies. However, blindly following other investors is not a good idea.  Big investors strategies might not be similar to yours, they might be looking for something different than you.  If you're going to do that, find someone with similar goals. Having investments, and a strategy, that you believe in and understand is paramount to investing.  It's that belief, strategy, and understanding that will give you direction.  Otherwise you're just going to follow the herd and as they say, sheep get slaughtered.