From Joanne Fritz,
Your Guide to Nonprofit Charitable Orgs.
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Can a business have one part as nonprofit and the other part as for-profit? My scenario: creative classes for children as nonprofit and a creative product line for profit. Both parts (teaching and sales) existing in the same space.

A. I think that is difficult to do. The IRS has very strict regulations for 501(c)(3) organizations...one being that the bulk of the activities must be for the "greater good."

Your best bet might be to just set up a nonprofit and then set up a gift shop or other retail operation that helps support the nonprofit. But, the retail would be a part of the nonprofit entity...not a separate business entity.

If you are out to make a living from your classes and sales, I would just leave the whole thing as a business. I suggest you seek the counsel of a lawyer that has experience in nonprofit incorporation for definitive advice. Meanwhile, read our articles such as:

• Starting a Nonprofit Organization
• Incorporating Your Nonprofit Organization