Should Your Hybrid Program Be an LLC or a Nonprofit?

This post is AI generated from the transcript of Episode 7 of my podcast.

In the last post, we talked about the difference between a private school and a homeschool supplement. Today, I want to continue that conversation and dig into another big decision you’ll face as a founder: what kind of business structure should you choose?

For most hybrid school or homeschool supplement programs, the choice usually comes down to two options:

• LLC (Limited Liability Company)

• Nonprofit (501(c)(3))

Each has its own benefits and challenges, and understanding them will help you start off on the right foot.

First, a Quick Disclaimer

I’m not a lawyer or an accountant. What I’m sharing comes from research and personal experience, but please consult a professional before you make final decisions.

What an LLC Looks Like

LLC stands for Limited Liability Company. The “limited liability” part is important because it means you and your business are treated as separate entities. If something goes wrong, your personal assets are protected.

If you don’t form an LLC, you’re considered a sole proprietor by default. That means you and your business are the same in the eyes of the law. If a parent sues, or if an accident happens without insurance, they can come after your personal assets. That’s why I strongly recommend forming an LLC instead of operating as a sole proprietor.

How to Set It Up

• File simple paperwork with your state (you can do it yourself or through a service).

• Get an EIN (Employer Identification Number) from the IRS.

• Open a separate business bank account and run all transactions through it.

Key Benefits of an LLC

• Control: You make all the decisions. There’s no board or bylaws to answer to.

• Profits are yours: After paying expenses and taxes, you keep what’s left.

• Flexibility: You can structure your taxes in different ways (such as electing S-corp status).

The trade-off? You pay taxes on your profits, and you generally can’t access grants or fundraising opportunities reserved for nonprofits.

What a Nonprofit Looks Like

A nonprofit is structured very differently. By definition, it doesn’t exist to profit you personally. If your program brings in $60,000 above expenses, you can’t just pocket it. That money stays with the organization—but the organization doesn’t pay taxes on it.

To pay yourself, you’d need to be hired as an employee (most founders take the role of executive director).

Key Features of a Nonprofit

• Governed by a board of directors (not just you).

• Requires bylaws, board meetings, and transparent record-keeping.

• Can accept donations that are tax-deductible for donors.

• Eligible for grants and many fundraising opportunities.

The Founder’s Reality

As the founder, you’ll likely wear two hats: the visionary who started the program and the employee who runs the day-to-day. But you won’t control everything. Your board has the legal authority to govern, and you’ll need to work closely with them.

Why Choose One Over the Other?

Here are some practical factors to consider:

• LLC Pros:

  • Simple to set up and run.

  • You keep full control.

  • Profits are yours.

• LLC Cons:

  • You pay taxes on profits.

  • Not eligible for grants.

  • Churches may be hesitant to rent to for-profits.

• Nonprofit Pros:

  • No taxes on revenue.

  • Access to donations, fundraisers, and grants.

  • Easier partnerships with churches.

• Nonprofit Cons:

  • More complex setup and governance.

  • You don’t control everything—the board does.

  • Your pay comes as a salary, not profits.

One More Note on Facilities

Many hybrid programs start in church buildings. If that’s your plan, pay close attention to your business structure. Churches may be reluctant—or even unable—to rent to for-profits without creating tax complications for themselves.

If a church facility is essential for your program, a nonprofit structure may be the better fit. However, you want to talk to a CPA, and/or ask a potential church’s CPA about this. It may still be possible, just make sure before you get too far in!

Final Thoughts

• An LLC is often best if you want simplicity, control, and direct access to profits.

• A nonprofit is often best if you need fundraising, donations, grants, or access to church facilities.

Neither option is “better” across the board—it depends on your vision, your funding plan, and your long-term goals