Joint Ventures

When a nonprofit forms a joint venture with a for-profit corporation, a conversion may be triggered. A joint venture between a nonprofit and for-profit is a partnership that forms when the nonprofit transfers or sells all or a portion of its assets to the venture and a for-profit contributes some of its assets and/or purchases the nonprofit’s assets. (As part of the deal, the for-profit often pays off the outstanding debt of the nonprofit.) Both the nonprofit and the for-profit then become partners in the joint venture, which is unincorporated. The level of control that the nonprofit retains over the joint venture varies. For example, nonprofit St. Davids Health Care System of Texas and for-profit Columbia/HCA formalized a joint venture in 1996. St. Davids contributed all of its assets –six medical facilities– to the joint venture. Columbia/HCA contributed its five facilities in the area and a 50% share in a medical center in Austin to the joint venture, and took over managerial control of all the facilities. St. David’s effectively had converted its facilities to for-profit ownership but retained its tax-exempt status as the nonprofit owner of a 50% share in the joint venture.