Good as Gold: Preserving Community Resources in Nonprofit Conversions

Turning a nonprofit organization into a for-profit business, often called a “conversion,” can have a tremendous impact on community assets and resources. A nonprofit operates in the public interest and for the benefit of the community it is organized to serve. Nonprofit hospitals and clinics, for example, may provide emergency services and free “charity care” to the indigent. Conversion transaction players mindful of the potential loss of such services can preserve these community benefits. This can be done by the creation of a new foundation that holds the former nonprofit’s assets for the benefit of the community. Or, a community can decide to create and permanently fund a new nonprofit, such as a clinic or revolving student loan fund, with these assets.