Simple English definitions for legal terms
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A feeder organization is a business or trade that operates for the benefit of a tax-exempt organization. However, the feeder organization itself is not tax-exempt. This means that it must pay taxes on its income and profits.
A feeder organization is a business or trade entity that operates for the benefit of a tax-exempt organization. However, the feeder organization itself is not tax-exempt.
A non-profit organization that provides education to underprivileged children may have a feeder organization that sells merchandise to raise funds for the non-profit. The feeder organization operates as a separate entity and pays taxes on its profits, but its main purpose is to support the non-profit organization.
Another example could be a hospital that has a feeder organization that operates a gift shop. The profits from the gift shop go towards supporting the hospital's operations and programs.
These examples illustrate how a feeder organization can support a tax-exempt organization by generating revenue through a separate business entity.