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Key Legal Considerations in Nonprofit Spinout Transactions
I. What is a Nonprofit “Spinout”? A nonprofit “spinout” refers to a transaction where a nonprofit organization sells all or a substantial portion of its assets to a for-profit organization. These transactions typically involve a nonprofit forming a for-profit subsidiary, contributing assets to such subsidiary, and then selling all or a majority stake in the […]
Posted by Michael Santos, Daniel Irvin, and Stefan Rajiyah, Morrison & Foerster LLP, on Monday, March 24, 2025
Editor's Note:
Michael Santos is a Partner, and Daniel Irvin and Stefan Rajiyah are Associates, at Morrison & Foerster LLP. This post is based on their Morrison & Foerster memorandum.
I. What is a Nonprofit “Spinout”?
A nonprofit “spinout” refers to a transaction where a nonprofit organization sells all or a substantial portion of its assets to a for-profit organization. These transactions typically involve a nonprofit forming a for-profit subsidiary, contributing assets to such subsidiary, and then selling all or a majority stake in the subsidiary.[1]
This article focuses on key legal issues and considerations for transactions where a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (the “IRC”) sells a material portion of its assets.
