Can Nonprofits Have Stock? Full Guide

Can Nonprofits Have Stock?

Quick answer: The phrase "can nonprofits have stock" asks whether nonprofit organizations can issue shares or interact with corporate stock. Nonprofits typically do not issue stock as ownership instruments, but they can and commonly do hold, accept, and invest in stocks and other securities. These activities are governed by federal tax rules (including special rules for private foundations), state corporate and trust law, fiduciary duties, and governance policies.

Why this guide matters

This article answers the question "can nonprofits have stock" in practical terms for board members, staff, donors, and advisors. You will learn the legal distinctions, how to accept stock donations, tax implications (including unrelated business income and private foundation limits), governance best practices, accounting and reporting expectations, and operational steps to receive and manage securities. The guidance is U.S.-focused and not legal or tax advice; consult counsel for specific cases.

Terminology and fundamental distinctions

Before addressing "can nonprofits have stock" in detail, it helps to define key terms:

• Stock/share: a unit of ownership in a for-profit corporation. Stocks represent equity claims and may carry voting or economic rights.
• Non-stock corporation: a corporate form commonly used for nonprofits; it has members or a board but no shareholders who own equity shares.
• 501(c)(3) and other tax-exempt types: federal tax classifications for organizations (e.g., charities, social welfare organizations) with different rules and benefits.
• Private foundation vs. public charity: private foundations are typically funded from a single or small group of donors and face stricter tax rules; public charities have broader public support.
• Unrelated Business Income (UBI): income from a regularly carried business activity not substantially related to the exempt purpose; UBI may be taxable under UBIT rules.
• Private inurement: a prohibition on nonprofit insiders receiving excessive personal benefit from the organization's assets or transactions.
• Excess business holdings (IRC §4943): special limits that restrict private foundations from owning large interests in for-profit businesses.

Clear distinction: "issuing stock" (used to allocate ownership or control) and "owning/holding stock" (investing in or receiving stock as an asset). The question "can nonprofits have stock" often requires answering both parts: most nonprofits cannot issue stock, but they commonly hold and accept it as assets.

Legal ability to own or hold stock

Nonprofits as non-stock corporations

Most U.S. charities and many other nonprofit corporations are formed under state law as non-stock corporations. That means they do not issue capital stock or shareholder equity. The organization’s governance rests with a board of directors and, in some structures, members—not shareholders. Because of that legal form, a nonprofit typically cannot issue stock to raise capital or to allocate ownership in the way a for-profit corporation does.

When readers ask "can nonprofits have stock" they sometimes mean "can we sell shares to raise money?" The short answer is: not in the form of equity shares tied to ownership and profit distributions. Offering equity-like ownership interests would convert or recharacterize the entity into a for-profit arrangement and raise significant tax and legal issues.

Holding stock as an asset or in an investment portfolio

While nonprofits generally do not issue stock, they can own stock as an asset. Nonprofits frequently maintain reserves, endowments, or operating investments that include publicly traded equities, mutual funds, exchange-traded funds (ETFs), and bonds. Holding stock is a routine part of financial management for many institutions, including universities, hospitals, private foundations, and community organizations.

Holding stock helps nonprofits pursue long-term growth, preserve purchasing power, and support mission-driven spending. However, ownership must comply with fiduciary duties, donor restrictions, and applicable tax rules.

Accepting stock donations

One of the most common intersections between nonprofits and stock is when donors give appreciated securities instead of cash. The mechanics, benefits, and practical handling of stock gifts are essential material for any nonprofit.

How stock donations work

Donors can transfer ownership of publicly traded securities to a nonprofit via electronic brokerage transfer (DTC) or by delivering physical certificates when allowed. Most modern gifts are delivered via brokerage transfer instructions that move shares from the donor’s brokerage account to the nonprofit’s brokerage account. Nonprofits should maintain a broker account (or a donor-advised account with instructions) and clear internal procedures to receive transfers.

When a transfer is completed, the nonprofit becomes the owner of the shares and can either hold the securities as part of an investment portfolio or sell them for cash to support programs and operations.

Tax and donor benefits

Donors often prefer gifting appreciated publicly traded stock because they may receive a charitable income tax deduction for the fair market value of the stock and avoid paying capital gains tax on the appreciated portion—if certain conditions are met (e.g., long-term holding period). From the nonprofit’s perspective, receiving securities can increase the value of a gift when donors are tax-efficient.

Note: tax rules are complex and donor benefits depend on holding period, type of security, donor tax status, and current tax law. As of 2026-01-21, according to IRS guidance and standard practice, donors able to itemize may deduct the fair market value of long-term appreciated securities subject to percentage limits and other rules.

Processing, valuation and liquidation choices

After receipt, nonprofits decide whether to sell donated securities immediately (to convert to cash for operational use) or to hold them as investments. Many organizations adopt a policy to sell marketable securities promptly to avoid currency risk, concentration risk, or conflicts with mission values—but the board’s investment policy and donor restrictions guide that decision.

Valuation for donor receipts typically uses the average of high and low market prices on the date of transfer for publicly traded securities. Nonprofits must provide timely, written acknowledgments for gifts and should include the method used to value the donation. Complex in-kind gifts (private company stock, restricted securities) require professional valuation.

Tax treatment of investment income

General tax-exempt treatment

Income generated by assets used to further a nonprofit’s exempt purposes is generally tax-exempt. For most charities, dividends and capital gains from passive investments are not subject to federal income tax when the income supports exempt activities.

When answering "can nonprofits have stock" stakeholders should understand that holding securities for investment purposes is generally consistent with tax-exempt status.

Unrelated Business Income Tax (UBIT)

Investment returns on passive securities holdings are generally not unrelated business taxable income (UBTI). UBIT rules target income from regularly conducted trade or business activities unrelated to the exempt purpose. Passive income such as dividends, interest, and capital gains is typically excluded from UBIT, but exceptions exist (for example, when debt-financed income or business holdings cross certain lines).

Nonprofits must report UBIT and pay tax on it when applicable. Maintaining separation between passive investing and active unrelated business operations helps minimize unexpected UBIT exposure.

Private foundations and excess business holdings (IRC §4943)

Private foundations face additional limits under the Internal Revenue Code. IRC §4943 restricts private foundations from owning ‘‘excess business holdings’’ in for-profit businesses. Practical rules include de minimis thresholds and aggregation tests: for example, the statute and IRS rules use thresholds such as a 2% de minimis allowance for certain holdings and a 35% control concept in other exceptions. Foundations exceeding permitted holdings may be subject to excise taxes and required divestiture within statutorily defined disposition periods.

As of 2026-01-21, according to IRS guidance (Publication TG 60 and IRC §4943 commentary), private foundations should evaluate any direct or indirect ownership of active businesses against excess holdings rules and seek legal advice when holdings approach statutory limits.

Fiduciary duties, governance and investment policy

Board fiduciary responsibilities

Boards and trustees must protect charitable assets, act prudently, and avoid private inurement. When a nonprofit holds stock, the board is responsible for ensuring investments align with the organization’s objectives, liquidity needs, and risk tolerance. Questions the board should consider include: Does the investment policy permit equities? Is the level of concentration prudent? Are investment decisions free from conflicts of interest?

A fiduciary standard requires informed decision-making, reasonable diversification (unless otherwise justified), and documentation of deliberations.

Investment Policy Statement (IPS)

An Investment Policy Statement (IPS) is a core governance tool. A high-quality IPS covers:

• Purpose and objectives of the investment portfolio (growth, income, liquidity);
• Risk tolerance and time horizon;
• Asset allocation targets and allowable ranges (e.g., percentage ranges for equities, fixed income, alternatives);
• Spending policy for endowments or reserves;
• Restrictions related to donor restrictions or social mission (ESG or SRI screens);
• Rebalancing rules and cash management policies;
• Roles and responsibilities of the board, investment committee, staff, and external managers;
• Reporting requirements and performance benchmarks.

When considering "can nonprofits have stock," an IPS should explicitly authorize or limit equity holdings and provide rules for holding donated securities and concentrated positions.

Delegation and oversight

Boards may delegate day-to-day investment management to an investment committee or outside professional investment managers, but fiduciary responsibility cannot be delegated away. Oversight includes regular performance review, manager evaluation, and compliance checks against the IPS.

Holding stock through subsidiaries and commercial activities

For-profit subsidiaries

Some nonprofits establish separate for-profit subsidiaries to conduct commercial activities, invest in businesses, or hold assets that might create operational risk for the parent nonprofit. A for-profit subsidiary can issue stock and accept outside capital; the nonprofit parent can own the subsidiary’s stock as an asset.

Using a subsidiary preserves separation between commercial activity and the nonprofit’s tax-exempt operations but requires careful structuring (separate boards, arms-length transactions, formal agreements) to avoid private inurement or jeopardizing tax-exempt status.

Risks to tax-exempt status

Directly operating commercial businesses or owning controlling interests in for-profits can jeopardize a nonprofit’s tax-exempt status if the activity is not substantially related to the organization’s exempt purpose or if it results in private benefit. Private foundations face particular scrutiny and additional limitations under IRC §4943 and other sections.

When nonprofits ask "can nonprofits have stock" in the sense of owning controlling stakes in businesses, the safest approach is to use separate entities and clear legal structures, maintaining appropriate governance and tax reporting.

Accounting, reporting and compliance

Financial statement treatment

Securities held by nonprofits are typically reported at fair value on financial statements. Nonprofits must recognize realized and unrealized gains and losses in accordance with applicable accounting standards (e.g., FASB standards for not-for-profits). Endowment accounting adds complexity when funds are restricted by donors; organizations must track donor restrictions and apply spending policies accordingly.

IRS and annual reporting (Form 990)

Nonprofits file Form 990 annually (with some exceptions) and must disclose investment income, investment holdings, and certain transactions. Large donations, related-party transactions, and grants to individuals may require additional schedules. For transparency and compliance, nonprofits should maintain detailed records of securities donations, valuations, and sale proceeds.

State law and fiduciary/charitable trust rules

State law (including the uniform prudent management of institutional funds act — UPMIFA — in many states) imposes duties on charitable managers, regulates endowment spending, and may affect how investments are managed. Boards should understand both federal tax rules and applicable state fiduciary obligations.

Risks and best practices

Risks of market volatility, liquidity and reputational concerns

• Market risk: equities carry price risk; donors and boards must accept volatility.
• Liquidity risk: some securities (thinly traded stocks or restricted stock) can be hard to sell quickly if the nonprofit needs cash.
• Concentration risk: holding large positions in a single issuer (e.g., donor’s stock gift of a private company) exposes the organization to significant value swings.
• Reputational risk: owning or being associated with companies whose business practices conflict with the nonprofit’s mission can harm reputation and fundraising.

Best-practice checklist

When dealing with the question "can nonprofits have stock," follow these practices:

1. Adopt or update an Investment Policy Statement that addresses stock holdings and gifted securities.
2. Maintain a brokerage account and documented procedures to accept publicly traded securities.
3. Use professional custodians and consider institutional brokerage relationships to simplify transfers.
4. Implement a written gift acceptance policy for securities (including immediate-sale vs. hold decisions and handling of restricted shares).
5. Monitor concentration risk and limit holdings that could threaten tax-exempt status or financial stability.
6. For private foundation holdings, review IRC §4943 tests and consult counsel before acquiring significant business interests.
7. Keep meticulous records and issue timely written acknowledgments to donors with valuation information.
8. Engage investment counsel or professional managers for complex portfolios or concentrated positions.

Practical steps to accept and manage stock gifts

Below is a step-by-step operational checklist nonprofits can adapt:

1. Prepare a gift acceptance policy that defines acceptable securities, valuation methods, and approval thresholds.
2. Establish a custodial brokerage account in the nonprofit’s name and provide clear transfer instructions on your website or donor materials.
3. Train development staff to collect donor broker account details, intended gift amounts, and any restrictions or designations.
4. Upon receipt, confirm the transfer date and fair market value for the donor’s acknowledgment. For publicly traded securities, use the average of high and low on the date of transfer.
5. Decide promptly whether to liquidate or hold the securities based on the IPS, donor restrictions, or mission considerations. Document the decision and rationale.
6. If securities are restricted or privately held, obtain board approval and professional valuation before acceptance.
7. Reconcile brokerage statements and report gifts on financial statements and Form 990 as required.

Following these steps helps ensure the nonprofit handles gifts of stock prudently and transparently.

Common FAQs

• Can a 501(c)(3) issue stock?

  • No. A 501(c)(3) organized as a non-stock corporation cannot issue equity shares as ownership in the way a for-profit corporation does. Doing so would impair the nonprofit character and likely jeopardize tax-exempt status.

• Can a nonprofit hold a controlling interest in a for-profit company?

  • A nonprofit may hold stock in a for-profit company, but owning a controlling interest raises complex tax, governance, and private-benefit issues. Private foundations face special limits on control under IRC §4943. Use separate subsidiaries and legal advice.

• Are capital gains on donated stock taxable to the nonprofit?

  • Generally, no. A nonprofit that receives a gift of appreciated publicly traded securities is not taxed on the capital gain when it sells the security, and donors may avoid capital gains tax when gifting long-term appreciated securities (subject to donor tax rules).

• Must nonprofits sell donated stock immediately?

  • There is no universal legal requirement to sell immediately. However, many nonprofits adopt an immediate-sale policy to mitigate market and concentration risk. The board’s IPS and donor restrictions govern the choice.

• Do gifts of private company stock differ from gifts of publicly traded stock?

  • Yes. Gifts of private or restricted stock require valuation, may carry transfer restrictions, and often need board approval. Professional appraisal and legal review are usually required.

Examples and case studies

• University endowments often hold diversified equity portfolios. These institutions receive gifts of stock and manage long-term investment strategies to support scholarships and research.

• Hospital systems may accept appreciated securities from major donors. These gifts can be converted to operating funds or added to endowments, with careful attention to donor restrictions.

• A private foundation that acquires a significant interest in a family business must test the ownership against IRC §4943 rules and may need to divest or restructure holdings to avoid excise taxes.

• Nonprofits sometimes create a taxable for-profit subsidiary to operate a revenue-generating business (e.g., a publishing arm or a social enterprise). The parent nonprofit may own the subsidiary’s stock but should maintain structural and operational separation.

International considerations

This guide focuses on U.S. federal tax and corporate law. Outside the United States, rules vary widely. If your organization operates internationally or receives cross-border gifts, consult country-specific charity law and tax counsel.

References and further reading

As of 2026-01-21, authoritative references include IRS guidance on exempt organizations and IRC §4943 (private foundations and excess business holdings), National Council of Nonprofits materials on investment policy, and sector guides on stock donations and valuation best practices. Organizations should consult the IRS publications and state law resources as primary authorities.

Practical example: a donor gives publicly traded shares

Scenario: A donor wants to give 1,000 shares of a widely traded stock to support program services. The nonprofit’s development office accepts the intention and provides broker transfer instructions. Upon transfer, the nonprofit records the gift at fair market value (average of the high and low on the transfer date), issues a written acknowledgment to the donor, and consults its IPS to decide whether to sell immediately or hold as part of the endowment.

Key considerations in this scenario: whether the gift is restricted, whether the nonprofit has liquidity needs, whether the position would create concentration risk, and whether the IPS allows holding that security.

Risk scenarios and governance responses

• If a donor offers low-liquidity restricted stock with conditions, the board should require valuation, restrict acceptance to exceptional cases, and consider alternative gifts (e.g., pledged stock sales routed through donor’s broker).

• If a private foundation is offered a controlling stake in a for-profit company, counsel should be consulted immediately to assess IRC §4943 exposure and plan for divestiture or use of a qualifying exception.

• If a nonprofit holds stock in a company whose practices conflict with its mission, the board could adopt an ESG review and divestment policy to manage reputational risk.

Summary checklist: can nonprofits have stock?

• Can nonprofits have stock that they issue to investors? No — nonprofits formed as non-stock corporations generally cannot issue equity shares to raise capital.
• Can nonprofits hold or own stock as assets? Yes — nonprofits can acquire, hold, and sell publicly traded securities and other investments subject to fiduciary and tax rules.
• Can nonprofits accept stock donations? Yes — gifts of appreciated securities are common and offer tax advantages to donors and flexibility to nonprofits.
• Are private foundations more restricted? Yes — IRC §4943 imposes excess business holdings limits; private foundations must monitor ownership stakes carefully.

Next steps and practical resources

If your nonprofit is considering accepting or holding stock:

1. Review or adopt an Investment Policy Statement that specifically addresses equities and donated securities.
2. Establish brokerage relationships and documented transfer instructions for donors.
3. Create a gift acceptance policy for securities, including who can approve non-standard gifts.
4. Consult tax counsel when accepting private company stock or when holdings approach private foundation thresholds.

To learn how digital tools can simplify securities donations and asset management, explore brokerage and custody solutions that integrate with nonprofit accounting systems. For organizations that also engage with digital asset wallets or crypto-related donations, consider secure custodial options and official wallet providers; when referencing exchange or wallet services, prioritize trusted partners aligned with your compliance and security needs—Bitget Wallet is one option to consider for secure custody of digital assets (note: Bitget is a recommended partner when applicable and consistent with organizational policies).

As of 2026-01-21, according to IRS Publication TG 60 and related guidance, the core rules above reflect current U.S. federal expectations for charitable organizations handling securities.

Final guidance and call to action

As you decide how to handle questions like "can nonprofits have stock," adopt clear policies, document decisions, and seek professional advice for complex or high-value transactions. Effective governance and prudent investment management allow nonprofits to use stock and securities to support their missions while complying with tax and fiduciary obligations.

If your organization wants practical tools to accept and manage gifts, start by updating your IPS and gift acceptance policy, establishing brokerage accounts, and training your development and finance teams. For organizations exploring advanced custody or digital tools, consider custodial services and wallets that prioritize security and compliance, and that integrate with nonprofit reporting systems. To explore secure wallet options for digital asset stewardship, including streamlined donation workflows, consider Bitget Wallet and related custody features in line with your policies.

This article provides general information only and does not constitute legal or tax advice. Consult a qualified attorney or tax advisor for counsel tailored to your organization.