Non-Profit 101: Turning Your Non-Profit Vision into Reality
Five Questions to Ask Before Starting a Non-Profit
Have I actually thought through what kind of organization I want to start?
Deciding to “start a non-profit” presumes you have already answered a host of questions—and assumes a non-profit is the right approach for you. But is it? The legal form should be a tool to further your goals. Make sure you’ve thought through the implications before you start something new. The answers could change what you actually start!
What am I trying to accomplish?
To decide what kind of organization to start, get clarity on your goal. Just because you want to do good doesn’t necessarily mean you should be a non-profit, just like the desire to sell goods or services doesn’t necessarily make you a company. There are many ways to pursue mission, for example: non-profit, LLC with a social purpose, LLC owned by an existing charity, B Corporation (a form of entity signaling a company’s commitment to a financial and social bottom line), B Corp certification (which certifies a company meets certain social good standards).
What is your overall mission, the north star that will guide you long-term —and what are the tactics that may change over time? How will you fund your dream? Who will call the shots? Who do you hope to engage?
The more you flesh out your vision, the more you can answer . . .
What advantages and disadvantages matter to me?
A quick search will give you the main advantages of being a tax-exempt non-profit:
Tax benefits for the entity: it usually is not taxed on revenue, and may be exempt from tax in other areas, like property, sales, or hotel.
Tax benefits for donors: people are often incentivized to make contributions because of the personal benefit they receive on contributions.
Halo effect: non-profits may enjoy a reputational boost. People feel good about them.
But only you can decide how and when these matter to you, in light of your actual goals. For example, how important are the tax considerations for your donors if they don’t itemize taxes, or if your primary income isn’t from donations?
The main restriction is about what happens to the money: in a tax-exempt entity, profit goes back to the mission, and cannot be used for private benefit. Are you willing to forego personal profit and put all funds back into your mission?
Tax-exempt organizations are also subject to greater oversight and have less flexibility. For many, the trade-offs are worth it. Before you start, make sure they are worth it for you.
Should I form something or join something?
Even if you want to do charitable work, is starting a new non-profit the best way to accomplish your mission? Forming a tax-exempt entity takes time and paperwork. There are avenues for accelerating launching charitable programs that might be a better fit, such as a fiscal sponsorship arrangement.
Do I need help thinking through these questions?
Getting clear, thoughtful answers to these questions will set the tone for whatever you launch. It may feel like a lot of pressure. But you’re not alone. All of these questions can be helpful to discuss with a trusted advisor who has walked through these questions before.
We’re here to help! To schedule a free 30 minute consultation, contact non-profit law expert Jeannie Rose Barksdale – jeannierose@ch-llp.com
