If you’re considering starting a business, you might be asking yourself whether to go non-profit. It’s important to understand the difference between a non-profit and a for-profit company. The simplest way to determine the class of business you wish to start, is to carefully consider the following:
- Are you starting a business to make a profit for yourself or others?
- Are you starting a business to help a cause that affects others, and making a profit is not applicable?
If you answered yes to the first question, then you want to pursue the for-profit route. If you answered no to the first, and yes to the second, then you should pursue a non-profit business.
According to the Society for Non-profits, a non-profit business’ sole pursuit is advancing its programs and/or services. It makes no monetary distributions to owners or stockholders, and answers to a board.
Non-profit organizations fall under these categories:
- Trade Associations
- Charitable Organizations
- Social Clubs
- Governmental Groups
- Political Groups
How to start a Nonprofit
When considering this plan, it is imperative to take careful stock of the size and scope of the business venture you are engaging in. Do your research, and verify that your cause is not already being met or strongly supported locally by another non-profit. If it is, then perhaps you could simply get involved.
If your cause is not yet covered, then most of the leg-work on the front-end can be done by yourself. However, it is recommended that you at least meet with an attorney who can oversee your work and offer guidance when it is practical.
Determine your Mission, Structure, and Home Base
Once the research has been done, and you have decided to begin, you will need to:
- Compile a sort of mission statement for the organization. Make sure to develop your statement by addressing the needs you intend to meet for the community.
- Create a clear declaration of purpose and intent, and include any programs or services to be offered.
- Define the structure of accountability within the organization.
- Ascertain the necessary facilities to enable the daily functions of the establishment.
Formalize Your Non-profit
Once you’ve clearly defined your organization, you can move forward with filing articles of incorporation and developing bylaws with any and all states that you will be conducting business within.
If your non-profit intends to orchestrate fundraising activities, then be sure to register in any states where you will be doing so. Please be aware that regulations vary from state to state.
Also, be sure to apply for exempt status with the Internal Revenue Service as soon as possible, because it can take between 3-12 months for a response.
At this point, and throughout the process, it is always recommended and helpful to consult an attorney when making any difficult decisions regarding the business.
You will also want to work closely with a marketing specialist to ensure your company is well represented and has sufficient support to grow.
Some Benefits of running a Non-Profit
- Serving your community is often a very personally rewarding pursuit.
- Non-profits qualify for tax-exempt status with the IRS.
- Eligible for both private and public grant funding.
- As Limited Liability Companies, they protect their owners from any personal liability related to the business.