Most of us focus on for-profit businesses. Many times, nonprofit corporations make a tremendous impact on the economy too. However, for those you thinking about owning a nonprofit company, there are several differences to consider first. For example, the way you write off travel expenses could change. Here, we will cover some of the crucial information for managing a nonprofit business.
Nonprofit vs. For Profit
The major difference between a for profit and a not for profit corporation is literally right their in the name. Obviously, a traditional for profit business is established to make money. On the other hand, while a nonprofit corporation can indeed make a profit, they cannot be established primarily for that purpose. That is why there are even Quickbooks alternatives for nonprofit organizations. Typically, the profits used by nonprofit corporations are immediately re-invested in the business, while traditional business profits are dispersed to the business owners and shareholders. Now that you truly understand the difference between not for profit business vs. for profit business, keep reading to determine how to establish a not for profit corporation.
Establishing 501(c)(3) Status
While most people are commonly intimidated by starting a nonprofit corporation, the act of incorporating the organization is quite straight forward. Although establishing the company entity is relatively easy, getting 501c3 status is very challenging. It required you to fill out the long IRS Form 1023 which requires a minimum of 28 pages of paperwork. However, the entire form can take over 50 pages when all the necessary documentations are provided. Furthermore, you will have to navigate your way through state compliance for charitable solicitations, state corporate tax and state sales tax exemptions. Of course, you also need to get your nonprofit tax ID number. Once completed, your nonprofit corporation will have successful set up the organization structure to operate appropriately.
Aligning Goals And Missions
After setting up the nonprofit, you have to put your plans into action. The goals and missions that you have laid out for the company should be internalized by everyone in the organization. Be sure to e-verify this with all employees. The best way to ensure your company’s success is by clearly defining what it stands for. The mission should be concise, emotionally charged and easy to understand. With a clear vision for the company, it will be easier to get others to donate, contribute, buy or get involved.
Tax Implications For Owners
Who actually owns the nonprofit corporation? If you are the one who started it, you are the owner, right? Actually, the nonprofit is not owned by any one person, even if they started it. Rather, nonprofit organizations are public organizations that are owned by the public at large. That means, you do not draw profits and pay taxes the way a private business would. Instead, you would pay taxes on the salary that you earn from working for your nonprofit company.
Raising Awareness For Donations
For non-profit companies, donations can be a huge contributing factor to their carryout their mission. In order to raise awareness and funds, some nonprofits will team up with celebrities who can use their “star power” or influence to spread the word about the organization. This is a great strategy for fundraising for nonprofit organizations. Certainly, if the corporation has a message that resonates with the celebrity’s followers, the results can offer huge support to the company. It is important to use the best payment processing companies for nonprofits too, as they are likely to charge a lower per-transaction fee.
Nonprofit Revenue Dilemma
Just like any other business, nonprofit corporations have to pay expenses too. If the business is not earning enough to stay in operation, the nonprofit will have to dissolve. As a result, the board members of the corporation are in a continuous dilemma of how to manage finances so that the company’s vision can remain for the future and also deliver the best of its ability in the present. Furthermore, if funds are tight, how can the company continue to pay its employees while also trying to fulfill its mission. Sometimes, the answer is not always black and white. Founders will have to face these business decisions with a realistic approach to all stakeholders involved.
Nonprofit Corporation Examples
There are so many great non profit corporations that are working to create a better society. However, it can be touch to compete in certain industries. If you look at the non-profit corporations that make the biggest impact, they have strategic partnerships with government and private sector. Sometimes, these partnerships include nonprofit to nonprofit partnerships. Some of best examples include nonprofits working with for profit hospitals and tech giants in silicon valley and around the country for the greater good of humanity. Certainly, you should model a nonprofit corporation after these types of partnership examples to drive growth.
Get Your Board Involved
Lastly, another great nonprofit corporation management strategy is to get your members involved. Ideally, you should have a strong understanding of your members’ motivations for being on your nonprofit board. Since these individuals are most likely volunteers, they usually care deeply about the cause. Of course, each person’s specific reasoning can provide valuable insight for how they can help your organization. Once you better understand why they joined the board, you should try to provide exciting engagement opportunities, such as retreats, outings, and corporate planning events. Remember to show your appreciate for the time, money, and effort they are contributing to your organization as well. In short, get your board involved to manage your nonprofit corporation effectively.
Without a doubt, being a nonprofit corporation is an accomplishment within itself. Establishing the company, aligning its mission and understand its operations are some of the major aspects of attaining its status. Furthermore, you should be looking ahead to manage the company’s marketing relationships and financial viability to ensure its success.