To Be or Not to Be a Nonprofit?
You want to make a difference. Therefore, you have to start a nonprofit.
Or… maybe you don’t.
I get it. I’m a nonprofit lawyer, so I’ve seen first-hand how much good nonprofits of all sizes can do. If you want to help your community or animals or the environment, a nonprofit seems like the easy answer, right?
But you don’t necessarily need to go the nonprofit route, and there are even times when you shouldn’t.
Let’s talk about it.
Not Every Idea Makes Sense as a Nonprofit
Many well-intentioned people are starting new nonprofits because they want to do something good. They see a need that isn’t being served, or maybe it is but they have a better idea for how to doit.
But you need to ask yourself- do you have to start a nonprofit to make your dream come true?
Have you taken a moment to think about whether your idea might make better sense as a for-profit? Or if there’s another organization out there that you can work for or volunteer at?
If not, take some time to really think about it.
Starting a nonprofit isn’t an easy little side project. There are LOTS of rules and regulations you need to keep up with, even for the tiniest organizations. So if your main goal is to work on the mission, there may be easier ways to do that than starting a brand new nonprofit organization.
A lot of people come to me because they want to fill a need or fix a broken system. Sometimes, after hearing their story, I tell them that a nonprofit can be the way to go. Other times I recommend they go the for-profit route because to me, it’s honestly the best direction for their vision.
Nonprofits Can Be Hard Work!
There is a lot of work involved in starting a nonprofit. It’s not like an LLC or other small for-profit where you can click a few buttons on your state’s website and make the business, and then figure out all the rest as you go. There are some big questions you’ll need an answer to BEFORE you should even start the incorporation paperwork:
- Who’s going to govern the organization? (hint – it can’t be just you!)
- Where will the financial support come from?
- Are you going to have staff or volunteers?
These are only some of the questions you need to ask yourself. And these are the kinds of things the IRS is going to want to know about, so you can’t wait until all the paperwork is done to start thinking about it.
Don’t get me wrong- I’m not trying to discourage you if you’ve been thinking about starting a nonprofit. A lot of ideas work out – vision and persistence have been responsible for great organizations of all sizes who do amazing work in their communities. But others don’t because the founders had the right idea but the wrong approach.
“But Jess, For-Profit Sounds Too Greedy!”
I get it. Starting a nonprofit seems more noble and selfless, and lots of people think starting a for-profit comes across as being all about the money.
It doesn’t have to be that way, though. Not every world-changing idea is even possible as a nonprofit. There’s nothing stopping a for-profit company from doing GREAT things with the money they bring in. Look at companies like Warby Parker or Finnegans Brew Co – these are for-profits who are doing good deeds with the money they bring in. And they have benefit of doing it without all the extra regulation and scrutiny that comes with being a public charity or other kind of nonprofit organization.
Let’s be honest – there are benefits and drawbacks to both nonprofit and for-profit legal structures. What I’m saying is that nonprofits don’t have dibs on making a difference. Organizations with earned revenue streams do just as well as those that rely on grants and donations.
TLDR: It’s what you do with the money that truly matters, not necessarily how you get it.
“Thanks For the Insights, But I REALLY Want to Start a Nonprofit.”
I get it – and I applaud you. That’s why I became a nonprofit lawyer.
Nonprofits strengthen communities by providing important educational, health, and social services that the government can’t always provide on its own. However, they can only do this when passionate, dedicated individuals get them started and keep them going.
People like you.
If you’ve got an idea that’s perfect for a nonprofit, start by doing your research. If you intend to rely on outside funding, you’ll need to cultivate the mission, story, and relationships that encourage public and private generosity.
These don’t have to be barriers, but you do need to think about them.
If you’re passionate about making a difference, go for it! People like you are needed now more than ever. But before you decide which route you should take, speak to a nonprofit lawyer who loves helping people do great things with good intentions.
Thinking About Starting a Nonprofit? Let’s Talk!
I’m Jess Birken, founder of Birken Law Office in Minneapolis, Minnesota. If you want to chat about the ins and outs of starting and running a nonprofit, hit me up! I could seriously talk about it all day.
If your idea seems perfect for the nonprofit sector, I can show you how to get started and be there for you if any challenges come up. (After all, stuff happens!) However, if I think you should be a for-profit instead, I’ll tell you, even if it means I’m out of a job. I firmly believe that you can do the most good when you start your enterprise on the right foot, so I’ll give it to you straight and, if necessary, point you in the right direction.
If you’d like to connect, call 612.200.3679 or contact me here. Can’t wait to meet you!