ENTREPRENEURSHIP / SEP. 21, 2014
version 3, draft 3

How to Run a Not-for-Profit Business

Want to save, or at least better, the world? See it as everyone’s responsibility to help and assist each other in any way we can? Tired of the rat race, dollars and cents scramble that is adult life? Well, then, you might just be suited to start (or at least work for) a not-for-profit organization.

Not-for-Profit?

A not-for-profit (NFP) organization (also called a non-profit) is a company that does not, and can not, make a profit. That doesn’t mean that it doesn’t make or raise money, but all income after expenses is put back into the business, its causes, and its mission(s). You can still draw a salary, and you still pay your employees (if any) for the work they do, of course. But the overall goal is to make better some particular aspect of the public welfare...not to make as much money as possible.

A not-for-profit may be educational, literary, charitable, religious, scientific, or any number of possible niches. They work for the greater good.  

The Structure

Want to save, or at least better, the world? See it as everyone’s responsibility to help and assist each other in any way we can? Tired of the rat race, dollars and cents scramble that is adult life? Well, then, you might just be suited to start (or at least work for) a not-for-profit organization.

Not-for-Profit?

A not-for-profit (NFP) organization (also called a non-profit) is a company that does not, and cannot, make a profit. That doesn’t mean that it doesn’t make or raise money, but all income after expenses is put back into the business, its causes, and its mission(s). You can still draw a salary, and you still pay your employees (if any) for the work they do, of course. But the overall goal is to make better some particular aspect of the public welfare...not to make as much money as possible.

A not-for-profit may be educational, literary, charitable, religious, scientific, or any number of possible niches. They work for the greater good.  

The Structure

A NFP is incorporated in much the same way as a traditional corporation. You’ll need to register with the appropriate state, provincial, or federal authorities in charge of incorporation. You submit the necessary documents, including the Articles of Incorporation, as though you were a for-profit business.

There are some important differences, though. A NFP does not have an owner(s), nor do they have any shareholders. It cannot be sold. A NFP must be dissolved and the assets distributed to another legally recognized NFP at the end of its existence.

It does, however, have a Board of Directors. It needs to have a constitution (rules, regulations, and bylaws that govern its operation), and a mission statement. You may be eligible for tax-exempt status (check with the IRS, Revenue Canada, HMRC, or whatever tax agency exists in your home country for specific details). Depending on the country and the mission of your NFP, you may qualify for “Charitable Status”, which carries with it special tax considerations and the ability to issue tax-exempt receipts for any donations you receive.

Heavy Regulation

As a not-for-profit, you’ll be subject to heavy regulations at both the state or provincial level, and the federal level, too. Take the time to fully and completely understand your legal responsibilities and obligations, especially when it comes to issues of tax exemption and tax relief.

Raising Funds

As a NFP, you’re not in the business of selling a product or service. You’re only source of income (and remember that ALL of it must be used for your stated mission) is from donations and/or fundraising. Part of your job - and a great deal of your time - will be to procure enough money to run the organization.

You may have pledge drives, fundraising events, raffles, or auctions. You might send out requests to members, friends, and previous donors asking for help (and as a recognized charity - which not all NFP are - you can issue tax deductible receipts).

You will also likely apply for various grants. These can come from individuals, foundations, or the government itself. Private foundations, like the Bill and Melinda Gates Foundation, grant large and small amounts of money to NFPs of various sizes and industries. Government grants can also be quite sizeable if you know where to look (such as the official Grants website for the US government, or the Funding Portal for various Canadian grants). The money is there. Finding enough is a challenge for many, so keep at it. Don’t wait until you desperately need it before you start looking for and working towards raising it.

The money raised, via donations, grants, and fundraising endeavors, goes towards keeping the organization going. Salaries, research, development and donations. Anything that falls under the umbrella of your overall mission statement. Just remember to keep flawless and meticulous financial records, as they could be examined at any time by any number of government or private watchdog groups.  

Other Useful Links

Starting a Not-for-Profit (USA)

Creating a Not-for-Profit Corporation (Canada)

Setting Up a Charity (UK)

Working for a not-for-profit can be incredibly fulfilling. You’re working for the greater good. You’re trying to make a difference. You’re leaving the world a better place than you found it. But it can be exhausting and very demanding. Money, for most, is always a concern and source of stress. So long as you know that, and your heart is in the right place, you’ll likely be much happier than you would be in the corporate world.

 

Photo Credit: Pratham Books

Creative Commons License

 

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