Could a Non-Profit Structure Be Right for Your Business?

If you have a business idea, or an idea for a service for your community, there's one decision you must make early on: are you going to structure your project as a for-profit business, or as a non-profit corporation?

Now, it may be that you already have a clear idea about this. Some business ideas are clearly "for profit". For example, if you want to sell insurance, or stocks, that's undoubtedly a for-profit business. On the other hand, if you want to raise money for research into a cure for juvenile diabetes, that project will best be served by forming a non-profit corporation.

One difference between for-profit and non-profit organizations is that grants funding is generally reserved for non-profits. Some grants are available to for-profits (and to individuals), such as government grants to promote affordable housing or job creation in economically depressed neighborhoods. Most grants, however, and particularly grants from foundations, are given only to non-profit corporations designated by the Internal Revenue Service as 501(c)3 corporations.

In many cases it is not so easy to determine into which category a business idea should fall. One question to ask is: will my planned project deliver a service to clients? A beauty shop located in Beverly Hills, catering to wealthy women, is certainly a service business. The clients, however, are not needy. They can easily pay for the service without assistance.

So the second question to ask is: will the project assist clients who are in need? A beauty shop located in a Medicaid-supported nursing home will serve clients in genuine need - clients who could not pay for this service from their own resources.

What are the benefits of a for-profit business model? Well, first of all, the owner of the for-profit business holds personal (or corporate) title to the business and all its assets. Any money that is made by the business can be used according to the discretion of the owner. The owner can borrow against the business, or sell it and keep the profits. When the owner dies, he or she can leave the business and/or its assets to his or her heirs.

For-profit businesses exist not just to support the owner, but also to build wealth. So if you have a business idea that has the potential to build wealth for you, I recommend you stick with the for-profit business model. For example, if you have designed a widget that is apt to revolutionize its market niche, and you hold the patent, by all means produce and sell it through a for-profit business. That widget could make you rich, while offering a great benefit to your customers.

Does this mean that non-profits can't earn money? Not at all. In fact, I always encourage my non-profit clients to look for ways to become self-supporting. Many non-profit agencies generate income through contracting with other organizations to provide services. Other agencies operate businesses such as thrift stores.

The difference is that the income generated by a non-profit organization always belongs to the non-profit agency, not to the organization's founder. If the non-profit organization decides to cease operations, its assets, by law, must be donated to another non-profit agency.

While a non-profit organization may not generate wealth for its founder, a non-profit can be a vehicle that provides a very good ongoing income. Many people create non-profits to do work they love, and to create a job for themselves. The founder of a non-profit organization can become the agency's Executive Director, and draw a salary that is comparable to salaries in the for-profit sector. In some cases, the founder may choose to occupy another staff position, and turn ongoing management over someone else who functions as Executive Director.

There is also a third possibility, one that I call a dual for-profit/non-profit structure. If you have a business that provides a service that could potentially be made available to clients in need, this structure may work for you. For example, if you teach painting, you may want to charge some clients a high fee for art lessons. But you could also teach painting to disadvantaged children, and use grant funds to reimburse yourself for the work.

In order to use this structure, you could join forces with an existing non-profit, such as the YMCA, and assist them in writing a grant to underwrite art lessons. You could also set up a new non-profit agency devoted to providing arts education to needy children, enlist interested people to operate the agency, and contract with that agency to be paid for teaching. This dual for-profit/non-profit structure can work for a variety of different businesses.

Jillian Coleman Wheeler is a Grants and Business Consultant to businesses and non-profit organizations. Her website, http://www.GrantMeRich.com, is a resource site for entrepreneurs, grant writers and consultants, and offers online training for grants consultants. She is also author of The New American Land Rush: How to Buy Real Estate with Government Money. For more information, visit: http://www.NewAmericanLandRush.com

---

Three Cs - What Startups Need to Get a Business Loan, Part 1

You want to get a good, solid overview of what... Read More

Delivery Companies Make the Grade

In the United States we have the most efficient delivery... Read More

How To Start a New Business

While it is tempting to just leap into a new... Read More

The 7 Traits of an Exceptional & Successful Entrepreneur

How often have you either referred to or considered the... Read More

Secret Revealed In The Business Code

? Beginners often rush into business without any planning.? Unless... Read More

Entrepreneurship: What does it REALLY mean?

Introduction:In a world where ideas drive economies, it is no... Read More

When Your Business Feels Like an Arranged Marriage

Q. I was laid off six months ago. Jobs in... Read More

Interview with Best-selling Entrepreneurial Authors Barbara Winters and Nick Williams

Ray Bradbury's quote, "You've got to jump off cliffs all... Read More

Entrepreneurial Emotions or It Seemed Like a Great Idea at the Time

It's your first business or the next Great Idea in... Read More

How To Get More Clients and Customers; Dont Sell Be of Service

Whether you are just starting your business or focusing on... Read More

How To Find Hot Online Business Ideas

Would you like to find the key that unlocks the... Read More

Entrepreneurs - 9 Top Mistakes to Avoid

1. Isolating Yourself When setting up a business, you can... Read More

What Makes An Entrepreneur Tick?

It is only natural that when you start a business,... Read More

Entrepreneurial Hate, its out there

Today, I got an email from a lady who hates... Read More

Abstract Business Marketing Strategy for the Entrepreneur

If you look at those Corporations in franchising today you... Read More

Your Company Needs A Mission Statement; Make It Count

Does anyone remember that book "Built to Last" done y... Read More

Developing A Contract

As a service provider, the most important type of "boundary"... Read More

Work vs Play: Which is the Better Way to Make Big Money?

If you want to make big money, you have to... Read More

Hurricane Katrina, Death, and a Different Type of Entrepreneurship

I've seen terrible images today on the television and internet-bodies... Read More

Drive Website Traffic Unconventionally, Force Your Children To Do It

If you believe that every little bit helps then keep... Read More

7 Small Business and Self Employed Law of Attraction Principles For Success

It is widely held that one of the most important... Read More

Do You Have What It Takes?

I think it's fair to say that not everyone is... Read More

Prescription for the Future and Technological Revolutions

The world sure has changed in the last two-decades hasn't... Read More

Ten Traits of Successful Entrepreneurs

Successful entrepreneurs have many traits in common. Here are ten... Read More

Venture Capital Negotiating Issues

When companies enter into negotiations with venture capital firms, there... Read More

About Ending Competition

1. Why should I not compete with others?The very concept... Read More

Success Secrets - What I, Mike Litman Learned From This Old Book

Yesterday was a beautiful, sunny day in New York and... Read More

Lessons Learned from One Entrepreneur on Vioxx

For the past ten-months, I tried every drug from the... Read More

Part-Time/In-Home Business - Low Expense and Low Risk

As a first time entrepreneur, there are a variety of... Read More

Creativity & Entrepreneurship: The Secret to Discovering Your Purpose in Life!©

Hello Creative Entrepreneurs!In the second course on Creativity & Entrepreneurship... Read More

Customers - Why Should They Buy From You?

There are a whole range of reasons why customers buy... Read More

CHINESE TAKE-OUT: Oriental Business Principles Demystified For Online Enterprises

"The expectations of life depend upon diligence; the mechanic that... Read More

Starting Your Business: It All Boils Down To Making Money and Saving Money

Bootstrapping in the context of business start-ups refers to the... Read More