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

---

What Makes An Entrepreneur Tick?

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

The Business Leader as Ultramarathoner

Have you ever heard of an ultramarathon? A standard marathon... Read More

Corporate Espionage in Franchising

Franchising Trade Journals do not do well, because today with... Read More

Coating Service Business Case Study

There are many coating businesses in the market today, but... Read More

Lessons Learned from Successful Entrepreneurs

Entrepreneurs are a special breed of high achievers. They create... Read More

Oil Change Guys History; Part IV

One trait of franchisors and something you will find in... Read More

... in Pursuing the American Dream

This morning I woke up at 4:30 in the morning,... Read More

Be Where the Pucks Going To Be

The "Great One" said it bestHockey legend Wayne Gretzky, when... Read More

For Business SUCCESS... Listen To The Voices of Experience

Discover the pitfalls of owning your own business BEFORE... [you... Read More

What Makes a Person an Entrepreneur?

Entrepreneurship is generally characterized by some type of innovation, a... Read More

Before Getting A Franchise

Buying into a franchise is a great way to be... Read More

Six Degrees of Separation

Through just five or six intermediaries, you could be linked... Read More

Two Types of Business Plan Executive Summaries

Companies seeking capital often ask how long the Executive Summary... Read More

Entrepreneurs - 9 Top Mistakes to Avoid

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

Entrepreneurship: Insight and Closer Look At The Entrepreneur

Life as an entrepreneur is the American Dream. To be... Read More

The 5 Senses of an Entrepreneur

If you have seen me speak you will know that... Read More

Financial Issues in Business Startup

A primary inhibitor of business start-up is that few people... Read More

Are You An Entrepreneur?

With all the buzz about everybody being an entrepreneur these... Read More

The Lonely Hat: A Marketing Parable

Jones was a typical entrepreneur who worked long hours and... Read More

Drive Website Traffic Unconventionally, Force Your Children To Do It

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

Why I Should Go In To Business

Rohit Kochgaway was very upset with his boss for his... Read More

Could a Book About Your Company be Worth $1.7 Billion? Building Value Through Publishing

"Berkshire Hathaway (NYSE: BRK.A) to purchase Clayton Homes for $12.50... Read More

Double Your Income Automatically

It is a common known fact that it is far... Read More

Youve Found Your Guru, Now What?

In my last article, "Follow That Guru", I told you... Read More

Differentiation ? Smart Marketing Strategies for the Solo Entrepreneur

Are you ever frustrated or hesitant when you talk to... Read More

PTO; Justification of the Means and the Ends

Some would say about certain issues that the means do... Read More

Mobile Car Washing Long Term Opportunities in the Market

The long-term outlook for the Mobile Car Washing industry is... Read More

Ten Traits of Successful Entrepreneurs

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

Entrepreneurial Business Plan The Down And Dirty Way

Does the idea of running your own business sound exciting?... Read More

The Fear Factor

I recently conducted a lil' survey asking my colleagues what... Read More

Determine Your Niche & Be Successful

What's a niche?Dictionary.com provides a great, twofold definition:"A situation or... Read More

The Role of Statistics in Prospect Modeling

Identifying prospects has come a long way since the days... Read More

Traits and Skills of Successful Internet Entrepreneurs

There are certain traits and skills that many successful online... Read More