Category Archives: Non-Profit

What You Need To Know About Starting a Non-Profit

What You Need To Know About Starting a Non-Profit from The Startup Garage

What You Need To Know About Starting a Non-Profit

Corporations usually acquire funds from government agencies and private foundations. They use these funds to achieve goals that aim at improving social benefits. If you want to fund a non-profit corporation and effect positive changes to the community, check out the following list. It will enable you to gain better understanding about the benefits and the drawbacks of non-profit corporations.

Non-Profit Qualifications

Many types of groups can seek non-profit status. The following ones may be eligible: childcare centers, shelters for the homeless, community health care clinics and hospitals, museums, churches, synagogues, mosques, and other places of worship, schools, performing arts groups, and conservation groups.

Tax Exemptions

Non-profit groups can gain tax exemptions when they obtain corporate status. Non-profit corporations usually get their tax exemptions from Section 501(c)(3) of the Internal Revenue Code. It not only enables a non-profit to be free from paying taxes, but also allows people and organizations that donate to the non-profit to take a tax deduction for their contributions.

Shielded From Personal Liability

Forming a non-profit corporation can protect its staff from the corporation’s debts and liabilities. If any employee obtains a judgment against the non-profit, this judgment can reach only the non-profit corporation’s assets. Personal assets of all the people working in the non-profits are shielded from personal liability.

Roles and Salaries

The board of directors run a non-profit corporation and they hire management team members. They oversee the financial area and do strategic planning. A board member can also be a payroll member working for the organization.

Profits and Exit Strategy

Profits cannot be divided among corporation members beyond reasonable salary payment. A non-profit corporation cannot be sold for money. If its board of directors decided to dissolve it, its debts and liability have to be paid off, and all its assets need to distributed to another non-profit corporation.

The government provides non-profit organizations with many benefits, but they also post some regulations to limit certain behaviors. It is necessary set up a consultation with a lawyer and know the benefits and drawbacks for a non-profit. Your strategy should take advantage of the laws and should be documented in your business plan.

 

Whether you have a question about Starting a Non-Profit, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Driving Economic Development with Inclusive Business

Driving Economic Development with Inclusive Business from The Startup Garage

Driving Economic Development with Inclusive Business

An Inclusive Business is a business model that strives to benefit the community by directly including low-income populations into their business cycles, whether as producers or consumers of the good or service. It is a strategy that aids a large and often forgotten section of the community through social initiatives while still fostering business growth and for-profit policies. A main driving force behind Inclusive Business models is to create sustainable means of support for the society without the use of welfare.

Inclusive Business models vary slightly in the way they approach social issues then the Social Enterprise models discussed in our previous blog. Social Enterprises are organizations that blend their business between financial and social returns on investment in attempts to raise social awareness and aid to their cause, and to funnel monetary support to both the company’s growth and social issue as well. Though extremely similar concepts, Inclusive Businesses are created with the direct intent of benefiting one social issue – the poor. Going further, Inclusive Business models do not just raise awareness or financial aid for their cause; rather, they take frank and hands-on approaches towards achieving their goals. This is done by utilizing local suppliers for the company, creating products and services that are targeting towards the low-income community, or by making a point in employing a large majority of low-income persons.

The Inclusive Business model theorizes that if companies target the low-income community, who on a global economic pyramid are our base and largest sector, we can slowly integrate them towards more modern and formal economies. Through employment, a sector that primarily works in labor now will begin to gain human capital through formal training as well as an income that introduces them to new financial markets. As consumers, the community can be endowed with new products and services that specifically match their needs. With all of these segments of the business cycle fully turning, we would see a rise in local employment, skill, and income which in turn would drive economic development and growth.

 

Whether you have a question about Inclusive Businesses or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Revenue Sources: Donations

Donations to Non-Profits from The Startup Garage

Non-Profit Revenue Sources: Donations

Target the Best Potential Donors

  • Know where to begin your donor search.  It is more cost-effective to strategize who will be most likely to make a donation and target those potential donors rather than spend the time and effort to cast your net as far and wide as possible.  Start with the board of directors and their contacts, since they already share a passion and drive for the pursuit of the mission.

Know Why People Donate

  • Maybe it’s because they share in your commitment to the non-profit’s vision.  Maybe they want a tax write off if you have qualified as a 501(c)(3).  Maybe they want the PR benefit of being able to call themselves a donor to your organization.  No matter what the reason may be, it is important you are paying careful attention to why your donors choose to donate.  It’s a great way to effectively target them for future donations.

Stay Organized

  • Putting prospective donor information into some sort of system will be incredibly helpful in streamlining your efforts to secure donations.  This way you can have an effective system for knowing how much, when, and why a donor chose to help your organization.
  • If you plan on having a membership option for your donors, make sure you have a system in place that tracks their membership details.

How to Ask for a Donation

  • For in-person and phone requests, it is critical that you train your staff and volunteers on how to ask for a donation.  You can identify who are your strongest donation solicitors.  Make sure they are prepared to handle rejection and can interact with a potential donor in a conversation.  Ask for a donation in a specific amount (or suggest several specific amounts) rather than just asking for any donation – it’s better to propose amounts as options rather than “yes” or “no” as options.
  • For e-mail and paper requests, bear in mind that these two forms of contact are usually numerous and easy to disregard amongst the rest of the “junk mail”.  E-mails are inexpensive, but if not done carefully, can alienate your prospective donor.  Make sure to include your organization in the subject line, include a link to your organization’s web page, and encourage the potential donor to forward the e-mail along.  You should also provide options to unsubscribe as well as hide the e-mail address from the rest of the recipients on the list.  You can save on postage if you obtain a non-profit discount on bulk mail.  Your mailing should include a letter asking for a specific donation, a brochure about the organization and a response card for the donor to return.

 

Whether you have a question about Non-Profit Revenue Sources, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Revenue Sources: Grants

Grants for Non Profits from The Startup Garage

Non-Profit Revenue Sources: Grants

Sources of Grants

  • Unlike donations from private individuals, grants come from foundations, government agencies, private businesses and other groups.  As these groups have access to larger accounts, the grants they give out are usually much larger than individual donations.
  • Many grants are only available to 501(c)(3) tax-exempt organizations.
  • Grant givers are often looking for an organization that meets the giver’s criteria in terms of the activities and projects conducted by the recipient.  It is important that you look for grants that specify criteria you can meet in order to have the best shot at winning the grant.

Writing Grant Proposals

  • Many grant givers have specific application procedures and deadlines, so make sure you are up to date.  Many grant applications have two rounds to screen for appropriate recipients and save the non-profit the time necessary to prepare a full grant proposal.  The full proposal, if you are invited to submit one, includes a cover letter, cover sheet, description of the organization, a needs assessment, program goals and objectives, financial information, a conclusion and any appendices or attachments as necessary.

Corporate Sponsorships

  • Approaching local businesses, banks or institutions for corporate sponsorship can also generate a large amount of revenue for the non-profit.  Most corporate sponsors want some kind of recognition – such as their name and logo on a banner or t-shirt – for their contribution.  However, you are only allowed to “acknowledge” your sponsor, not provide them with advertising.  Providing them with advertising can count as unrelated business income (UBI) and be subject to tax or losing your 501(c)(3) exemption status.  Consulting with an attorney may be helpful if you are not sure whether your form of recognition is acknowledgement or advertising.  If you do provide recognition with a commercial value (advertising) than the donor can only deduct the difference in value between the donation and the item of commercial value provided the item exceeds $75 in value.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Non-Profit Grant Sources, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Revenue Sources: Fundraising

Non-Profit Idea and Steps from The Startup Garage

Non-Profit Revenue Sources: Fundraising

Importance of Relationships

  • No matter what the amount you are trying to raise, you must have a good connection with your donors.  Especially if the donor is contributing for the first time – a thank you note can go a long way to ensuring continued donations in the future.

Convince Your Potential Donor

  • Be specific and build a compelling case for why you need this donation.  Your potential donors have many options for where to donate – if they donate at all – and you must convince them that you are the best recipient of their financial support.

Don’t Forget the Bigger Picture

  • But keep the organization’s bigger picture in mind.  You can’t always hide your expenses as a compassionate need – maybe you just need office supplies.  A good fundraiser is also able to bring in funds for the overhead expenses of operating.

Make a Fundraising Budget

  • Unfortunately, some of the money you raise is turned around to spend on future fundraising efforts.  Fundraising can add up quickly so make sure you set a budget that is realistic for the amount of money you are wishing to bring in.  Look for ways to cut costs or to get time, space or materials donated to assist with the fundraising effort.

Consider Membership Opportunities

  • You can collect dues from members of your organization if you have a program that gives them something in return.  It could be a token gift or the right to participate in an exclusive group such as a list serve or a planning committee.  But you must somehow involve your members for them to feel connected to the organization and continue to provide membership dues, which are a source of revenue.

 

Whether you have a question about Non-Profit sources for Fundraising, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Helpful People to Have On Your Non-Profit Team

Non-Profit Team from The Startup Garage

Helpful People to Have On Your Non-Profit Team

Chances are you do not specialize in every area of business necessary to get your non-profit organization off the ground.  There are some people with whom it will be necessary to ask for or hire for their ability to help you.

Mentor

  • As much as you read about starting a non-profit, it will always be helpful to have access to someone who has gone through the process before.  Hopefully you already have someone in mind to talk to, but if not you can look up another non-profit manager in either your local area or in your field of non-profit on Council of Nonprofits, or do an internet search to find more non-profits in your area.

Attorney

  • Although you probably prefer to resolve business issues on your own, some issues are more efficiently dealt with by an attorney.  Some attorneys specialize in working with non-profits.  Ask your mentor or anyone else you know in the non-profit world for suggestions.  A recent shift in the legal world is the increasing presence of lawyers who are willing to work with you collaboratively or as a coach, rather than the traditional “all-or-nothing” approach.  Make sure to ask a prospective attorney if they would be willing to help you collaboratively if that is something you are interested in doing.  It might help you save money on legal expenses.

Accountant/Tax Professional

  • If you qualified as a 501(c)(3), tax deductions are both a huge benefit financially and a significant amount of paperwork and time.  Especially if you are a new non-profit, it is important to ensure tax filing accuracy to avoid delays or the revocation of your 501(c)(3) status.  Having this paperwork completed or reviewed by someone who specializes in it may be a necessary expense.

 

Whether you have a question about Helpful People for a Non-Profit, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Profit-Seeking Activities

Non-Profit Legal Team Setup from The Startup Garage

Non-Profit Legal Issues: Profit-Seeking Activities

Since non-profits are established with a specific promise to return the profits into the organization and to not pass them along to any officer, director or employee of the organization, some financial transactions are bound to raise a red flag or be a cause for a non-profit to lose access to federal grants, community donations, and tax exemption.  These transactions fall into two categories.

Private Benefit/ Inurement

  • While directors and staff employed by a non-profit have a right to a reasonable salary, anything beyond what is considered reasonable, even if it’s not a monetary compensation, is considered to be an inappropriate and illegal appropriation of non-profit funds.  This category includes the crime of embezzlement.

Unrelated Business Income

  • A non-profit could stand to lose its 501(c)(3) tax-exempt status if it has too much income generated from activities or trade that are regularly carried on and are unrelated to the exempt function of the organization.
  • If your business plan includes regularly carried on trade or business from which you would like to retain a profit, you can consider structuring your business as a social enterprise rather than a non-profit.  California recently introduced two “hybrid” corporate forms for social enterprises: flexible purpose corporations and benefit corporations.  The Startup Garage has helped several social enterprises begin their businesses – please look through The Startup Garage’s web site for more information on beginning a social enterprise.

 

Whether you have a question about Non-Profit Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Lobbying

Non-Profit Lobbying from The Startup Garage

Non-Profit Legal Issues: Lobbying

Lobbying is the act of working to influence legislative or administrative decisions.  Any activity by a charity relating to proposed or pending legislation or molding public opinion on legislative matters could qualify as lobbying.  Lobbying can be done either professionally or on a certain issue by passionate members of the community.  There are many organizations that are formed for the purpose of lobbying on behalf of a community or a cause. While this sort of advocacy is often motivated by the same desires to see change that motivate non-profits, the two activities have very little legal overlap.  This is because the actions of a non-profit are meant to benefit the public, not just a segment of the public with a particular political view.  A non-profit that has qualified for a 501(c)(3) exemption is prohibited from all lobbying efforts except for those that are “insubstantial”.  And to be permitted to do so, the 501(c)(3) organization must submit a 501(h) election, available as Form 5768.

 

However, a 501(c)(3) organization is expressly prohibited from  participating or intervening in any political campaign on behalf of, or in opposition to, candidates for public office. If a non-profit wishes to engage in a moderate to extensive amount of lobbying, they can still qualify for tax exemption as a 501(c)(4) action organization.  The downside to being a 501(c)(4) is that donations to a 501(c)(4) organization are not tax deductible to the donor.  For more information about applying for and your lobbying rights as a 501(c)(4) organization, please see the IRS’s web page about Social Welfare Organizations.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Whether you have a question about Non-Profit Lobbying Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Non-Profit Legal Issues: Fundraising

Non-Profit Fundraising from The Startup Garage

Non-Profit Legal Issues: Fundraising

As mentioned in our earlier blog post on State Filing, most states require that you register with the Attorney General for the right to solicit funds within the state, and most states additionally require you to report on your fundraising revenues and expenditures.  Fundraising for a non-profit can take many forms, and below we discuss some of the legal issues that come up in the context of non-profit fundraising.

Wills

  • A possible avenue to secure funds to be available in the future is to get donors to put your non-profit in their will.  The donor can use a legal device called a codicil to amend their will to include your non-profit.  You can offer to draft the codicil for the interested donor so their only step is to complete the codicil.

Planned Giving

  • A planned gift is a major contribution that can range in form between a bequest to a trust, and involves financial advisors, tax attorneys and others who assist in the process of putting the planned gift together.  The gift can include money, stock, insurance, property or other assets, and can either be paid to the organization at the donor’s death or during their lifetime, depending on how the donor wants to structure the deductions.  Setting up a planned giving program is best done under the advice of an attorney.

Telemarketing

  • Placing a telemarketing call from an automatic dialer to a cell phone is prohibited by the FCC, but calls from political organizations, charities or telephone surveyors that aren’t made to sell goods or services.  If you do sell products to raise funds, you may call someone who has made a purchase within the last 18 months, as an “existing business relationship” lasts for 18 months.

Disclosures to Donors

  • For 501(c)(3) tax-exempt organizations, contributors who gave a “quid pro quo” donation (received something in return) of more than $75 must receive certain disclosure information, and donors contributing more than $250 must receive additional disclosure information.  Further information can be found on the IRS’s web site on Substantiating Charitable Contributions.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Fundraising Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Overview of Common Non-Profit Legal Issues

Non-Profit Legal Overview from The Startup Garage

Overview of Common Non-Profit Legal Issues

There are two categories of common legal problems this post will discuss: the problems that arise by virtue of being a business (contract, employment and personal injury issues) and the problems that are common to non-profits (fundraising, lobbying, profit-seeking).  Here we will explain the former as they are more simple, and will reserve individual blog posts for the latter.

Contract disputes

  • Most of your everyday transactions will be based on a contract, either written or oral.  Make sure you are meticulous with the details of a written contract before you sign it, and try to avoid oral agreements.  A paper trail of your past agreements with their terms enumerated will be invaluable in protecting your non-profit if an issue arises.

Employment claims

  • Employment lawsuits are one of the biggest category of lawsuits against non-profits.  It is important that you are well versed in the relevant employment laws that apply to non-profits.  You can begin your research at the Department of Labor’s web site.  Some of the categories of employment claims include:
    • Wrongful termination: At-will employees may not be fired for an illegal reason, and contract employees must be fired with “good cause”.
    • Sexual harassment: Employers can be responsible for failing to prevent or responding inadequately to an employee’s claim of sexual harassment.
    • Discrimination: When it comes to hiring, firing, pay, shift assignments, promotions or access to training, you are prohibited from using race, color, gender, national origin, religion, disability, citizenship status or age as a criterion. In California, the additional criteria of ancestry, mental disability, medical condition, marital status, or sexual orientation are also protected.
    • Retaliation: If an employee has filed an action against your non-profit or has assisted someone else in doing so, you are prohibited from punishing them by denying them something they were otherwise qualified for.
    • Wage and hour claims: The laws that govern the worker/employer relationship are complex and may necessitate consultation with an attorney.
    • Defamation: The main context for a defamation claim is over an ex-employee’s reference.  Avoid issues by requiring a prospective employer to place a request for a reference in writing.

Personal injury suits

  • Personal injury claims can include physical injuries, property damage, emotional distress or damage to a person’s reputation.  There are many risk management strategies that can be utilized to minimize the risk of personal injury, including purchasing a general liability policy.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.
 

Whether you have a question about Common Non-Profit Legal Issues, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!