Options to becoming a Non-Profit

December 3, 2010 § Leave a comment

One of the decisions currently being worked on here at NPJP is the business model that will work best for us.

The options that seem to make most sense (pre-investigation and consultation) are the following:

Seek Fiscal Sponsorship

Seek fiscal sponsorship instead of becoming a tax-exempt organization yourself. Fly under the cover of an existing nonprofit so that you can accept donations and apply for grants before being registered as a tax-exempt organization.

Organize an Unincorporated Association

Put together an unincorporated association to fulfill your mission without seeking tax-exempt status. Not all charitable organizations are incorporated and IRS registered.

Become a Social Entrepreneur

Become a social entrepreneur by forming a for-profit social venture to accomplish your social goals; or set up a small business with the goal of contributing some or all profits to a charitable cause.

There is even a new type of organization that is a hybrid of nonprofit and for-profit. It is an

L3C (Low-Profit Limited Liability Company

L3C organizations are a new way to fulfill a social mission. A hybrid of a nonprofit and for-profit corporation, the L3C is run in a similar way to a for-profit company, but is like a nonprofit in that its mission is to do something for the social good.

An L3C generates a profit but it isn’t the sole priority. It is not tax-exempt, but it can seek investors and investments that are program related for funding. The IRS does restrict how much profit an L3C can make and property it can own. Also, this hybrid organization cannot engage in political work or lobbying. The organization must make clear that fulfilling a charitable goal is the primary reason it exists.

SOURCE:  http://nonprofit.about.com/od/nonprofitbasics/tp/nonprofitalternatives.htm?nl=1

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