September 23, 2017
 
Should You, Could You, Be a 501(c)(3)?

By Carla C. Cataldo

Carla Cataldo
Many people want to start a 501(c)(3) nonprofit to obtain grants, but the reality is that grant awards usually make up less than 15% of the total budget. So how do you decide when to start a new nonprofit, vs. working with an existing one?

To help answer the question, consider the following five issues:

1) Do you love learning new things and administering all aspects of a project?
Nonprofits are highly regulated. There is a tremendous amount of state and federal paperwork, including state and federal forms, and annual financial filings, without getting into any of the specific paperwork or regulations of your chosen field.

Do you feel that you can master the requirements governing nonprofit’s, in addition to the actual work that you want to do with your organization? Do you have the time? If not, can you hire someone to take care of the administrative requirements?

If the answer is no, then you should consider other alternatives, such as using an existing nonprofit as your fiscal agent for donations, grants, and administrative umbrella

2) Can you keep the new organization funded until it has its own base of supporters?
Like any new business, a nonprofit needs seed money to begin operations. Can you make an initial donation, or ask enough friends and board members to provide the capital required for the first year? You may be independently wealthy, but unless you want to create a private foundation instead, any public charity must prove that at least one-third of its revenue comes from different sources, and no more than one-third of its support from gross investment income—and that means fundraising.

3) Can you recruit and train a board of directors?
The legal responsibility for any nonprofit rests with its board. It is difficult to find good volunteers to serve on non-paid boards. Can you recruit others that represent the community you would like to serve? Can you and your board develop orientation materials, policies, and train in fundraising? If this idea makes you want to flee, think about working with an existing organization first. If you have never been on a nonprofit board, join one before deciding whether to start a new organization or serve an existing one.

4) Can you accomplish what you want to do any other way?
Can you collaborate with a private business, a religious group, a business/labor or professional association, or an existing nonprofit? If the answer to any of these is yes, then that is often the path of least resistance. Have you researched if other nonprofits in the region are working on the same or similar problem? If so, what will you be doing differently?

5) Can you give up control?
One person does not a successful organization make. You will need to bring in, at a minimum, three to seven board members, some of whom who may not agree on how to proceed. Is it your way or the highway? If that’s the case, consider a private, for-profit business instead. Like any new business start-up, it will be all consuming the first six to 12 months. Can you afford not to break even or get paid much the first year? If not, consider affiliating with an established nonprofit to do the work you love.

If you can’t imagine doing anything else, and have the passion to put your heart, soul, and wallet into a nonprofit venture...then go for it!

Carla C. Cataldo, principal of Proposals, Etc., helps organizations raise the money they need to provide vital services to the community. She can be reached through her web site, www.proposalsetc.com.

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