This is the fifth and final installment in a series of articles on how you can start a nonprofit organization. Many businesses could qualify for and benefit from nonprofit status – but don’t realize the range of options available under the law. My aim is to share with you the research I’ve conducted concerning nonprofit organizations. This is not legal advice, nor is it a substitute for legal advice.
In the first four articles, we covered the basics of launching a nonprofit business. My primary aim has been to make the case that nonprofit enterprises aren’t limited to soup kitchens and homeless shelters. You can do just about anything as a nonprofit that you can do as a for-profit business – anything, that is, but distribute profits to owners.
I won’t go into all the differences between the two, but here’s a nice, concise breakdown that includes some helpful resources: Nonprofit vs For-profit.
Nepal earthquake relief (CC) courtesy of Direct Relief
Nonprofits focus on serving others. For-profits focus on generating funds that can enrich shareholders (or proprietors). That said, however, it’s perfectly fine (and lawful) for a nonprofit to pay those who do the work. And that compensation doesn’t have to be in the form of minimum wages.
Here are a few examples of CEO salaries paid by nonprofits in 2014:
- $2.9M: Memorial Sloan-Kettering Cancer Center
- $1.5M: Shriner’s Hospital
- $1.5M: American Jewish Committee
- $1.4M: American Cancer Society
- $1.2M: American Way
- $1M: American Rifle Association
- $1M: Boy Scouts of America
By the way, the M stands for “Million”… do you get what I’m saying here? Being the CEO of a nonprofit doesn’t have to be a down-and-out ordeal.
More Benefits to Nonprofit Organizations
But wait, there’s more. Not only can a nonprofit pay its staff well, it can contribute to other nonprofits. I believe that’s one of the complaints lodged against the case study we’ve been using, Kars 4 Kids. There was public concern over what appeared to be a “masking” of where the funds were really going.
To illustrate that case study, let’s take a look at the Kars 4 Kids IRS Form 990 from 2012. The 990 is the “Return of Organization Exempt From Income Tax.” I’m using the 2012 return because it’s the one the pops up in search. My aim here is just to provide an example, not to research the organization. There are several salient points here.
A nonprofit can operate as a dba
The first thing I note is that “Kars 4 Kids” is a dba (doing business as). The real name of the organization is “J O Y For Our Youth, Inc.” It would appear, then, that nonprofits can make use of a dba, just as a sole proprietor can choose a business name different from the owner’s given name.
A nonprofit can generate millions of dollars
Let’s look at the Kars 4 Kids tax return. It is publicly available here: Kars 4 Kids 990
Kars 4 Kids revenues
In the Revenues section, I see that Kars 4 Kids gathered almost $27M in 2012. And here’s a cool thing about that: The income is listed as “Contributions and grants” not as “Wages” or “Income” like you would see on tax forms for individuals or other types of organizations. For Kars 4 Kids, the contributions came, in large part, from those who donate cars to the organization.
Kars 4 Kids get tax-free income, while the donors get tax advantages! It’s a win for both parties!
Recommended for YouWebcast: Advanced Facebook Growth Hacking
Kars 4 Kids expenses
We can find out how those funds were distributed in the Expenses section of the form 990. Salaries were about $1.8M. Other expenses came to $12.5M. And Contributions and grants were almost $14.5M. Total expenses for 2012 were about $28.8M, meaning the nonprofit realized a net loss of about $1.8M ($27M revenues – $28.8M expenses).
But what, exactly, did Kars 4 Kids spend those millions of revenue on? To answer that, we have to turn some pages…
Part IX of the return shows that Kars 4 Kids spent $11.7M on advertising, $160,690 on office expenses, $107,378 on legal services, and $69,089 on accounting. Note that nonprofits can advertise and get professional help just like any other business. And they don’t have to pay discounted rates.
Nonprofits can donate funds to other nonprofits
How about the contributions and grants of almost $14.5M, though? Where did they go? It turns out that Oorah Inc. received $14.1M from Kars 4 Kids in 2012. But what does Oorah do?
According to their website, “Oorah’s simple, straightforward goal is to give Jewish children and their families opportunities to become active and productive members of their community.”
My goal here is not to disparage Kars 4 Kids in any way. Their tax documents are publicly available. If they weren’t operating within the bounds of IRS regulations, they would lose their nonprofit status.
By the way, I’m definitely not an expert on tax law or tax filings either. I may be reading that 990 form all wrong. You can see if for yourself here: Kars 4 Kids 990.
Nonprofit organizations can do all kinds of things for the public good
My point is that a nonprofit can do all sorts of things you may not have thus far realized. A nonprofit can operate under a dba. A nonprofit can pay excellent salaries to those who help operate it. And a nonprofit can even donate funds to another nonprofit… all without being taxed on the revenue coming in and while benefiting those who donate.
It would be tough to find a better business platform to operate a “helpful enterprise” from.
Are you ready to get started on that nonprofit?
Would a nonprofit work as the best business type for your dream? It just might. My hope is that this series of articles can help you decide.
Here are the links to the previous articles in this series:
For more information about my research, or to get a complimentary copy of an ebook that can help you get going, just ask: Tell Me More.
Meanwhile, I wish you the very best in your “social entrepreneur” journey. May the organization you launch grow to help millions of people enjoy a richer, more meaningful life.
How to Start a Nonprofit Organization – Are You Ready?
Aucun commentaire:
Enregistrer un commentaire