News‎ > ‎

The Agony and Ecstasy of Starting Your Own Nonprofit

posted May 9, 2018, 1:22 PM by Rebecca Baumann
Nonprofits are created because someone discovered a gap or someone had a passion and decided that a nonprofit (nonstock corporation) would be the best business structure.  Calls that I receive from nonprofit entrepreneurs often focus on initial funding.  Particularly in creating a new nonprofit, there is the misconception that start-up funds are available.  

While there may be unique situations when this is true, the most common experience is that startup funding comes from the founder's own personal bank account with maybe some help from board members, volunteers or friends.  When trying to locate that first grant, most foundations want to know that there is at least a small history demonstrating support from others, support from the community served, and some services and programs that are already underway.  Ironic as it is, it is easier to get funding once you have funding along with a track record of success.  

Another awful truth is that if you choose to create a nonprofit, even as the founder, the organization is no longer yours.  It becomes a public entity.  Most probably you will be chair of the board, may serve as executive director, or even be hired as executive director.  The truth is that there are term limits in the State statute that prohibit you from holding a board position for life.  Even without that, the board could vote you off or vote someone else to serve as board chair.  It is the board who hires the executive director, so that position is also not secure.  

So while you may not solicit charitable donations from foundations without your official IRS 501(c)(3) nonprofit status, and friends cannot deduct their donations to you, as a nonprofit, you also can no longer independently determine the organization's fate.  As a for-profit business, those decisions are yours.

The nonprofit is created to serve a public mission and while you may be the parent, the child is free to grow, thrive or fail as decided by the board of directors.