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.
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 wage or even close to minimum wage.
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. It’s possible to earn a substantial income, while still serving in a nonprofit. Is it fair for officers of nonprofits to benefit from the work? My personal take on that question is that EVERYONE who works should be paid well for that labor.
Do people sometimes take advantage of the laws regulating nonprofits and dip further into the collection can than they deserve? Probably, so. Even the best-meaning people are still people, and we’re all subject to fear and greed.
More Benefits to Nonprofit Organizations
- A nonprofit can contribute to other nonprofits: If your nonprofit startup ends up creating more revenue than it needs, you can help another nonprofit with funding. Friends help friends, and it’s a wonderful sight to see when one nonprofit supports another. Consider the relationship between hospitals and Ronald McDonald houses, for instance. They are symbiotic in their mission to make sure children have access to the healthcare they need.
- A nonprofit can operate as a DBA (doing business as): As your business expands, you may find the original name no longer suits the need you serve. No worries, you can file a DBA name and continue on the path best-suited for you.
- A nonprofit can generate millions of dollars in revenue: Nonprofit doesn’t have to mean “broke and begging.” You can generate all the revenue your organization is capable of producing. It’s not how much money you make that counts. Rather it’s what you do with that money that distinguishes a nonprofit from it’s for-profit neighbor.
Nonprofit organizations can do all kinds of things for the public good. 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 and while benefiting those who donate to the business, those who manage the business, and those who do the work.
It would be tough to find a better business platform to operate a truly helpful enterprise from. If your vision can be organized in a way that will qualify it for nonprofit status … the road ahead could be clear.
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:
I wish you the very best on your journey as a social entrepreneur. May the organization you launch grow to help millions of people enjoy a richer, healthier, more meaningful life.
Read more: How to Make Money Running a Nonprofit