InfinityBy BUSINESS MAGAZINE Dana Earhart, of Dana Earhart Consulting
STARTING, SERVING, OR SUPPORTING A NONPROFIT Repeat after me: "Nonprofit" is a tax status, not a business plan. Keep that tenet in the back of your mind as you read on. Nonprofit organizations are permitted to make a profit. With approval from the IRS, they are exempt from paying taxes. Better stated: "nonprofit" = "tax-exempt." Too many nonprofits struggle because their donors, volunteers, or leaders forget how crucial it is to run the organization like a business. When extraordinarily passionate people come together in pursuit of a common philanthropic mission, it's easy to let emotions cloud rational decision making. As of November 2018, there were over 19,000 nonprofits in the state of Nevada. Nineteen. Thousand.
Gina Bongiovi Managing Partner of Bongiovi Law Firm, Gina is a Las Vegas native and holds a JD/MBA from UNLV. The company, which just celebrated its tenth year in business, serves as outside counsel to small and medium-sized businesses. Gina is a recurring speaker at a legal technology conference on topics such as Process Automation and Technology Planning.rtups and small businesses.
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All rely heavily on just over 3 million Nevada residents for their support. Though it's a silly proposition which ignores the fact that many of those residents are themselves served by nonprofits, if you divided our population by the number of organizations, each nonprofit could call dibs on about 158 residents. Could you run your business with only 158 clients? I could…for about three months.
asked for my help in setting up a nonprofit that only rescued white German Shepherds or only German Shepherd puppies, I'd do my darndest to talk them out of it. If you have an idea that might jibe with the efforts of another organization, volunteer to lead a task force to bring that vision to reality. Most nonprofits would welcome the diversity and extra pairs of hands.
Let's talk more about mission. To file a taxexempt application, you'll have to articulate your charitable purpose. This shouldn't be an off-the-cuff thing but should be informed by the same depth of research involved in a forprofit venture's business plan. Resist the belief that everyone in the world shares your passion because that simply won't be the case. With that in mind, you'll want to first confirm you can recruit board members, a veritable army of dependable volunteers, and declare a purpose that interests enough donors so you can keep the lights on. A mission supporting the repopulation of the threatened African Pangolin might be a bit too narrow while one that "helps women" is far too broad.
Another reason to reconsider setting up your own nonprofit - it's complicated. Registering at the state level might be easy, but the IRS 1023 application is no joke, at around 28 pages. The IRS, not surprisingly, is primarily concerned with where your revenue will come from and how you'll spend it. To that end, the 1023 application requires an invasive yet mostly clairvoyant examination of your budget, mission, messaging, fundraising efforts, donor channels, governing documents, board participation, employees, independent contractors, policies and procedures…the list goes on. Once you submit the application, the IRS takes months to process.
This is only one reason among many why I strongly encourage people wanting to start their own nonprofit to instead search the market for an existing organization with a similar mission with which they can align. As an example, I helped establish Vegas Shepherd Rescue. They rescue, rehabilitate, and rehome orphaned German Shepherds. If someone
I also helped found Dress for Success Southern Nevada; we waited nine months for our taxexempt approval, even with a request for faster processing from our global headquarters. Vegas Shepherd Rescue's application was approved in only three months. Maybe we got lucky and our application landed on a dog lover's desk. It's the IRS – there's no way to tell.
