I often get requests from individuals wanting assistance to start a nonprofit. Usually the requests come from individuals who genuinely feel they have a service to offer to others and need a vehicle for providing that service. Nevertheless, even those with a genuine desire to help are also thinking that starting a nonprofit will immediately position them to apply for and acquire grant funds to do the work, and more importantly, to pay THEM for doing the work. In a few cases, individuals really have entrepreneurial ideas, and want to find a way to fund them. So, I feel a need to clarify the distinction between a nonprofit and an entrepreneurial venture.
Many people misunderstand about nonprofits. Oftentimes, especially in difficult economic times, individuals think that starting a nonprofit is a way to garner additional personal income. The primary focus of nonprofits is to bridge the gap between unmet social/public needs. Nonprofit doesn’t mean that individuals who direct them or provide services through them can’t benefit (e.g. earn wages or a salary from the work they do). However, the IRS designation of a nonprofit is only given to organizations who are established for CHARITABLE PURPOSES or “exempt” purposes. The definition that the IRS uses for exempt purposes can be found here: http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html.
In addition, no individual “owns” a nonprofit, as they cannot be operated for private interests, or to benefit those running the organization. Thus, nonprofits MUST have a governing boards of directors, who are primarily responsibility and LIABLE for all of the work of the organization. The buck stops with them. Generally, particularly in small, grassroots organizations, the board is unpaid, but have the responsibility to hire someone to direct the work of the organization. That paid staff works exclusively at the pleasure of the board, who also has responsibility for replacing them, if they are not able to effectively run the organization.
On the other hand, if you’re looking to start a business that will garner you personal income, that’s an entirely different playground, with totally different rules. In that case, your first steps will need to be conducting a feasibility study for your business, and then developing a well-researched business plan. With that in hand, if you don’t have the capital to finance it yourself, you have a tool for seeking willing investors. There are few, if any, grants (free money) available for for-profit ventures.
That being said, nonprofits CAN be entrepreneurial. There is this idea and concept called social entrepreneurship whereby entrepreneurial ideas and practices are utilized in the service of social change. But, we’ll talk more about that later….
Hope this was helpful! If you have questions, please feel free to leave them in the comments section. I’ll answer any and all that I can.
Transformative Concepts Consulting Group 