Giving Compass’ Take:
· Tom Vander Ark discusses the benefits and downsides of forming a nonprofit and provides these organizations with 10 ways to scale impact and three basic scaling strategies.
· How can nonprofits focus on expansion to scale their impact? What are some effective ways for nonprofits to increase fundraising?
Nonprofit organizations are formed with a charitable intent around a mission–a big problem or a great opportunity. There are more than 1.5 million nonprofit organizations in the United States. While they will receive more than $400 billion in donations this year, most of that is concentrated in a small percentage that have achieved scaled impact.
There are some good reasons for forming a nonprofit corporation (one that qualifies as a tax-exempt organization under IRS code section 501(c)(3)):
- You are eligible for private and government grants (not typically available to for-profits).
- Unlike a loan, If you receive a grant you don’t have to give the money back.
- Donations are tax deductible for your donors.
- If you make a profit, you don’t need to pay federal corporate income taxes and, in most instances, do not pay state corporate income, franchise, excise, use, and sales tax.
- You may receive generally favorable treatment from educators skeptical of private enterprise.
There are a couple downsides to forming a nonprofit corporation. The first is the loss of control. You need to put together a board of directors that become your boss–and they can fire you. You may be subjected to more scrutiny because your finances are open to public inspection. If your organization grows and becomes profitable you can’t sell it. Nonprofits may pay lower salaries and have less incentive compensation than for-profits that can make it a challenge attracting talent.
Read the full article about scaling nonprofit impact by Tom Vander Ark at Getting Smart.
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