Should I Start a Nonprofit?

by Daniel Wood

First off, I have to confess that I’m not a lawyer.  I was the jury foreman once, but don’t think that counts.  So please don’t take my advice and quote me in a court of law.  They would probably laugh anyway.  However, I did start a not-for-profit performing arts corporation in California and have acted as its executive director for the past ten years so I have learned a thing or two.

With that experience, individuals take me out for coffee asking how to start their own nonprofits.  They want to know:


  1. How do I apply?
  2. Can I make money with a nonprofit?
  3. Is a nonprofit time-consuming?
  4. Is it worth starting one?

For number 1, I tell them to buy a book for the application process.  I used the Nolo Press book, How to Form a Nonprofit CorporationIt is available from online retailers and will probably have the latest information on the process in your state.

Number 2 is easy. Nonprofits can make money.  They just can’t funnel that money into employee’s pockets at the end of year as bonuses.  They have to put any extra income back into their organization.  For example, the extra revenue could be used to buy equipment or build up a savings account (read that as unrestricted operating cash reserve in “nonprofit-ese”.)

Nonprofits are time consuming.  You are setting up a corporation.  (All nonprofits are corporations.)  You are breathing life into an entity with its own unique tax ID number that can “never die.”  More on that later.  Any time you start something like that, it is going to take some time to keep it running smoothly.

And finally, given the mission and focus of your idea, a nonprofit can be well worth it and the way to go.  For most people who talk to me, however, it isn’t.  They are doing it for insurance reasons, to get donations, or to apply for a grant.  You don’t need to be a nonprofit to do these things.  I explain at the bottom.  Hint: fiscal agent.


As most people know, contributions to non-profits are tax deductible, but the organization also benefits from a variety of other factors. Simply put they are: tax exemptions, limited liability, perpetual legal existence, employee benefits, and formality.

The first two are pretty self-explanatory.  Being tax exempt means that you don’t pay taxes on your revenue.  Woohoo!!  If you are a performing arts organization that makes a lot of money every year and the taxes would be a big blow to your organization, then being a nonprofit due to your charitable existence is a very good idea.  Many smaller organizations, like chamber ensembles, don’t have that issue of rolling in money so this wouldn’t be a driving factor for them.

As for perpetual legal existence, this can be a really nice thing.  It kind of makes you immortal.  When you are a nonprofit, your audience can feel confident that you are going to stick around.  Funders and donors are more inclined to invest in what you do too.  Of course, if you do go under, there are some legal ramifications.  Check out the disadvantages for that.

While a nonprofit corporation can’t share profits amongst employees, salaries can and should be commensurate with for-profit organizations. Your organization should make sure to have the necessary funds for administrative and artistic compensation, healthcare, pension, and benefits such as professional development.

Finally, the formality of the organization in regards to its documents (Articles of Incorporation, Bylaws, Minutes of Meetings, Board Resolutions, etc.) creates a “built-in set of ground rules…that is an important advantage…where the composition of the board includes diverse members of the community with correspondingly divergent interests.” (Nolo Press, How to Form a Nonprofit Corporation in California) Without these guidelines, reaching collective decisions that benefit the community at large would be difficult if not completely futile.


Things are not completely peachy however. Nonprofit corporations have a great deal of paperwork to deal with, the high price tag of incorporation costs and fees, and lots of time and energy to maintain.

And while the rosy gates often are opened to you if you are a nonprofit in terms of grants, tax deductible donations, rental rates, insurance premiums, etc., two words very often can help you avoid setting up the nonprofit in the first place: fiscal agent.  Another nonprofit with a similar mission can act as your fiscal agent and be used as a go between you and the grant, donor, insurance company, etc.  Arts councils and national service organizations often act in this capacity for their constituents.

And if you form a nonprofit and it doesn’t work out, all of your assets need to be given to another nonprofit that does comparable work.  Therefore, if all the music you bought for your symphony was paid for by the nonprofit, every last piece of it needs to go to another nonprofit group if the bills can’t be paid.  Hopefully it will never come to that.  In this economic climate though, you never know.


Forming a nonprofit can really help you organize your mission and get your idea off on the right track.  However, it can be a ton of work to maintain.  If you have an idea that will keep you working throughout the year and it has a charitable mission, then perhaps starting that nonprofit is the right way to go.  Either way, good luck and make your idea happen.

DanielWoodDaniel Wood is an entrepreneurial musician living in the San Francisco Bay Area.  Since 2000, he has worked and mentored large and small arts nonprofits in the areas of management, marketing, development, and board governance.  As a founding member and executive director of the horn quartet Quadre and teacher at the Community School of Music and Arts, Daniel publishes his music with Solid Wood Publishing and lectures on the business of music nationally as a “Savvy Musician” advocate.

Related Posts with Thumbnails
Share and Enjoy:
  • email
  • Print
  • RSS
  • Facebook
  • Google Bookmarks
  • Digg
  • Technorati
  • StumbleUpon
  • Mixx
  • Blogplay
  • Yahoo! Bookmarks
  • Yahoo! Buzz

217 Responses to “Should I Start a Nonprofit?”

  1. read more says:

    Hey there, you’re certainly right. I constantly read your articles carefully. I am furthermore curious about free apps, maybe you might write about that occasionally. See you soon.

  2. Your posts are unbelievable. My pleasure to being here on your blog. I needed this. Your post is absolutely on point!

  3. I really like the things you dudes are up to. This kind of clever effort and reporting! Carry on the good effort guys, I’ve you to my own Arvind Pandit Kansas site.

  4. Hi there. I recently saw this amazing site and I really enjoy it. I also always like to chat about how to buy ethereum at times. Good to be around, bless you!

  5. Hello there, what do you really feel around asbestos lawyer mesothelioma? Very interesting matter, huh?

  6. Attractive part of content. I just stumbled upon your site and in accession capital to claim that I get actually loved account your blog posts. Any way I’ll be subscribing for your augment or even I success you get right of entry to constantly fast.

  7. I like what you fellows are now up to. This type of great work and coverage! Keep up the amazing work friends, I’ve included you my personal blogroll.

  8. I’m happy for such educational material

  9. my site says:

    Incredible ! keep it down

  10. visit says:

    Just love your site

  11. Many thanks for discussing this, I bookmarked this page. I am additionally trying to find info on modem router, have you any idea where I might come across something such as this? I will be back in a little while!

  12. Thank you for this excellent article! I actually liked it.I’ll be sure to save this website and will come back in the future. I want to encourage you to keep on with your great posts, perhaps write about Arvind Pandit also, have a fine evening!

  13. Lizabeth says:

    Nice post. I used to be checking continuously this weblog and I’m impressed! Extremely useful info specifically the closing part :) I take care of such information much. I was looking for this particular information for a very long time. Thank you and good luck.

  14. ios app bar says:

    I bet this is probably a simple thing for you. Can you tell us more about this? My aunt would like to be a master in this field someday.

  15. Bonnie Bowers says:

    I am loving this!! And I am a horn player!!!! I am in process of starting a music non profit.

  16. unicos says:

    Admiring the hard work you put into this blog and comprehensive facts you display. It really is amazing to find a website every now and then that is not the similar obsolete re-written material. Great read! We’ve saved your webpage and I’m adding your RSS feeds to my own racks and equipment cabinets website.

  17. incest crime says:

    Many thanks for discussing this, I bookmarked this page. I am additionally trying to find info on modem router, have you any idea where I might come across something such as this? I will be back in a little while!

Leave a Reply

Powered by Wordpress | Designed by I Design Blogs