Nonprofit Business

The business of starting and running a nonprofit organization is in every way more complex than starting and running a for-profit business.

While the focus of a for-profit business is financial growth for the business owner or owners, and while there are certainly opportunities for the organizer of a nonprofit to receive compensation, the focus of a nonprofit is to benefit the specific goal or purpose of the nonprofit, not the mere benefit of those running the nonprofit.

Many nonprofits enjoy special tax status allowing for exemption from income tax. In exchange for this tax status, significant restrictions are placed on the activities as compared to a taxable organization. Identifying these restrictions and tailoring you nonprofit operations to comply with these restrictions is critical.

The labor force of a nonprofit also significantly differs from that of a for-profit business. While for-profit businesses financially compensate people in exchange for the performance of tasks, most nonprofit organizations rely upon unpaid volunteers who personally support the goal or purpose of the nonprofit by donating free time to the nonprofit efforts. When contemplating operation of a nonprofit organization, evaluate if the popularity of the goal or purpose of the proposed nonprofit will provide a large enough volunteer pool for the proposed operation.

Finding funding for nonprofit formation and operation also significantly differs from the sources of capital used to finance a for-profit business. Just as evaluation of volunteer labor must be analyzed, potential sources of funding to start and operate a proposed nonprofit must be examined. When seeking sources of start-up funding, keep in mind that the proposed nonprofit will not have tax exempt status until granted by the appropriate government agencies.

The nonprofit section of this website provides information about some of the issues a nonprofit is likely to face and the ways in which San Diego Corporate Law can be of assistance.