Nonprofit status

[Niki]

Are any of your centers nonprofit? Do you think it makes sense to be nonprofit as opposed to a private enterprise? I keep running into brick walls with my county and city because they see me as a private business entity and don't want to support the center. (This is a discussion we've been having in a different thread). I'm now wondering if the center would get more respect as a not-for-profit. I know I would be able to get grants and financial support not available to me at this point. Thoughts?

Nancy
Business Success Unlimited
where we help business grow: connecting, motivating, and collaborating
www.success4biz.biz

[Tom Brandt]

Getting 501(c)(3) status is a real pain, and comes with restrictions, but it can help to change perceptions of your motives. And, as you point, foundation grants and so forth are available for non-profits that are not available to for-profits.

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@twbrandt

[Jacob Sayles]

Yes, a federal 501c3 is tricky because of the tax implications, but a state non-profit in Washington only takes a few hours to setup.  Donations are not tax deductible but it's still a full fledged non-profit.  Different states have different law.

That said, Office Nomads is a private LLC.  When we evaluated our options we went with LLC because it gives us the most flexibility.  Also, the non-profit/for-profit argument is often confused as good/evil which really has nothing to do with it.  

Jacob

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Office Nomads - Individuality without Isolation
http://www.officenomads.com -  (206) 323-6500

[Joshua Marpet]

We're debating it now.  Disclaimer: We do not have a space yet, but are in the process of building membership, board, funding, etc. 

Non-profit is a PITA, and reduces possibilities of Lots O' Money.  However, it increases grant and funding ease.

Overall, is it worth it?  Damn, I wish I knew.  Let me know what you decide, please?

Joshua Marpet

[Matthew Wettergreen]

The question of whether to set up your coworking space as a for-profit entity vs. a non-profit entity was discussed fairly heavily a couple of years ago. 

Here are two threads I pulled:

http://groups.google.com/group/coworking/browse_thread/thread/58fd2e543ee90cc/4b17c654dd016473?lnk=gst&q=business&pli=1

http://groups.google.com/group/coworking/browse_thread/thread/a93c9d37cf0caa9e/6549e584ab15544e?lnk=gst&q=business

The general concensus thus far has not been that non-profit is a "bad" way but that the for-profit model offers as Jacob just said, the most "flexibility."  

Why?

Operations

The management of a well run non-profit entity carries with it far greater responsibility and reporting guidelines than a for-profit entity. In addition to the extra paperwork there is also the (sometimes) lengthy process of obtaining 501(c)(3) status. 

Good Vs. Bad

The perception of non-profit status as one which positively impacts public opinion and willingness to partner with a coworking space is a fallacy. First of all, this bins non-profits as "altruistic" and for-profits as "opportunistic." In the end, these and other incorrect designations (good/evil) come down to the core values and mission of the organization. Triple Bottom Line businesses (Hat Tip Alex Hillman) and B Corporations are perfect examples of for-profit businesses driven by profit but not-at-the-cost of services, people, or place. 

 

Finances

501(c)(3) status seems attractive for a number of reasons but until more coworking spaces play around with this model the cost/benefit analysis just doesn't seem to be there. On one hand you have the opportunity to be awarded grants for your organization. On the other hand, very few people know how to write grants. Even less know how to write them well. While you are working on grants you could be focusing on delivering on the core values of your coworking space to the members, community and surrounding areas. 

Counting on donations solely due to non-profit status is similarly a poor bet as, tax deductible or not, donations and contributions key more closely to individual's belief, confidence, and trust in an organization and its mission, not whether the donation itself will be tax-deductible. Furthermore, there are more valuable contributions that your community will bank with you than money. That's reciprocity, sweat equity, evangelism, and presence. 

On the profit/loss side, coworking entities' revenue/expenses work like providing a service meaning that yearly taxes should be super low anyways.

The key thing to remember is that every space and community's needs are different. If you think that you can run more effectively as a non-profit entity, that's ok. Regardless of the choice, the key is to make sure that your values show through in your actions, operations, and commitment to the people you are looking to interact, work, and share mindspace with.

Matthew

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Matthew Wettergreen, Ph.D
e: mwette...@gmail.com
w: http://matthewwettergreen.com
c: 713.825.4613
t: @organprinter

[Alex Hillman]

As others have said, it is 100% dependent on your goals.

There are two common reasons to go non-profit, both have been mentioned here:

1) grant opportunities

2) adjust perceptions of motivations

Grant opportunities usually don't just walk in the door, and they also don't come without strings attached. If you've never done grant work before and you're considering the non profit option for the purpose of grant money, I'd recommend you carefully weigh your options

If you need to be a non-profit to adjust peoples' perceptions of your motivations, maybe there's an underlying problem that needs to be addressed. 

We chose to be a for-profit LLC for two reasons: agility and sustainability.

Agility means that we can make fast decisions when needed.

Sustainability means that it's our members who decide if we get to stay open another year, not a grant foundation.

-Alex

-Alex

/ah
indyhall.org
coworking in philadelphia

[Mike Pihlman]

I went thru the 501c3 for http://ForCarol.com last year using LegalZoom....it was not as bad as I expected.  Of course our goals for ForCarol.com are way different than my goals for AltamontCowork.  It cost a total of $1200 to get the 501c3 (and several months of waiting / effort).

Mike

Mike Pihlman, Video Conferencing Consultant

TelBitConsulting.com

95 W. 11th Street, Suite 203

Tracy, CA 95376

Phone: 209-757-8862

Twitter: @AltamontCowork

Drive Safe! Never Forget  http://ForCarol.com

[julianne]

Hey there Nancy,

I am definitely not the expert on non-profit v. for profit status in
the States.

I know a few people who are starting businesses in the EU which have
an ultimate goal of making social change - the term that they use is
called 'Social Enterprise'. 'A social enterprise is an organization
that applies business strategies to achieving philanthropic goals.'-
according to Wikipedia -http://en.wikipedia.org/wiki/Social_enterprise

If this is the direction you are heading for it may be something to
include in your business plan description.

Just a thought.

Good luck with your decision and your space!

Julianne

[Tom Brandt]

At Workantile we are looking at becoming an L3C, which is a low-profit LLC (and believe me, we are low-profit :)). It gives you the flexibility of an LLC, but still allows you to pursue foundation grants. Michigan, Vermont, and a few other states have passed legislation allowing them.

There is, of course, paperwork involved. At the state level in Michigan, you just have to declare you are an L3C. But to get foundation grants you have to have a ruling from the IRS stating that your mission is compatible with non-profit status (not necessarily 501(c)(3)). This IRS ruling allows foundations to make grants to you as though you were a non-profit. To get this ruling, the mission or purpose statement in your LLC operating agreement must reflect some charitable, educational, or other purpose compatible with what the IRS allows for non-profits. This can be tricky.

This may be an option worth looking into if your state allows it. You will need a lawyer who understands all this stuff to pull the paperwork together correctly.

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@twbrandt

[sk...@emergentresearch.com]

The Wall Street Journal has a good summary of some of the new legal
structure options for socially oriented firms - LC3, B-Corps and
flexible purpose corps. The article is at:
http://online.wsj.com/article/SB10001424052970203413304577088604063391944.html?mod=djemSB_t

[Niki]

Thanks for all the thoughts, guys. I really don't want to be a non-profit. I've worked in the non-profit arena for years and know many of the ins and outs. However, as discussed here previously -- I can't get funding for things (they all say "only for non-profits") and the recognition I'm trying to garner, the opportunities to work with the community won't come because the county and city I'm located in will not talk with "the competition", with for profits, with outsiders (I'm not originally from this town). The trials of small town farming communities. I'm just trying to figure out what would make the mentality of people change to evolve and want to build community. So far, I've offered free spaces on the weekends for entrepreneurs to showcase their wares in my downtown storefront. We're holding a FREE CYCLE event Saturday, but no one has shown interest (can't even get the newspaper to cover it). Want to do a Dress for Success program where entrance is free and women get professional clothes (free), a free lunch, resume writing and work etiquette classes... Keep in mind I am in one of the hardest hit economic locations in the country (was reliant on auto industry up until a few years ago), and most people have lost jobs and are now trying to start biz themselves. I'm really just trying to figure this all out. It is MUCH different than when I did the same type of thing in Washington, DC a few years ago when I had LOTS of people flocking to me.

I'll get it figured out some day, I'm sure. Thanks, again, all.

Nancy
Business Success Unlimited
where we help business grow: connecting, motivating and collaborating
www.success4biz.biz

		Feb 15 (22 hours ago)

[Mike Pihlman]

Small towns have their own dynamic.  It is all about trust and comfort.

You need to be truly committed to your small town, join the chamber and mix.  Don't tell people u are ready to go back to "San Jose".  Make sure they know ur kids go to school locally and that you support local charities and community stuff. 

Unfortunately, this takes time.  I have lived in Tracy since 1985.  My daughter is 20 now, and a native.  I am still considered by some a newcomer.  Go figure. 

I have had "Bay Area" members who came here thinking Tracy was easy pickings.  They found out differently and failed. 

Mike

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[Alex Linsker]

Hi Nancy, What is your vision statement for your business? Do other
people see what you see, when they hear your vision statement?

Have you asked someone in town why they haven't come to one of your
events? What did they say?

Alex
--
Alex Linsker, "Collective Agency" Coordinating Council member
(503) 517-6900 landline  (503) 517-6901 fax  (503) 369-9174 mobile
322 NW Sixth Ave, Suite 200, Portland, Oregon 97209
http://CollectiveAgency.co

[Niki]

Alex, good questions. My vision statement is my dreams come to reality.

Within the next five years,Business Success Unlimited will have helped create a energetic, productive community filled with entrepreneurs and small businesses acquiring the education,skills and resources necessary, along with a place to work, a group to share and collaborate with and programs to help build self-sufficient prosperous lives. Along with this success of others, BSU will also see success through at least $100,000 a year from rentals, meeting memberships and admin support work.

When I ask people to come to meetings (i.e., a twice a month mastermind program) they say, wow sounds great. I'm too busy. Can't come. Or -- they simply ignore the invitations. I have had people say, you're no different than the Chamber or SCORE -- they didn't help me, why should I think you will?

[Alex Linsker]

If I lived there, I would come to the mastermind group, because I've
already been to a great mastermind group in another town. Each week
for 10 weeks, we reviewed business basics, read from a text, and
talked about building our businesses. I made friendships, and am
constantly reminded of the importance of the basics, which help me
manage my time, plan priorities, communicate, etc.

I'd recommend getting advice from the Chamber and from SCORE about
your business. The experience that you have with them will give you
the experience that people in your town expect to have with Business
Success Unlimited. I think that has to be the first step, if you
haven't already.

Then the question is: what does a different experience, the one that
you are confident can happen (but people there don't yet know can
exist in their town), what does that look like? what actually happens?
what are the results? what does it feel like? How do people in town
describe an experience similar to what you will do, in their own
words?

And then the challenge is finding some people (likely in one or two
industries only will attract more people total) who will do that with
you. Who will pay you (either immediately or later on) and especially
who will tell their friends to have the exact same experience with
you.

To rephrase: the experience you want to create, people will only
believe after it happens to them, or after they make it happen
somehow. So the way to make happen it is to do it somehow, with the
resources you already have, the people and places you already know. To
make your vision real, you will need to do it by educating and being
educated, skill-sharing and having skills shared with you (you are
already doing that by posting to this group), resource-sharing and
having resources shared with you, collaborating on your own projects
and other people's projects, and identifying the ways (and making
those visible to the people around you) that you already have a self-
sufficient prosperous life, and identifying the ways that the people
around you already have a self-sufficient prosperous life: and sharing
those ways so that they appreciate the prosperity they already have,
themselves.

Then there is no need for anything, there is a growing appreciation of
what and who already exists, and then people can breathe to
appreciate and participate in and grow your vision along with their
own.

Alex
--
Alex Linsker, "Collective Agency" Coordinating Council member
(503) 517-6900 landline (503) 517-6901 fax (503) 369-9174 mobile
322 NW Sixth Ave, Suite 200, Portland, Oregon 97209
http://CollectiveAgency.co