Nonprofits: The Downside

While there are tremendous advantages to incorporating your business as a nonprofit entity, there are also a few drawbacks. Here’s the downside. You must take these points into account because the paperwork alone is quite a task. If you can manage it, outsource this side of things so you can focus on making your new nonprofit business successful without worrying about minutia.

Nonprofits require money, time, and hard work. Beginning a nonprofit organization takes a lot of dedication to the project. It takes more effort than creating a LLC or other profit corporation – and in the end you’ll probably find it was worth it. It’s a necessary process that you can’t get by without. So, just knock it out!

If you haven’t already enlisted the services of an attorney, skilled in the creation of nonprofit enterprises then you’ll want to do so quickly. Accountants can also save you substantial headaches and should be consulted early on.

To incorporate your nonprofit organization on this site is just $235. Add to that the cost of requesting federal tax exemption from the IRS – which will be $200 to $400 (and changing with time).

Mountains of Paper! State paperwork keeping requirements require a lot of time, effort and attention to detail. There are strict requirements as to formatting, and deadlines to be met for filing with specific governmental agencies. Some nonprofit corps must file IRS Form 990 annually, an additional requirement.

No King, but a Committee. When you create a nonprofit organization you will likely be surprised that you are not in complete control of the company. There are many laws to follow as well as following to the letter your own articles of incorporation and bylaws. Some states require several directors to be appointed – these directors are the only persons that can elect or appoint officers that create the nonprofit policy of operation.

Open to the World. Nonprofit organizations have at their heart a focus on the public interest. All non profit finances are open to the public for inspection at a mutually agreeable time and place.  Salaries and expenses can be obtained by anyone with a desire to see them.

These may look like substantial disadvantages to forming a nonprofit organization – and in truth, they are probably the major reason most entrepreneurs shy away from them. Times are changing, and more nonprofits are being registered in the USA every year.

If you want to begin registering your nonprofit corporation, start here…

Nonprofit incorporation online form >

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