Evaluating the DIY charity option
Has starting your own charity ever crossed your mind? If the answer is "yes," you are not alone. Today's social impact culture mindset means more and more people are evaluating the options for making a difference in the community. Thousands of new charities are started each year by people passionate about a cause. If you've got a cause you're passionate about, how do you know whether starting your own charity is right for you?
Here are two key questions to ask yourself before you get started. Be sure to ask the professionals at your community foundation for advice, too, as you work through these questions.
First, do you really want to start a charity, or is a for-profit structure better for you? The answer starts with what you want to accomplish. And then you can see what revenue model is best. Either way, you have to ask for money--either by selling a product or service, or asking for people to give to support your cause. Check out the pros and cons of a nonprofit versus for profit.
Second, find out whether an existing charity already doing something similar. There are well over a million charities in the United States, so chances are pretty good that there is one that is doing what you want to do. Competition for dollars is high. Requests for charitable contributions are filling up everyone's inboxes, not just yours! A great idea is to consider incubating your idea as a volunteer within an existing charity to test the idea and get early traction.
Remember, starting a charity is just like starting a business; it's just governed under a section of the tax code with rules relating to the deductibility of donations and the exemption from taxation. You still have to make sure ends meet and that your expenses don't exceed your revenue.
IDEAS FOR USING THIS ARTICLE
1. You, your team, and your CEO no doubt get lots of calls from people who want your advice about starting a charity. Or, they are looking for ways to quickly start a charity so they can establish an income stream for themselves. It's all good--but sometimes it can be challenging to explain that your community foundation is not a good fit to help them. Use this article as a set of talking points for phone calls, or link to it in your email responses to the "DIY" inquirers.
2. Share this article with your staff, along with a brief refresher course on the key requirements of a 501(c)(3) organization--specifically the requirement of public benefit versus private inurement, and the requirement that the organization be organized for exempt purposes. You can refer to the IRS circular, which does a great job laying out the rules and regulations for what qualifies as a 501(c)(3) organization.
3. Have some fun with this topic at a roundtable of "Next Generation Donors." Invite the children and grandchildren of your donors to a brown bag lunch to discuss their hopes and dreams for the community. Then, connect the dots to organizations that are fulfilling these missions already. Talk about the benefits of working with an established organization versus starting an organization from scratch.