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“There are huge markets where people have needs — for food, shelter, education and more — but can’t afford to pay money out of their own pockets to have their needs met.

In the United States, the government created the 501 (c) (3) nonprofit corporation to help address this situation. Technically speaking, a 501(c)(3) is a tax-exempt legal structure that can receive charitable donations from individuals, businesses, government agencies, and philanthropic foundations. Examples of well-known not-for-profits include: the Boys and Girls Clubs, the YMCA and the Sierra Club. People who donate money to these charitable organizations benefit by deducting the contributions from their taxable income.

In the United States, over one million organizations qualified for 501(c)(3) status in 2009 compared to 600,000 in 1993. Charitable donations have declined: in 2008, $315.08 billion were invested in the not-for-profit sector, compared to $303.75 billion in 2009. Competition for resources has increased, making it more difficult for nonprofits to grow or even exist.

Like any business, a not-for-profit needs to generate revenue to cover its expenses. It needs to identify a target market and figure out how it will deliver its products and services to that market. Some key differences and considerations exist, however, and you should be aware of them before you choose this legal structure:”

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Social entrepreneurs who want to start a new venture quickly confront an important question: What type of legal structure should I create? Should I start a traditional nonprofit, a for-profit, or something in between? This is not a simple question to answer, and it is in some ways becoming more difficult with the proliferation of new legal structures like the B corporation that are intended to allow entrepreneurs to meet financial, social, and environmental bottom lines.

I have started successful and unsuccessful for-profit and nonprofit ventures. My goal in writing this article is to help other social entrepreneurs navigate these waters. I am not, however, a lawyer, and I cannot offer legal advice about creating a venture. Rather, I want to guide you through the issues that you need to consider before you even begin to think about choosing an attorney or getting help structuring your social venture.

The first thing to remember is that the legal structure is simply a tool for accomplishing your goals. Deciding structure first may lock you into a direction that won’t get you where you want to go. It is important to take the time to explore your idea first; then answering the legal structure question will be easier.

Selecting a legal structure is not a question of moral purity. I am structure agnostic: I believe that for-profit and nonprofit structures can both be good vehicles for improving society. You should look seriously at both as part of your toolkit as you’re creating your new social venture.

If personal wealth is a primary motivation and changing the world for the better is a nice benefit but not fundamental, it is pretty clear that you should create a for-profit structure. Being a for-profit typically gives you more flexibility and control, especially if you’re the sole or controlling shareholder. This flexibility gives you the freedom to completely change your business if you spot a new and more lucrative opportunity. And you can still create an ethical and responsible for-profit. If giving away money or providing services at below cost and feeling good about it is your primary or only motivation, then your answer is similarly easy. The U.S. 501(c)(3) nonprofit structure was created to serve this purpose. If your ideas fall somewhere between making lots of money and giving most of it away, there are many ways to structure a venture to accomplish these goals. read more/a>

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am convinced that skill at fundraising and governance alone do not an excellent board member make. Nor do such skills alone ensure that a nonprofit organization maintains a durable, deep connection to the wider community it serves.

A third skill—I call it civic reach—distinguishes a great board member from a merely adequate one, a world-class nonprofit from one that is simply functioning. Take a couple of examples: Back in 2005, Rochester Area Community Foundation’s (RACF) smart, highly engaged board had few well-known civic leaders. With the guidance of Jennifer Leonard, the foundation’s president and executive director, RACF aimed to become greater Rochester, N.Y.’s “catalyst for community change” and realized that movers and shakers could extend the institution’s influence. RACF added to its board the CEO of the city’s chamber of commerce, the CEO of a leading advertising company, the area’s school board president, a noted venture capitalist, a former United Way campaign chair, and the head of Rochester’s downtown development group. In just one of the positive outcomes, the chamber incorporated RACF’s recommendations into its annual state advocacy platform, resulting in $7.8 million in restored child care subsidies, plus crucial support for after-school funding.

In another example, the board of directors of Make-A-Wish Foundation International, a nonprofit devoted to granting the wishes of children with life-threatening medical conditions, shifted its composition to achieve a worldwide leadership profile. Previously, the organization was governed by chapter affiliate representatives from various counties, a decidedly internal focus. The new board boasts a powerful cadre of business leaders with the prestige, power, and contacts to open doors worldwide. Two board members illustrate this new heft. Jim Fielding, president of Disney Stores Worldwide, connects Make-A-Wish to Europe, Asia, and North America, prime markets for both Disney merchandising and Make-A-Wish civic engagement. Tim Kilpin, general manager and senior vice president for Mattel Brands, provides Make-A-Wish with cash contributions from the company’s toy sales and facilitates business relationships through its worldwide network. Savvy, connected players like Fielding and Kilpin—people with profound civic reach—serve as global thinkers for charities while they tend to their own business interests. As a result of its new board, Make-A-Wish more expertly navigates its corporate and individual relationships, ties its work to corporate social responsibility efforts, attracts a wider range of corporate sponsorship dollars, and manages its wish granting on a worldwide scale. read more

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Are myths about online volunteering preventing your organization from tapping into this valuable resource? In the following article, which first appeared on the website Coyote Communications, consultant Jayne Cravens dispels some common misconceptions about finding and working with online volunteers.

Online volunteering means unpaid service that is given via the Internet, either via a computer or a handheld device (smartphone, cell phone, PDA, or iPad). It’s a method of volunteering I have been using, studying, documenting, and promoting since 1995, first independently, then with the Virtual Volunteering Project, and then with the United Nation’s (UN) Online Volunteering service. It’s also known as virtual volunteering, online mentoring, ementoring, evolunteering, cyber volunteering, cyber service, telementoring, micro-volunteering, crowd-sourcing and on and on.

Now, 15 years on, I’m stunned at how many myths are still out there about the concept. Here is a list of 17 of the most common myths, and my attempt at countering them:

1. Online volunteering is great for people who don’t have time to volunteer.
False. This is probably the biggest and most annoying myth out there about the practice. Online volunteering requires real time, not “virtual” time. If you don’t have time to volunteer offline, you probably don’t have time to volunteer online either. Online volunteering should never be promoted as an alternative volunteering method for people who don’t have time to volunteer face-to-face. Rather, the appeal of online volunteering for individuals is that:

It’s a way for someone who cannot volunteer onsite because, while they have time to volunteer, they cannot leave their home or work place to do so.
It’s another way for a person to help an organization they are already helping in face-to-face settings.
It allows a way for people with disabilities who have problems with mobility, or people no way of traveling easy, to volunteer.
It can allow a person to help an organization that serves a cause or issue of great importance to the person but for which there are no onsite opportunities in his or her area.
It can allow a person to help a geographic area that he or she cannot travel to. Read More

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Did you see the 60 Minutes story about Greg Mortenson, his book, Three Cups of Tea, and his charity, the Central Asia Institute? If not, you can get the gist of the expose with this AP article or Monday’s New York Time’s article about it.

The 60 Minutes report was pretty damning, alleging misrepresentation of the facts in Mortenson’s wildy popular book, suspicious financial arrangements at the charity, and testimony from some credible third parties that something is not right at the charity.

It’s too early to tell yet who is right and who is wrong in this situation, much less how the negative publicity will affect the charity’s fundraising and its cause. But it is certainly a good example of what not to do when the media comes calling.

Here are some lessons from the way Mortenson and his charity mishandled this situation:

Get out in front of any damaging media coverage. The organization and Mortenson knew CBS was investigating but apparently did not respond to earlier requests for contact from the network.
Never run away from an unexpected visit from the media. A 60 Minutes reporter approached Mortenson at a book signing before an event (apparently because they had been unsuccessful in making contact earlier) and Mortenson looked like the typical deer in the headlights, caught in the act guilty person who was caught red-handed. His “people” called in the hotel security forces to t ry to evict the reporter and camera crew. They promised to send someone to meet 60 Minutes in the lobby later but sent no one. Mortenson “escaped” out the back door after cancelling the event. Whew…can’t get any worse than that. Read More

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While the publishing industry waited to see whether it faced the embarrassment of yet another partly fabricated memoir, Greg Mortenson, the co-author of the best-selling “Three Cups of Tea,” a book popular with the Pentagon for its inspirational lessons on Afghanistan and Pakistan, forcefully countered a CBS News report on Sunday that questioned the facts of his book and the management of his charitable organization.

The report could puncture a hole in the uplifting narrative of “Three Cups of Tea,” which has fed a charity run by Mr. Mortenson, the Central Asia Institute. The institute has built schools, mostly for girls, in Afghanistan and Pakistan.

The report has also revived a chronic concern in the publishing industry over the accuracy of nonfiction memoirs, which are typically only lightly fact-checked by publishers, if at all.

Viking, the imprint of Penguin Group USA that published “Three Cups of Tea,” declined to comment on the book or answer questions about how it was vetted.

The CBS News report questioned, in particular, a central anecdote of the book that was as dramatic as it was inspirational: in 1993, Mr. Mortenson was retreating after failing to reach the summit of K2, the world’s second highest mountain, when, lost and dehydrated, he stumbled across the small village of Korphe in northeast Pakistan. After the villagers there nursed him back to health, he vowed to return and build a school Read More

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Government is always challenged by the need to render social services to its citizens. The more disadvantaged a big portion of the population is, the heavier is the task of government to reach out and make the lives of the underprivileged easier and better. This is recognized by government and initiatives were made to institutionalize partnerships with faith based non-profits by providing funds and other incentives to serve the public.

Faith based groups are looked upon as reliable and effective partners of rendering social services not only to those of their faith communities but to the overall general comunities. The natural environment and culture of faith organizations that focuses on loving, forgiving, and reaching out to others are believed to be factors that make them naturally adapted to the task of a non-profit. People who are in the dumps need to be in touch with those who are caring, who would not look down at them or take pity on them. They just need understanding or natural interaction without the drama, but at the same time they are hypersensitive to cold shoulder treatment, whether real or imagined. Thus, the disposition of volunteers or workers in faith based groups is considered well fit for the job.

As the importance of faith based non-profits came to fore, they had been called upon by government to take a more active role. This stance of government was made concrete by laws and regulations that were passed in favor or faith based groups. To date there are several faith based grants and funds that they could avail of, plus tax and other privileges. What faith based organizations have to do is to create another entity, a 501(c)(3) in order to qualify.

There are available funding from the local government, the state and federal government that aids faith based non profits that will specifically render services for a certain sector or operate for a certain purpose such as to assist those who have health related problems, family issues, juvenile delinquents, early pregnancies, minority women, distribution of foods, or any other that the group would like to carry and serve. However, priority projects for federal funding are those connected to HIV/AIDS, substance abuse, homelessness and hunger, those who have had violations with the law, preventing possible offenders and families on welfare.

Faith groups should be aware of these chances to work arm in arm with government and receive government funds to carry out social services. Although on the side of government this move is a cost effective way of rendering services without bloating government bureaucracy, on the side of faith based organizations this is a golden opportunity to be able to move around and interact with the community. And the good thing is, the funds are provided by government or are sourced out from private foundations.

If you are not sure how to go about with this, there are several consulting or law firms that can help you create a faith based non-profit and start expanding the services that your faith organization can render.

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The Internal Revenue Service or IRS has many excellent resources available for tax exempt and other nonprofit organizations. Every nonprofit should take advantage of these resources to ensure that they are complying with the law and preserving their non profit status.The IRS actually has a wide variety of resources available for nonprofit organizations. These resources can help an organization keep its tax exempt status and organizations gain or regain that status.

Why Your Non Profit Should Take Advantage of IRS Resources
Taking advantage of the many resources offered by the IRS can make life a lot easier for the leaders of nonprofit organizations. News reports indicate that many nonprofits face the loss of their status because they didn’t file the right paperwork.

Had somebody at those organizations bothered to check with the IRS they could have probably got the proper paperwork and filed it. This would have helped them maintain their nonprofit status.

In many cases those organizations could have kept their nonprofit status by simply filing form 990-N or e postcard with the IRS. Those groups may not have known about this because they didn’t check.

Many organizations are going to be hit with a tax bill next year because nobody bothered to fill out a few simple forms. Something that every nonprofit executive should remember is that it is the responsibility of the nonprofit itself to comply with the tax code. Nonprofits that don’t comply with the tax code will loose their status.

Here is a list of basic online resources from the IRS for non-faith based nonprofit organizations. Every nonprofit group that is not faith based will have to register as a tax exempt organization and file a 990-N each year. These resources can show you how to register and to file.

Online Resources from the IRS
The best source of information on tax issues for non-profits is the IRS website Tax Information for Charities & Other Non-Profits. Not only are all of the tax forms and other paperwork an organization needs available there, so is a lot of really good information.

The IRS answers a great many of the basic questions about getting tax exemption and the forms you will need here:
Frequently Asked Questions About Applying for Tax Exemption

This web page contains links to most of the IRS documentation that non-faith based nonprofits will need.
Tax Information for Charitable Organizations
These documents are in PDF form so you will need Adobe Reader or Adobe Acrobat in order to see them and print them out.

The IRS’s website specifically dedicated to non profit organizations can be found here:
Tax Basics For Exempt Organizations. This site does have some really good resources including webinairs (online seminars) and online courses that show you how to complete many of the online procedures and processes. This site even contains a course on setting up a nonprofit organization and filing for tax exempt status.

The virtual workshop tab shows what online courses are available for nonprofit groups,Virtual WorkShop. These courses provide instruction in tasks such as registering a nonprofit organization as tax exempt. They’re a great resource for beginners in the world of tax exempt nonprofits.

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