The Pros and Cons of Starting a Nonprofit
Before you jump headfirst into making your nonprofit dream a reality, you need to understand some basic facts about nonprofit organizations. Let's begin by taking a look at some of the pros:
You'll receive exemption from taxes on most income to the nonprofit.
For some types of nonprofits, you'll have the ability to receive contributions that are deductible for the donor.
You'll gain the opportunity of receiving grant funds from foundations and corporations.
You'll get the feeling that you're contributing to the solution of a problem or to the improvement of society.
Just about everyone would consider these facts to be positive, but they aren't the whole story. If you're thinking of starting a nonprofit to get rich or to avoid paying taxes, consider the following list of cons:
Nonprofit employees' salaries are subject to income tax like all other types of compensation.
You'll be required to file an annual report with the Internal Revenue Service (IRS). The complexity of the report increases as your nonprofit income increases.
You can't start a nonprofit organization to benefit a particular individual or family member.
Competition for grants from foundations, corporations, and government agencies is tough, and so is getting donations from individuals. You'll be up against more-established nonprofits with successful track records.
If you decide to move on to other pursuits down the road, you can't take any assets accumulated by the organization you've built with you.
The bottom line is this: Think carefully about your motivation for launching a nonprofit organization. Remember that nonprofit organizations are permitted special privileges because they're formed to benefit the public, not individuals.