Advantages of Starting a Non-Profit Business

In today’s job market it is becoming more and more popular to start your own business. After all the only way to true financial independence is to own your own business. When pondering the type to start and developing your Business Plan consider starting with a non- profit business.

The first advantage of starting with a NP organization is that a NP business can own a for-profit business, but it can not work the other way around. There is not any stock of ownership in a non-profit. If the for-profit business wants to have a collaborative non-profit, it would need to register the NP as a separate business entity.

As the NP business grows it can develop any number of programs. The non-profit can even develop what is called UBI, or unrelated business income. The UBI portion of the non-profit can in theory be almost any kind of business activity. For example, many youth non-profits sponsor car washes. The car wash is an activity designed to generate revenue yet is not related to the mission or purpose of the sponsoring organization. If the car wash or other UBI becomes profitable on its own merits it could develop into an independent for-profit business which can be owned in whole, or in part, by the noon-profit.

A NP business can charge the same rate for services and products as a similar for-profit business. A classic example is child day care centers. The weekly fee for child care can be the same for both types of business entities. In addition, staff can be paid at the same rate and receive the same benefits. The difference between a for-profit and non-profit business has to do more with the tax-structure than the amount of revenue earned or salaries paid.

A 501c3 tax-exempt organization is a business corporation, and should be operated like any other business corporation. It is important to have sufficient revenue to pay all the bills, the staff, and to expand into new markets. The non-profit can generate as much revenue as possible and can even carry-over a surplus at the end of the year.

A business model using both a non-profit and for-profit is very strong, especially when their purpose and services are closely related. Not all business consultants are familiar with the non-profit – for-profit business model. You should seek advice from consultants who have expertise in both for-profit and non-profit business models.

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