Hunton Law

Legal Counsel for Nonprofits, Foundations & Social Enterprises

Legal Counsel for Nonprofits, Foundations & Social Enterprises

The Last Thing on a Nonprofit Founder’s Mind?

You are passionate about a social or environmental issue.  You have identified a problem that needs fixing – you have personally lived or witnessed this problem, and you cannot wait any longer to start tackling it.  You have a plan, a solid business model, to address the root of this problem.  How are you going to accomplish this?  Start your own tax-exempt nonprofit organization.  Get the tax-exempt status you deserve, provide your donors with the ability to deduct their charitable contributions from their income taxes, enjoy the “halo” effect and public trust that nonprofit status affords.  The last thing on your mind is: “what are the alternatives to starting my own nonprofit?”

Thinking about alternatives to forming a new nonprofit organization is an important exercise for any founder.  It can also be sobering, painful, and annoying.  But it’s still important, and I would go so far as to say it’s necessary and critical to the health and sustainability of a new organization. 

Why consider alternatives to a new nonprofit?  The scarcity of startup funds for new nonprofits; the difficulty raising funds and sustaining levels of funding; the competitive landscape of the nonprofit sector; the myriad compliance requirements that tax-exempt organizations are subject to, including the initial tax-exemption application and state filings, ongoing federal and state filings, the public support test, restrictions on private inurement, private benefit, fundraising, earned income, governance structure, and other activities; scrutiny and oversight by the IRS, state tax board, and state charities regulators.  The list goes on.

After a thorough examination of the challenges, it may make sense to go with an alternative, such as:

  • fiscal sponsorship
  • starting a project under the umbrella of an existing organization
  • volunteering
  • becoming an employee of a nonprofit
  • remaining an unincorporated association

Several well-established resources on the topic of nonprofit formation, and alternatives to nonprofit formation, include: