4 Lessons to Make a Difference in Your Community
Not long ago, I had a conversation with a female disruptor about her program, SpeakWell. The founder is a TEDx speaker, and she worked to get the students of the program, who were in seventh grade, to become the first in the country to each deliver a TEDx talk. The program is impressive with advisors such as John Wallace, a former Knicks NBA player, and Lillie Allen of Be Present, a social justice nonprofit organization.
The founder of the SpeakWell program, Patty McDonough Kennedy, and I spoke a bit about capacity-building for her program as it moves toward also becoming a 501(c)(3) nonprofit organization. Of course, that got me thinking about the many great social good programs in our country that should consider their organizational structures and alternatives — for example, becoming a nonprofit or a social enterprise, or even a Certified B Corp.
As we know, Americans are very generous people. Because of the needs people see in our society and the reality that Americans don’t have a strong safety net, we have a robust philanthropic culture. If you want to make a difference and impact in your community, perhaps you want to begin a social good organization. Therefore, this article will serve those who want to start something new by exploring several options.
Lesson 1: A Nonprofit Is a Business First
One of the common misconceptions about nonprofits is that they have nothing to do with business. That’s technically not accurate. A nonprofit is a corporation, which is set up in a state. The corporation then files with the IRS to obtain tax-exempt status.
Once you have your tax-exempt status, you are almost ready to accept donations. Since nothing is ever that easy, you also want to make sure that you understand your state’s regulations for nonprofit legal compliance.
Lesson 2: Fundraising and Nonprofits
Congress, through the IRS, created more than 30 types of tax-exempt organizations. However, to begin accepting donations, if you are structured as a 501(c)(3), you have to follow state law. Also, fundraisers, including fundraising consultants, need to be registered —
depending on state law — to act on your organization’s behalf to raise funds.
However, some states don’t require you to do anything. Therefore, to see the rules for your organization about charitable donations, start by taking a look at your state’s charity officials. You could also take a look at this free guide from Harbor Compliance and National Council of Nonprofits.
Lesson 3: Social Enterprise vs. Nonprofit
Another misconception about nonprofits is that they can’t make a profit. Well, they sure can. However, what nonprofit tax-exempt organizations cannot do is benefit any shareholders or individuals. In other words, these organizations are created to benefit the public.
However, if you want to have a business that makes a social impact and a profit, you could consider setting up a social enterprise. A social enterprise earns a profit for its owners and shareholders, but its impact is also measured in the good it does for society. For example, Seventh Generation is a for-profit business created to develop natural products and promote sustainability.
Lesson 4: Certified B Corporation
Certified B Corporations, also known as B Corps, seek to make a profit with a purpose. When companies become Certified B Corps, they adhere to the legal obligation of that designation. As a result, how they engage with their customers, workers, suppliers, communities and the environment is regulated according to B Corps standards. B Corps aim to be a source for good in every aspect of their business. Well-known B Corps include Patagonia, Ben & Jerry’s and Hootsuite.
In conclusion, if you want your organization to make a social impact, you have several opportunities. You could follow the path that will lead you toward creating and fundraising for a high-impact nonprofit. Alternatively, you could also decide to create a social enterprise or get certified as a B Corp. Those are simply some of the options you could explore with your business and legal advisers.
However, whatever you choose, there’s a lot of opportunities to make a difference in the world.
Editor's Note: This Legal Matters column was originally published in the September/October 2020 print edition of NonProfit PRO. Click here to subscribe.
Paul D'Alessandro, JD, CFRE, is founder and chairman of D'Alessandro, Inc., a fundraising and strategic management consulting company. He is also a lawyer and a tax law specialist for nonprofits.