Non-Profit Structure

Could a Non-Profit Structure Be Right for Your Business?
By Jillian Coleman Wheeler

If you have a business idea, or an idea for a service for your community, there's one decision you must make early on: are you going to structure your project as a for-profit business, or as a non-profit corporation?

Now, it may be that you already have a clear idea about this. Some business ideas are clearly "for profit". For example, if you want to sell insurance, or stocks, that's undoubtedly a for-profit business. On the other hand, if you want to raise money for research into a cure for juvenile diabetes, that project will best be served by forming a non-profit corporation.

One difference between for-profit and non-profit organizations is that grants funding is generally reserved for non-profits. Some grants are available to for-profits (and to individuals), such as government grants to promote affordable housing or job creation in economically depressed neighborhoods. Most grants, however, and particularly grants from foundations, are given only to non-profit corporations designated by the Internal Revenue Service as 501(c)3 corporations.

In many cases it is not so easy to determine into which category a business idea should fall. One question to ask is: will my planned project deliver a service to clients? A beauty shop located in Beverly Hills, catering to wealthy women, is certainly a service business. The clients, however, are not needy. They can easily pay for the service without assistance.

So the second question to ask is: will the project assist clients who are in need? A beauty shop located in a Medicaid-supported nursing home will serve clients in genuine need - clients who could not pay for this service from their own resources.