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Haile Shaw & Pfaffenberger Attorneys at Law

Myths about starting a Nonprofit or Charity (Part 2)

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Starting a Nonprofit Organization

Myth No. 2—“As a founder of my nonprofit, I can control it like I control my own company.”

So many nonprofits start from the ground-up with one or a handful of well-meaning volunteers doing all they can to make a difference for a cause close to their heart. Whether it’s creating care packages for soldiers, collecting pennies for a disease close to their heart, or advocating for funding for medical research, these heartfelt volunteers sometimes work for years until something clicks and they realize by default they’ve created a charity – but one without the organizational bones to go with the many hours of purpose-driven work. So, now they’re ready to formalize their efforts, create an entity, apply for nonprofit status or locate a fiscal sponsor.

It’s time to take their small, ‘mom and pop’ nonprofit and grow into a full-fledged organization that can qualify for government or foundation grants, and take that next step in the nonprofit lifecycle. For many nonprofit start-ups, the biggest challenge is the need for the founder(s) to relinquish some level of control to a board of directors. For many, it’s a hard lesson to learn.

Nonprofit Law

Practically speaking, the founder will need to create a board of directors of at least the required three individuals, and more is typically recommended. The board – not the founder – has ultimate responsibility to oversee the governance of the charity including doing all of those things required under state and federal law to properly manage its business and maintain its tax exempt status, once granted. While a volunteer organization is often closely held in the sense that it may start with a small board of volunteers, the reality is for the organization to grow and prosper, it needs to grow its board to include a group of diverse individuals each bringing a unique skill set and value to the board and the organization. This is often psychologically difficult for the founder(s) who started off with bake sales and dinner parties to raise funds and are now operating an organization requiring more sophisticated management and development techniques. It’s hard to give up control when you’ve done what you wanted, and how you wanted to do it, and have been told by so many how well you’ve done. And, you probably have, but it’s hard to accept that the best thing for the organization is to trust others to do the right thing – and recognize that one sure sign of success is when the small start-up you created to do some specific good, is now melding into a new organization ready for its next phase of development.

Founders must learn to trust that if they put the proper organization in place, created a well-rounded board of directors with a vested interest in the organizational purpose; it will be in good hands. One of the biggest mistakes I see repeatedly from founders is to populate a new board with only good friends or family members who have no real interest in the charitable mission. Often, they do not become fully engaged, and, worse, may be easily manipulated by a rogue board member out for their own personal interest. Best case may be that the board has constant turnover as all of its members are only there to do their friend, the founder, a favor by serving for a few months or a year without genuine interest.

One of the greatest ways to protect your organization at this critical early stage is to spend the time to vet your initial board members to find people who understand the organizational values created by its volunteer founder(s), the mission going forward and the responsibilities that come with joining a nonprofit board. Nonprofit founders have to realize that sometimes the best way to ensure their organization’s long-term success is to have faith that they can relinquish ultimate control by strategically constructing a board of directors who are philosophically in sync, mission-driven and ready to be engaged to accomplish great things in the spirit of the founder. This way, you give up ultimate control, before you risk outgrowing your own organization, and both the founder and the organization are typically better off for it.

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