Should this be a nonprofit?

October 6, 2012 7:00 AM

Do I need to register my new web project as a nonprofit? I want to donate ad proceeds from a website to animal shelters. Does that mean the site should legally be a nonprofit? If so, does anyone know of good free resources to learn about what nonprofit registration entails?
posted by three_red_balloons to law & government (9 answers total)

No. You are a for-profit company giving all your profits, after taxes, to charity. You need to be aware that if your company receives benefits from the sponsorship of shelters, your donation will be a taxable business expense and not deductible.
posted by parmanparman at 7:05 AM on October 6, 2012 [2 favorites]

Parmanparman, hmmm, that's very interesting. Is that true even if the sole reason the site exists is to generate donations for animal shelters?
posted by three_red_balloons at 7:14 AM on October 6, 2012

It's far, far easier to find a related and larger non-profit organization and use their 501(c)(3) status as an umbrella.

Registering as a 501(c)(3) is a very long, very slow, very annoying process. I can't imagine one person getting through it on their own, in any event.
posted by RJ Reynolds at 7:17 AM on October 6, 2012 [3 favorites]

I'm the Director of a nonprofit agency: Becoming a non-profit for tax purposes involves getting approval by the IRS and registering with your state attorney general's office (at least, that's the process in Michigan). You'll need a Board of Directors, and a set of bylaws (you may need an attorney to write these for you). You'll also need a license to solicit. You'll need to file a 990 annually with the feds and with your state tax authority.

My personal opinion, unless you'll be raising a hell of a lot of money, it probably isn't worth the expense and trouble.

Let the funds go directly to the shelters, if you don't touch the money, you don't need to worry about all of this.
posted by HuronBob at 7:18 AM on October 6, 2012 [1 favorite]

You only need to register as a non-profit or get fiscal sponsorship of another non-profit if you want to be able to accept tax-deductible donations.

If this is just a personal project that generates some ad revenue that you want to give away, there's no issue. Just get the ad revenue and give it away. If it turns out to be a lot of money you'll need to declare the income and donations on your tax returns, but that should be it.

(I'm assuming you're in the USA. If you're somewhere else, you should say so because the rules might be different.)
posted by alms at 7:31 AM on October 6, 2012 [2 favorites]

Talk to a tax attorney (it shouldn't take that long) in your jurisdiction if you're going to screw around with being a non-profit.

It is so much easier to just be affiliated with a big, existing 501(3)(c). If you can work directly with that animal shelter, DO IT.

(The LiningUp group worked with the Starlight-Starbright Foundation rather than try to be our own charity for the purposes of six weeks of fundraising, and it was arguably the best planning/organizational decision made in the four or so years that the group was active.)
posted by SMPA at 8:25 AM on October 6, 2012

I had a non-profit under an umbrella 501(c)(3), they did all the paperwork and took 10% as their fee. That was unquestionably a bargain -- maybe until you see an individual donation over $20K or so, but even then ultimately still worth it. Probably $200K annual is when I'd start to think of stepping out into the rain.
posted by StickyCarpet at 8:36 AM on October 6, 2012

Thanks, everyone. That's very helpful. I don't intend to accept any direct donations, but was hoping to possibly be able to use DreamHost's free hosting service for nonprofits. I'll investigate working directly with an existing nonprofit.
posted by three_red_balloons at 8:46 AM on October 6, 2012

You are looking for a fiscal sponsorship. I suggest you look for a non-profit that is already doing the kind of work that you want to contribute to or close to it.
posted by parmanparman at 9:19 AM on October 6, 2012