Dear Administrators and Directors,
I'm planning to build a 'not-for-profit' organization that will work closely with a 'for-profit' company that I am also forming at this time. They both share the same mission statement with young children and professional sporting organizations sharing education, physical fitness and character building.
My 'non-profit' organization mission is to help the many children whose lives are proportionally at a disadvantage even though they live in the same town.
My goal is to have both for-profit and not-for-profit companies. The 'for-profit' company, called by the same name, will be a sports and soccer academy. And, the for-profit organization will operate directly with my not-for-profit organization. While the 'for profit' will collect tuition fees and have tournaments between schools and other clubs around the world for profit, the non-profit objective is to have school teams compete nationally and internationally and eventually hold "A MINI-WORLD CUP" with the children and their school.
My question is how can I have both companies work together without there being a conflict of interest? Can I somehow join them together in a non-profit organization?
If so how...
Please I need your help! Thank you for your time and consideration.
Thank you for your inquiry. We have asked two of our members to comment on your situation; their replies follow. Mr. Bromberger also offered a consultation at a cost appropriate to your budget. He would be able to give you a sense of your choices and answer other basic questions, and a sense of what would be involved for a knowledgeable attorney to set this up for you. If you are interested in contacting him, please let us know.
We have also copied your original message at the end of this submission.
Ask the Experts, Governance Matters
Answers from our Experts:
From Mr. Bromberger:
It is possible to have a non-profit and a for-profit work together in a collaborative venture to accomplish a common goal. There are basically two ways to structure such a venture: either the non-profit must control 51% of the for-profit's voting shares, or the two organizations must be independent of each other and connect to each other principally by contracts that are fair to the non-profit and negotiated at arms length.
In the first scenario, the boards may contain significant overlap; in the latter scenario the boards must have independent majorities. In either case, conflicts of interest will invariably be present and those individuals with conflicts must disclose them and refrain from participating in decisions. It may be possible to pursue the project within a nonprofit if investment capital is not required. It may also be possible to pursue the venture within a for-profit company if tax-deductible contributions are not needed or can be routed through a public charity that has a related purpose.
There are many factors to consider in setting up a "hybrid" non-profit/for-profit venture. Documenting the structure and the various transactions needs to be done carefully to avoid legal, accounting and tax problems. Make sure you consult with someone who knows what they are doing before you proceed too far.
Business ventures created by non-profits can increase revenue. Diversified revenues generated through the creation of commercial ventures can help your organization become less reliant on donations, grants and corporate money, and more self-sustainable. This strategy also allows you to create new, unrestricted funding sources.
Non-profit business ventures are not a fad or a new idea. Many environmental organizations, literacy efforts, youth groups, senior service providers and affordable housing advocates, among others, are creating such ventures. Whether they are large or small, non-profits run franchises, thrift shops, food service companies, consulting firms and even academies to fund their programs. However, if you're not an established non-profit with existing policies and procedures that run smoothly, take time to build your infrastructure before undertaking a commercial venture.
The benefits of operating a business venture go beyond the bottom line. The advantages include reducing vulnerability to changes in donor trends, producing unrestricted income that can be used to fund administration or unusual projects, improving the organization's recognition and reputation, enhancing the delivery of services and programs, sharpening your mission, building an entrepreneurial culture with business discipline and attracting and retaining donors, volunteers and staff.