Rich people use non-profit vehicles. Should you too?

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By Adrian Cruce

As many of the world’s wealthiest people have discovered, founding nonprofit organizations offer them the opportunity to make positive changes in a world filled with poverty and inequality.

In the U.S., these charitable billionaires are many and include former Microsoft CEO, Steve Ballmer, Warren Buffet, Powell Buffet, the widow of the late Steve Jobs, Jeff Bezos, founder of Amazon, and Bill Gates, co-founder of Microsoft and prominent philanthropist.

These charitable billionaires offer more than their donations. They are concerned and want to make a difference to their various philanthropic missions. Above all, they have all proven that they are tremendously successful in running their business empires and bring the same dynamism to their charities.  Nagabhushanam “Bobby” Peddi, the TRUiC CEO himself is a serial entrepreneur who is one of the biggest supporters of philanthropy. As he explained: “Without good nonprofit structures, how could we give back something? I really view this structure as a special place in the portfolio of most big names in business”.

What advantages would a nonprofit organization offer you?

Forming a nonprofit organization to accomplish a philanthropic goal offers many more advantages than trying to accomplish these goals informally.

 Philanthropy and entrepreneurship

There are many rewards to be reaped from building a nonprofit organization. The management of a nonprofit can be demanding and time-consuming when compared to a small business, but you can build something that will be eternal and will offer valuable services. As Adriaan Brits, the CEO of Sitetrail said: “Philanthropy and entrepreneurship goes hand in hand and that is notable on the financial statements of anyone who walks the walk”.

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Like any business, nonprofits are entities that need to be built up and made into productive entities. Your team will include experienced employees and managers to ensure that it is built into a recognizable brand that will give back to the communities it plans to assist.

Your role will be that of a social entrepreneur. Your hard work will ensure a comfortable lifestyle and will be more rewarding than creating unsurmountable wealth.

Tax exemptions

The IRS allows nonprofits to file for tax-exempt status under various legal statutes of the Tax Code. These include 501(c)(3). In this way, nonprofits have the advantage of retaining funds to budget for their various services and programs.

Nonprofits have a competitive edge in fundraising because contributions by individuals are also tax-deductible.

Access to grants

Operating capital is easy to obtain because some nonprofits are eligible to receive grants from public and private entities.

Separate entity in a formal structure

Nonprofits are incorporated as an LLC and are legal entities. They are separated from their founders who can have no personal interests. Their mission and organizational structure are overseen by the directors who need to form a board. All contracts are entered in the name of the nonprofit which is responsible for all its obligations, and it can sue and be sued. 

Limited liability

The directors, officers and any members of the nonprofit are protected against personal responsibility for any debts and liabilities. Only the assets of the organization are affected. However, members of nonprofits are not shielded if they act illegally or irresponsibly. Directors have a fiduciary responsibility to ensure that they act in the best interests of the nonprofit otherwise they can be held liable.

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Disadvantages of a nonprofit

As Michael Stemley, the author of “Wealth, Power, Respect” said: “You need to understand the disadvantages as much as the advantages, as we have pro’s and con’s to all things in life”. The creation of a nonprofit can be time-consuming and costly because of the paperwork and fees required. Usually, an accountant and lawyer are required,

Nonprofits must keep detailed records and to keep them active and tax-exempt, they must make annual filings to the IRS and the state they are registered in.

Control is limited for their creators because nonprofits are subject to laws and regulations. These include its own articles of incorporation and policy is often determined by several directors or people they appoint.

All the finances of nonprofit organizations are open to public scrutiny.

How can you incorporate as a nonprofit?

If, like some of the richest people in the U.S., you are determined to leave a legacy behind, then the creation of a nonprofit will allow you to make a meaningful contribution.

Nonprofit startups may be considered difficult to create, but TRUiC makes it simple with eight easy steps. Every step is fully detailed and tailored to the requirements for each of the 50 U.S. states. You just pick the state and go through each step, with all the filing forms available online for quick and easy submissions.