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Ask HN: Advice on non-profits

4 points by TallGuyShort ↗ HN
I've been working on a software project that's essentially researching possible solutions for a good cause, and I'm at the stage where I'm ready to do some much larger-scale testing of my ideas and get a bit more publicity - maybe attract some other volunteers to develop and test, and if I'm lucky, get some funding. I need to buy some resources like servers, etc... and get volunteers to help with some testing. I'd also like to be able to accept donations if anyone's willing (even though I'm prepared to fund this myself), but I seriously doubt it will ever grow into anything more than a few employees.

Having said that, I would really like to set up a legal entity to manage the project so that things like hosting and domains can be set up in the name of the project, etc... I'd also like to be able to make a clear distinction when it comes to taxes, etc... what is "my money", and what is money that I gave to the organization, etc...

I'm thinking of setting up a non-profit, but I'm quite ignorant of that aspect of business, and I've been having a hard time finding any good resources. So while I keep looking, I thought I'd ask for any comments from the community. Does a non-profit sound like it's actually what I need? Is there a specific type I should look into considering the purpose and size? Is there some gold-mind of information about forming a non-profit that's been evading me somehow?

Any feedback you can provide would be very useful and much appreciated.

edit: if it makes a difference, this will be in Utah, and the software is basically a platform for researching different ways law enforcement could cooperate with the community, while promoting openness and preserving confidentiality where necessary. It started as a project just for fun and learning, but it's turned out to be potentially useful.

3 comments

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gyardley
You only really need a non-profit if you're going to accept donations and you want the donations to be tax deductible. It's almost certainly going to be a 501(c)(3) organization, like most non-profits.

Managing a 501(c)(3) involves as much administrivia as managing a regular corporation - it's not for those afraid of paperwork. There's also some non-trivial fees for registration.

A concept called 'fiscal sponsorship' exists, where an existing non-profit can fold you under its wing and pass through donations - that might be the route to go at first until you're sure it's worth getting your own 501(c)(3) status.

Rhodee
If you don't plan on taking money-save time and opt for fiscal sponsorship. It boils down to an existing non profit allowing your operation to borrow its federal EIN and you getting the benefits of being a non-profit. You will still need to create a board and do all the other stuff-just later. They also charge. I've worked @ "projects" that were sponsored that charged 7-10% for the sponsorship. It often included all the back-end stuff.

I'd opt for an LLC and then consider becoming a "B-Corp" (look it up). It sounds like the technology may have a business model in the future. If you want to be part of it as a founder-and not an employee-don't opt for the non-prof route.

Ping me if you've got q's.

zacharycohn
You can be a regular company and still do good things. You should be very, very sure that being a 501(c)3 is ESSENTIAL to what you want to do, otherwise it'll be a LOT of unnecessary work.