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MenuWe need to transform our company to a non-profit organization. What steps do we need to take to change our company while protecting ourselves?
We're Canadian base and only operate in Canada.
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Depending on Canadian law, you will most likely need to close your business and establish a Non-profit. They will need to be two separate entities if you want to do tax deductible donations.
Are you worried about protecting your IP? Your customers? I would need to know a little bit more about what you are trying to do in order to give you a more in depth answer.
My first question is why are you wanting to switch to a non-profit model? I raised over a million dollars in Canada for the Blind and I didn't have to become a non-profit to do it. If you partner with the organizations who have a name why start something brand new?
The development of commercial revenue streams allows traditional non-profit organizations to increase financial certainty in response to the reduction of traditional funding sources and increased competition. To capture commercial revenue-generating opportunities, traditional non-profit organizations need to deliberately transform themselves into social enterprises. Through the theoretical lens of institutional entrepreneurship, we explore the institutional work that supports this transformation by analysing field interviews with 64 institutional entrepreneurs from UK-based social enterprises. This extends our understanding of the ex-ante strategy of incorporating commercial processes within social organizations.
In response to these challenges, scholars suggest that traditional NPOs can acquire commercial revenue streams to ensure financial self-sufficiency. To effectively implement practices that attract commercial revenue streams, traditional NPOs need to deliberately reconfigure their current operating models and introduce new business functions. However, unlike NPOs that traditionally rely on private donations and government funding, SEs focus on generating incomes from commercial activities. Thus, we define a SE as a form of NPO that makes use of productive activities to generate commercial revenue in support of its social mission.
This definition is in line with the Earned Income School of thought Footnote 1 that stresses the vital role of SEs in organizing a range of commercial practices to help diversify their funding base and manage the risks associated with income generation . We argue that this practice of turning traditional NPOs into SEs fits the description of institutional entrepreneurship. Institutional entrepreneurship represents activities of transforming established institutions in ways that diverge from the status quo. From this perspective, the SEs’ executives play the role of “institutional entrepreneurs” who engage in activities to transform existing institutions into new ones.
Previous studies that investigate the formation of SEs often focus on understanding how institutional entrepreneurs respond to and accommodate dual social and commercial processes. Although this research line has generated valuable theoretical insights, one area which remains relatively unexplored is how SEs are transformed from traditional NPOs by incorporating commercial processes within social organizations in the first place. Specifically, we find that the transformation processes begin by traditional NPOs engaging the commercial revenue strategy.
Through building commercial revenue-generating mechanisms and establishing business partnerships with for-profit organizations, traditional NPOs can exploit commercial opportunities and develop commercial revenue streams. Institutional entrepreneurs focus their attention on constructing business-like working processes and supporting structures within traditional NPOs and developing capacity for managing business-like operations. Finally, we find that the transformation processes place great emphasis on legitimating the socio-commercial business model by advocating business-oriented strategic direction and maintaining social organization status to address stakeholders’ concerns about the newly emerged SEs. First, through the theoretical lens of institutional entrepreneurship, we identify different domains of institutional work that support the incorporation of commercial practices within traditional NPOs.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Related Questions
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What companies have successfully implemented both B2B and B2C products or services? Which should I start with for the non-profit sector?
I would suggest the first question to ask is "what problem do I solve?" And of those people I solve problems for "who do I create the most value for?" In the non-profit world you need to add "How does my business help the non-profit run better and/or help the group the non-profit focuses on?" For example, if you've created a platform that drives donations, your company "has created a platform that helps you reach fundraising goals faster." What you don't want to do is market and sell to B2B and B2C audiences simultaneously. They have different ways of buying - a B2B audience needs to have their benefits quantified (using your thing makes me x amount more) - and it's extremely hard for a startup to be able to do both well. Better to start with one, execute really well and move into the other. Feel free to give me a call and we can dig into who your most valuable audience is.AV
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Are in-kind donations are tax deductible?
Donations of in-kind services generally cannot be deducted. Donations of in-kind items (clothes, food, computers, etc.) are deductible. But the amount of the deduction is basically up to the donor; they declare the market value of the items. This is obviously very subjective, but there are some large national nonprofits that publish list of suggested values. For example, the Salvation Army has a list here: http://satruck.org/donation-value-guide One note -- vehicle donations are treated differently. I believe that the deduction used to be the Blue Book value of the car; I believe that is now only the case if the car is used by the charity in their operations or donated by them directly to a person in need. Most charities that receive donated vehicles will sell them in an auction; in these cases, the amount of the deduction is limited to the amount that the charity receives for the vehicle (i.e. if the Blue Book value is $5,000 but the charity only sells it for $2,000, I believe the deduction is limited to $2,000). NOTE: I am not an attorney and this is not legal advice. If you seek such advice, you should consult with a lawyer who specializes in this area. My response is based on my 13+ years of professional fundraising.JG
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What is the most important detail in asking someone to be on a BOD for a non-profit?
For background, I'm an active board member for two charities, am a past board member of CIRA (which runs the .CA domain) and am a graduate non-profit governance essentials course from the Institute of Corporate Directors. I also built Canada's first crowdfunding website that distributed over $3m to charities from over 115,000 members and in the process interacted with literally hundreds of charities on social media and cause marketing. Every board member needs to be willing and able to raise funds. I believe that every board member of a small non-profit (less than $250,000 in operating budget) should be able to raise at least 10% of the annual budget. Also important is values alignment ensuring that the board member understands and agrees with what the organization stands for. Finally, as much as is possible, ensure that each board member brings a missing skillset. Social Media competency in one, accounting in the other, for example. Final piece of advice is that good board members should be hard to get. The commitment of time and energy is significant and so therefore, anyone who is willing to join without much convincing or discussion is probably someone who isn't going to be prepared to do the heavy lifting. Happy to talk to you in a call about board composition or anything else. I have a huge passion for helping the non-profit sector and especially grassroots organizations like yours.TW
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What is the difference between a social business (social enterprise) and non-profit?
Non-profit is incorporated as a 501c(3) and must be approved by the government for the tax advantages to take effect. A social business or perhaps a Benefit Corporation is a new corporate structure available in certain states that allow the for profit corporation to put the "Social Mission" of the company ahead of the "Shareholder Profits".MS
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What are the qualities of a good fundraiser?
As someone who has founded and fundraised for a social venture, I can tell you that the fundraiser must be the CEO or President. Fundraising for a non-profit is all about building a relationship with your donor base, and the donation is often as much because the donor likes the person & people as much as they like the work being done by the Foundation. One of the most difficult paradoxes of raising for a non-profit web platform is that the more someone becomes excited by the potential of the platform, the more that they would prefer to invest cash for equity than simply donate and looking back on it, I think that would have simplified things for my social enterprise and would have been able to attract far more capital. The other avenue that you can explore is to build in tipping or crowdfunding for your operation directly into the online experience but that will only be a viable source of funds with significant traffic and thus, the operating capital required to grow the business requires proactive outreach to supporters. Happy to speak with you about this in more detail in a call.TW
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