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Questions to Think About BEFORE Starting a Not-for-Profit

doinggood-1I am all for not-for-profit organizations.  Many of my clients have brilliant ideas for how to improve the world and forming a not-for-profit is a great way to attack some of society’s ills.  Without being a Debbie-downer, I want to caution that forming a not-for-profit is hard work!  I suggest you consider some things before you commit yourself to full-fledged not-for-profit status.

Think about these questions BEFORE filing any official paperwork:

1) What state do you want to start in?  Even if you plan on going national or international at some point, you are going to have to incorporate in one place.  Choose a location where you will be focusing your services on or where you will focus your fundraising efforts or, ideally, both.

2) Who will be on your board of directors?  In New York, not-for-profits must have at least 3 members.  Being on a not-for-profit board comes with some legal responsibilities so you should understand what you are in for (as a potential board member) as well as what you are asking your friends or colleagues to sign on for.

3) How will you run your organization?  After filing the Articles of Incorporation in New York State your board should enact by-laws.  These rules set out how the board will make decisions.  Some things are routine, but other things, like whether you want a board that meets in person, may matter more to you.  The entire board should participate in drafting these.

4) How will you manage your finances? If you will be seeking 501c3 status, you need someone who is savvy in accounting to help you document the money you will have coming in and going out.  Set yourself up with someone early on so that they can keep you from making financial mistakes that may cost you down the line.

If you have solid answers to these questions, you are well on your way towards being ready to incorporate as a Not-for-Profit.  Managing a not-for-profit means more than just doing good for humanity, it also requires being smart about the legal and financial obligations you are committing to in the future.

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What to Ask Before You Partner-Up

partnerAll throughout grade school, teachers asked us to “partner-up.” If you were anything like me, unless your best friend was also in the class, you spent at least a little time contemplating who would make the best partner. In grade school my criteria usually revolved around who had the coolest color of glitter pen and which classmate’s mom made the best cookies.

Unfortunately, these criteria aren’t very helpful in the business world. If you are looking to “partner-up” you could take a lesson from those grade school days and write down your own list of criteria before committing to a business partnership with another person.

Forming a partnership is serious business and a partner shouldn’t be taken on lightly. In a recent blog post on Forbes.com, Amanda Neville posited that business partnerships are more difficult than marriage.  Think about the care you took (or plan to take) before entering into that partnership. A business partnership should be approached with the same amount of scrutiny and consideration.

While I send my clients home with a full page of questions before meeting with them about the details of any potential partnership agreements, I think there are three questions you absolutely MUST consider before filing any paperwork.

  1. What kind of business do you want to have in the long term? Here you get to think big picture, if everything works out perfectly, what do you and your partner see as being the ideal business? Each partner should develop her own ideas before discussing long term hopes together so you don’t influence each other during this discussion.
  2. How will you settle disputes? In the beginning, it is easy to think you will always agree about everything, but as anyone who has ever worked with a partner will tell you, this is never the case for long. You should talk in the beginning about how you will proceed when you don’t agree. Do all the partners need to agree to move forward? Will you see outside counsel when you disagree? From whom?
  3. What is each partner bringing to the table? Here it is important to talk about finances, expertise and work availability. The best partners are often people that have different skills and interests, because then your business doesn’t have to spend additional time and funds outsourcing critical tasks. Talk about what you see your role in the company being, how much you can contribute both financially and time-wise.

Discussing these points may seem uncomfortable at first, but they are necessary if you hope to build a partnership that won’t crumble at the first sign of trouble.

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Starting a Business on the Side – Protect Yourself!

This is the last installment of a four-part series on how to navigate taking on a side job or starting a business in addition to your regular employment.  If you missed the earlier parts, click here to read them from the beginning!

In all four of these posts I discussed various ways to protect yourself and your side business from potential hazards.  If you have considered these factors and decided to move forward with your new venture, there are a few last tasks you should take care of to cover all of your bases.

First, set up a company.  Even if you are contracting, and not creating an entirely new venture, you should separate your contracting business from your full-time job.  You can do this by forming an LLC, a corporation, or establishing your self as a sole proprietor.   There are low-cost ways to do this and taking this step can prevent major headaches in the future.

Either way you want to make sure that the money you receive from your new gig is kept separate from your full-time salary.  This will make life easier for your accountant later and allow you to write off expenditures for your side business.  You can do this easily by opening up a separate bank account for the new venture.  A separate bank account will keep you from mingling the funds until Uncle Sam gets his piece.

Keep in mind that a few simple steps early on can protect you from a host of hassles down the line.  It is always better to be over-protected when it comes to your money and your business.

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Starting a Business on the Side – Be Careful What You Work On!

This is the third installment of a four-part series on how to navigate taking on a side job or starting a business in addition to your regular employment.  If you missed the first or second parts, click here and read them!

Yet another thing you want to be aware of is whether or not your current gig could see your side business as competition.

This does not have to be direct competition, like McDonald’s and Burger King.  Your employer could see anything in the same field or line of work (basically any kind of food making or selling from fine dining to packaged granola bars could be seen as competition for McDonald’s).

Once again, if you have an employment contract, you want to pay attention to the clauses on working for competition in it.  Many contracts restrict employees in working for direct competition both during employment and for some time after the employee leaves the company.

If you think your side business could be seen as competition, you should tread carefully.  Consider negotiating with your employer and getting an agreement set in writing about the nature of your business and what your employer is comfortable with you pursuing.

If you don’t feel comfortable approaching your employer or you want to keep the project entirely secret, know that you are taking a risk that down the line your employer may fire you for your behavior or demand some ownership in your side business.

When in doubt, you should get a second opinion before investing significant time or money into a side business to ensure that you won’t have to reimburse your employer for your hard work.

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Starting a Business on the Side – When to Work?

This is the second installment of a four part series on how to navigate taking on a side job or starting a business in addition to your regular employment.  If you missed the first part, click here and check it out!

Once you have checked your contract for your employer’s restrictions on outside employment and decided whether or not to tell your employer, you need to consider when you plan on doing the bulk of the work.

When will you work on your side project?

If you currently have a job with chunks of downtime or you are salaried and don’t punch a clock, and you are hoping to freelance or start your own company during this time, you may want to consider your plan more carefully.

If you do the work while salaried or “on the clock” you employer might have an argument that anything you actually produce belongs to him.  This generally only becomes a problem when you least want it to, after your project has become successful.

For example, in the web development world, a developer who works for a fashion company might use her down time to write an amazing program that helps college kids sell their used books online.  This program appears to have nothing to do with fashion but if the program becomes successful the fashion company could want to use an element of the program to help people sell used dresses.  The fashion company could claim the developer created the program while working for them and thus they should be allowed to either a) use the program at no cost or b) be entitled to any profits the developer got from selling the program.  This is last thing you want when you have worked hard to create a successful business.

To avoid these issues entirely, you want to plan to avoid working during business hours and document this in case your employer ever asks.  If you have concerns that the business you want to create might not abide by these rules, you should consider trying to negotiate with your employer so the parameters of what will belong to you and what will belong to the employer is well-defined before you begin your side business.

As you start your side business, remember to pay attention to when you are working on your project and when you are working on your employer’s project.  If any entrepreneurs have a great time keeping system, I would love to hear about it!