Tuesday, December 19, 2006

Disadvantages and Advantages of the Nonprofit Corporation

As most people know, contributions to non-profits are tax deductible, but the organization also benefits from a variety of other factors. Simply put they are: tax exemptions, limited liability, perpetual legal existence, employee benefits, and formality. The first two are pretty self-explanatory. Having a perpetual legal existence kind of makes QUADRE immortal. As the Nolo Press book, How to Form a Nonprofit Corporation states, "[the organization] may, of course, be dissolved but its inherent perpetuity adds an element of certainty regarding the continuance of the group's activities, an attractive feature to the private and public grantor."

While a nonprofit corporation can't share profits amongst employees (and yes, nonprofits can make a profit), salaries can and should be commensurate with for-profit organizations. Given the mission driven nature of QUADRE's work-performing concerts for all ages across the country in formal ticketed situations as well as for students in schools-I hope to see the day when all of the artists can look at QUADRE as a model for how an artist should be compensated and treated. Every season the organization makes great strides in this regard which I'm very proud of. Recent accomplishments include administrative compensation, rehearsal pay for musicians, residuals for recordings, union pension, and documented personnel policies.

Finally, the formality of the organization in regards to its documents (Articles of Incorporation, Bylaws, Minutes of Meetings, Board Resolutions, etc.) creates a "built-in set of ground rules...that is an important advantage...where the composition of the board includes diverse members of the community with correspondingly divergent interests." (Nolo Press, see above) Without these guidelines, reaching collective decisions would be difficult if not completely futile.

Things are not completely rosy however. Nonprofit corporations have a great deal of paperwork to deal with, the high cost of incorporation costs and fees, and lots of time & energy to maintain. The last one is certainly the most noticeable from my end. However, the amount of good that we have been able to do for the community since we became a non-profit is overwhelming. I do feel that the effort to keep things not only going, but going as well as possible, creates a strong incentive to tackle each hurdle with great aplomb.


Anonymous said...

Thank you for these information about disadvantages and advantages of the nonprofit corporations, it's very useful for me.

Anonymous said...

thanks :}

Anonymous said...

Thank you for writing this blog. I had to do a project on non profit organizations, and I could not find any site with the advantages and disadvantages on it.

Verna said...

When I was in highschool, I'm wondering how does a nonprofit company earn money if they're aiming to help the less fortunate people. When I worked in an events company, sponsors play big role on the successful events. Same with the non profit orgs. The source of their budget in runnung a certain fundraising, are the sponsors or donors (it can be individual or corporation). Since accounts should be handle well, accounting nonprofit system is very important to organize the important files. Today, there are improved and new accounting for nonprofit. It would be easier for the fundraiser to monitor the cost of budget.

Anonymous said...

Can you guys summarize it?