Vol. 29, No. 5
Help—Not Another Start-up Nonprofit!: Help Has Arrived
by Heidi S. Glance, Had Beatty
How many times has a wonderful person, passionate about a charitable idea, come into your office and said something like the following?
I want to set up a new nonprofit to [fill in the person’s charitable mission]. Will you set up the corporation, help me get my Section 501(c)(3) status, and help me get going? [Name of a very important client] says he is sure that you would be able to do this for me, hopefully on a pro bono basis.
Almost all of you have had similar experiences. And almost every time, you have had reason to think one or more of the following thoughts: "I have no idea if this is a worthwhile enterprise or if this person can succeed, but, if The Client is excited about this project, I better pitch in." Or, "This person has a great idea for a charitable enterprise, but she is going to need a lot of infrastructure (such as financial accounting, insurance, and funding) to make this happen, and I doubt if she can pull it all together. But who am I to say? I guess I better give her a hand."
Those scenarios, and many similar ones, have played out in most of your offices. You’ve put in lots of pro bono time—always more time than you planned. You have done a myriad of lawyerly tasks on the corporate, tax, and administrative fronts. You also have become the mentor and strong right arm to many of these social entrepreneurs. Sometimes it has in fact worked out; the charitable project has achieved support and become successful. However, more often, the project has failed for reasons you anticipated (for example, lack of management and infrastructure), and all of your ministrations could not overcome the problems. Your social-entrepreneur client is disappointed, you are exhausted, and neither of you has much to show for the effort. This probably has happened to you many times during your career.
Organized, Planned Incubation of Qualified Nonprofit Projects
Approximately seven years ago, Albert Rodriquez, then a partner in the Los Angeles offices of Latham & Watkins, had endured these experiences too many times and finally said, "There has to be a better way." He thought about what might work for the lawyers, accountants, and charitable foundations that had attempted, without an adequate set of tools or environment, to incubate apparently meritorious nonprofit start-ups. More important, he thought about designing a system that might better serve early-stage social entrepreneurial projects and, thereby, the southern California community as a whole.
With the financial support of several southern California foundations and the efforts of other like-minded professionals, Rodriquez created a tax-exempt, nonprofit corporation with the mission of incubating nonprofit start-ups in southern California. That organization, Community Partners, has been a huge success: it has over 100 "projects" that now have approximately $5,500,000 in aggregate annual revenues.
The Colorado Nonprofit Development Center
Using the Community Partners model (with significant financial support from the Adolph Coors Foundation, the Denver Foundation, JFM Foundation, the Piton Foundation, Rose Community Foundation, and the Women’s Foundation of Colorado), the Colorado Nonprofit Development Center ("The Center") was founded in 1999. It has received IRS recognition of its § 501(c)(3) tax-exempt status.
The members of The Center’s volunteer board of directors are active in the Colorado nonprofit community.1 The Center’s Executive Director and the initial staff are now in place, the doors are open, and The Center is accepting applications for would-be projects. If you encounter someone who is passionate about a good idea for a new nonprofit activity in any area—social services, education, the arts—and if you are impressed with that person and the project’s goals, The Center could be a perfect fit.
The Center offers people with charitable goals a way to "jump start" their nonprofit projects, without first having to go through the costly, draining, and time-consuming process of setting up a corporation, creating an infrastructure, and obtaining recognition of tax-exempt status from the IRS. A new project becomes a "project" of The Center by operating under its corporate umbrella (much like a division of a for-profit corporation) and its tax exemption. Contributions are made to "The Colorado Nonprofit Development Center, FBO [Name of the Project]." The contributions are tax deductible to the donors and earmarked by The Center for the project’s use and expenses. In addition to assisting the launching of commendable grass-roots charitable enterprises, The Center also can serve high-wealth individuals with charitable goals and the desire for a hands-on involvement in a project. In such cases, The Center may be a preferable alternative to a private foundation or a donor-advised fund in a community foundation.
For almost any start-up nonprofit charitable enterprise, The Center is a good place to start, even if it is anticipated that the project will soon leave The Center’s incubation nest and achieve stand-alone corporate status with its own tax exemption. The Center’s motto is, "Making a Difference from the Start." You will do start-up nonprofit enterprises a favor, not to mention avoiding what is often an unrewarding legal services quagmire, by referring prospective nonprofit project organizers to The Center.
The Executive Director will be happy to talk to prospective project organizers. She also will be pleased to talk with you and your legal colleagues about The Center and to send you and your clients The Center’s brochure. The brochure goes into more detail about The Center, its facilities, its services (financial accounting, insurance, management coaching, organization development, budgeting, and discipline), its charges (essentially 9 percent of project revenues—if the project has no revenues, no payment is owed to The Center), and its guidelines for projects. Don’t start your nonprofit entrepreneur client down the nonprofit corporation formation, Form 1023 application road without first looking at the advantages of The Center.
To receive a brochure, have a brochure sent to a would-be new nonprofit project leader, or learn more about The Center’s criteria for project acceptance and its advantages for start-up nonprofits, please contact:
Melinda A. Higgs, Executive Director
The Colorado Nonprofit Development Center
4130 Tejon St., Suite A
Denver, CO 80211
Phone: (720) 855-0501; fax: (720) 855-8273
1. The Board of Directors comprises the following: Had Beatty, president, The Lazy Eight Foundation; Elaine Gantz Berman, president, Denver Board of Education; Heidi S. Glance, partner, Holland & Hart llp; Elsa Holguin, Rose Community Foundation; Bebe Kleinman, Doctors’ Care; Colleen R. Lohnes, The Stiles Group; Frederick R. Mayer, chairman, Captiva Resources/JFM Foundation; Adele Phelan, former president, Lorretto Heights College; Janine Vanderburg, Vanderburg & Associates; and David Younggren, Gary-Williams Energy Company.
Heidi S. Glance is a current partner, and Had Beatty is a former partner, of Holland & Hart llp. They both serve on the Board of Directors of the Colorado Nonprofit Development Center.
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