GHIC 2019: Global Health & Innovation Conference
April 13-14, 2019
Yale University, New Haven, CT

Unite For Sight's 2011 Global Health & Innovation Conference

Blog Report by Catherine Thomas, Unite For Sight Global Health Leadership Intern

"Workshop: Myths and Realities of Starting a Nonprofit," Maurice Segall, JD, Pro Bono Partnership, Inc.

Many of Unite For Sight’s conference attendees are themselves involved in (or hope to become involved in) both for-profit and not-for-profit organizations in the fields of global health and social entrepreneurship.  Hearing inspirational speeches about the most effective and ethical practices in global health, some ambitious conference attendees were certainly during the weekend ruminating over how to best implement their own ideas for health and development.  Maurice Segall, a lawyer working for Pro Bono Partnerships, provided a highly informative and useful workshop for these aspiring leaders concerning the advantages and disadvantages of 501(c)(3) status and practical alternatives.  This workshop provided an overview of the legal implications of applying for and attaining this status. First, Segall noted that while a 501(c)(3) may be relatively easy to start, it is difficult to maintain mainly due to constant fundraising and remittance of annual financial statements.  On that note, he suggested that individuals use a business approach rather than a non-profit one in order to ensure sustainability, especially since public giving to charities has decreased steadily over the past 3 years.

After a brief overview, Segall delineated some common myths about 501(c)(3) status.  For example, Segall noted that an organization needs to both apply to the state for non-profit status by filing a certificate of incorporation and apply to the IRS for tax-exemption by filing a Form 1023.  Also, non-profits can make an annual profit and, in fact, it is best to build up financial reserves.  They can also pay their employees salaries in line with reasonable compensation for comparable positions in the for-profit field.  I found the debunking of these myths to be most useful.

Next, Maurice Segall discussed the pros and cons of 501(c)(3) status including the following:

Pros
-Limited liability (to provide legal protection from liability for individuals in the organization)
-Increases funders’ willingness to donate (due to tax exemption)
-Allows for tax exemption (from some state taxes)

Cons
-Tedious annual state and federal filings
-Compliance with corporate formalities (bylaws, minutes of meetings, etc.)
-Must recruit members to ensure continuity
-Less autonomy for the CEO (due to board of directors’ influence)

After describing details of incorporation, Segall went into more depth about how to determine the appropriateness of incorporation and tax exemption for an organization.  He delineated a series of 15 questions to ask.  I will list some that I found most important.

  1. Is there an explicit need in your target community for your charity’s services?  You may need to conduct a needs assessment to ensure that your services will actually be used.  
  2. Are there other organizations doing the same thing? If so, could you join them or use them as a fiscal sponsor? (See more info below on fiscal sponsorship)
  3. Have you identified funding sources?  How will you get start-up funds? It costs from $150-$500 just to file for tax exempt status, on top of legal fees.
  4. Does your organization have a short-term goal? Do you plan to raise funds for natural disaster relief or for a temporary project?  If so, incorporation/tax-exemption is most likely not recommended.
  5. Have you explored alternatives to 501(c)(3) status?

This last question was a very valuable part of the workshop.  First, Segall noted that to receive tax exemption without becoming a non-profit, an organization can be a religious organization, have no more than $5,000 in annual gross receipts per year, or fall under “group exemption.”  This latter category includes two different arrangements which include (1) becoming a program of another organization or (2) finding a fiscal sponsor.  A fiscal sponsor is another 501(c)(3) organization that may provide financial and administrative support to an organization so long as the organization promotes the sponsor’s tax-exempt mission. The sponsor is responsible for financial and corporate recordkeeping and for submission of reports to the IRS on behalf of the organization. This arrangement allows an organization to focus on its own development rather than being bogged down by fundraising, organizational, and administrative responsibilities.  The disadvantages of this partnership include a small fee that the sponsor may charge for administrative work and a degree of loss of control and of identity.  However, the fiscal sponsorship may, above all, help ensure the success and sustainability of an organization.  This is a powerful option that is often unknown or overlooked.  

Overall, I found this workshop tremendously valuable.  During and after the conference, I know that I am thinking about how I can best contribute to global health and development and want tangible advice on exactly how to begin.  For those with ideas, this workshop provided technical knowledge that conference attendees can apply immediately after a weekend of thought-provoking and inspirational speeches and experiences.