Topic: General Posts
Subject: Non-Profit
Submitted on 05-11-11 4:42 pm
Message:
I have a client who is setting up a not for profit charitable organization and working on a determination letter from the IRS. One issue he is running into is that the IRS has responded that his net profit is too great and he is holding too much cash on his projection.
The charity is going to be spending money through its programs, but it is also creating an endowment fund for future giving programs. How do we classify this on the balance sheet so that the IRS is satisfied?
Message:
I have a client who is setting up a not for profit charitable organization and working on a determination letter from the IRS. One issue he is running into is that the IRS has responded that his net profit is too great and he is holding too much cash on his projection.
The charity is going to be spending money through its programs, but it is also creating an endowment fund for future giving programs. How do we classify this on the balance sheet so that the IRS is satisfied?
Replies
Subject: Re:Non-Profit
Submitted on 05-15-11 9:30 pm.
Message:
Probably should show it as an investment... but if the projections are very aggressive I'd probably tone them down... Not for profits are allowed to generate profits, significant profits but not seeing the projections there probably should be higher % of profits spent on program expenses then the projections indicate
Message:
Probably should show it as an investment... but if the projections are very aggressive I'd probably tone them down... Not for profits are allowed to generate profits, significant profits but not seeing the projections there probably should be higher % of profits spent on program expenses then the projections indicate
Subject: Re:Non-Profit
Submitted on 05-16-11 7:54 pm.
Message:
You might want to look at Guidestar to get a sense of what some 990's look like at profitable not-for-profits. It may give you a sense of what the IRS deems acceptable.
Good luck!
Message:
You might want to look at Guidestar to get a sense of what some 990's look like at profitable not-for-profits. It may give you a sense of what the IRS deems acceptable.
Good luck!
Subject: Re:Non-Profit
Submitted on 05-16-11 9:00 pm.
Message:
Petrina's suggestion is a great one.
I find the following site helpful- this is the link to their nonprofit taxation section:
http://managementhelp.org/tax/np_tax.htm
Message:
Petrina's suggestion is a great one.
I find the following site helpful- this is the link to their nonprofit taxation section:
http://managementhelp.org/tax/np_tax.htm
Subject: Re:Non-Profit
Submitted on 05-18-11 5:50 am.
Message:
Muhammad Yunus
Building Social Business
Suggest reading this book. Sometimes “not for profit” is not the best methodology. A social business, structured for profit but with agreed limitations on distributions and objectives can better attain objectives and faster too.
Message:
Muhammad Yunus
Building Social Business
Suggest reading this book. Sometimes “not for profit” is not the best methodology. A social business, structured for profit but with agreed limitations on distributions and objectives can better attain objectives and faster too.
Subject: Re:Non-Profit
Submitted on 05-27-11 2:54 pm.
Message:
Randy,
I just joined the Board of a non-profit that is working to build an endowment. It is being done by setting up a separate Foundation in which the long term invested funds will be placed and the income from the investments will provide a cushion for any funding shortfalls for the organization. It was set up before I joined the Board and I haven't had a chance to look at all the details yet. However, if your client works with an attorney who has non-profit organization expertise (rather than general practice law), the attorney should know how to get it done in a way that doesn't cause more problems.
The other replies all have good points for your client to consider. You should definitely look the 990's and annual reports available on the GuideStar web site (www2.guidestar.org) to see what other organizations with similar structures are doing.
Dinyar's comment is definitely worth considering. Just because your client wants to do good, doesn't necessarily mean that a non-profit is the best way to go. In addition to the book Dinyar recommends, you should also take a look at the May 2011 issue of Inc magazine. It has an article profiling 6 companies that are all committed to doing social good, but each one is following a different model to accomplish their objectives.
Message:
Randy,
I just joined the Board of a non-profit that is working to build an endowment. It is being done by setting up a separate Foundation in which the long term invested funds will be placed and the income from the investments will provide a cushion for any funding shortfalls for the organization. It was set up before I joined the Board and I haven't had a chance to look at all the details yet. However, if your client works with an attorney who has non-profit organization expertise (rather than general practice law), the attorney should know how to get it done in a way that doesn't cause more problems.
The other replies all have good points for your client to consider. You should definitely look the 990's and annual reports available on the GuideStar web site (www2.guidestar.org) to see what other organizations with similar structures are doing.
Dinyar's comment is definitely worth considering. Just because your client wants to do good, doesn't necessarily mean that a non-profit is the best way to go. In addition to the book Dinyar recommends, you should also take a look at the May 2011 issue of Inc magazine. It has an article profiling 6 companies that are all committed to doing social good, but each one is following a different model to accomplish their objectives.