The Rhythm & Reason Blog has examined various business legal structures common for music therapy private practices: Sole Proprietorship, LLC, Corporation, and will now discuss Non-Profit Organizations (NPOs). These brief introductions are for educational purposes only and do not substitute for rigorous research and expert legal counsel.
NPOs are often associated with service and charity. Whereas the previously discussed business structures ultimately seek to increase profits or dividends, non-profits are dedicated to addressing community needs or advancing a social cause. After covering all costs of running the business, surplus revenues must be used to further advance their mission.
Every business can benefit from a well-crafted mission statement. Perhaps no other legal structure demands a more thoroughly investigated statement of purpose more than an NPO. If you aim to build a non-profit, you must pinpoint a need for your new organization, research whether there are any pre-existing organizations serving similar needs, plan how you will ensure start-up plus sustained operational funding, and whether a non-profit is truly the best legal structure for your situation. A non-profit has the best chances of success when board members are judiciously selected, volunteers are motivated to support, and additional resources and supports are utilized. This team should craft a detailed business plan, including marketing and fundraising strategies. You will need professional guidance, preferably from an attorney or accountant with prior experience helping non-profits, to best navigate all of the required paperwork.
Once your team is ready to move forward, you will need to incorporate at the state level, apply for tax-exempt status first with the IRS, file for tax exempt status next on the state and local level, and then submit all applicable annual reports. The IRS recognizes 29 different types of non-profits, but the most common NPOs are categorized under Section 501(c)(3): those whose purposes are charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.
There are many decisions an aspiring business owner must make. Research, reflect, and seek counsel when selecting which business structure best fits your unique situation and vision. Whether working as a sole-proprietor, building an LLC, founding a corporation, or inspiring an NPO, remember that legal distinctions are just the beginning. Your business will only grow as big as you’re willing to go. Get out there! Live organized, be smart, work hard, study, meet important people, provide excellent service, keep effective records, develop lasting relationships, expand your network, advocate for music therapy, innovate, research, WORK, and flourish. Realizing your potential takes compassion, a willingness to ask for help, courage, commitment, and your own maturing combination of “intangibles.” Get out there and OWN IT!
Internal Revenue Service. (n.d.) Tax Information for Charities & Other Non-Profits. Retrieved from https://www.irs.gov/Charities-&-Non-Profits.
U.S. Small Business Administration. (n.d.). How to Start a Non-Profit. Retrieved from https://www.sba.gov/blogs/how-start-non-profit.
Wikipedia. (n.d.). 501(c) organization. Retrieved from https://en.wikipedia.org/wiki/501(c)_organization.