When it comes to the world of nonprofits and charitable organizations, there are myths abound. We help many different nonprofits and charities track and grow their membership at Join It, so we thought it was time to address some of these myths and set the truth straight!
Myth #1: Nonprofits don’t have paid staff; they only use volunteers.
While many nonprofits do make use of volunteer power, especially during events like virtual 5ks or times of high seasonal activity, nonprofits have paid staff! Typically, these paid positions are the team’s core members, like those in charge of financials, membership management, and events. Not to mention that a 501(c)(3) needs at least three board members!
Many nonprofits have both employees and independent contractors as well as volunteers. You’ll also need to classify any employees as exempt or non-exempt.
Myth #2: Nonprofits can’t earn a profit.
It’s easy to see where this misconception comes from… it’s in the name! But it’s simply not true. Nonprofits can turn a profit and will need to keep their doors open! Nonprofits should indeed try and build positive revenue for sustainability. The term “nonprofit” simply means that profits cannot be distributed to individuals. A nonprofit’s profit typically pays company costs, salaries, or subsidizes services for community members.
Myth #3: Donations are the only source of funding.
While nonprofits rely on donations, it’s certainly not the only funding source for many organizations. Nonprofits can acquire funding from fees for services, government grants or contracts, and contributions from individuals, foundations, or corporations.
Myth #4: All nonprofits are charities.
The terms “nonprofit” and “charitable organization” aren’t synonymous. Some nonprofits that aren’t charities include labor unions, chambers of commerce, social clubs like sororities and fraternities, and homeowners associations. Charitable organizations, on the other hand, are defined by the Internal Revenue Service:
The exempt purposes set forth in Internal Revenue Code section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
Myth #5: A nonprofit is more manageable than starting a for-profit business.
Regardless of the tax-exemption status or profit distribution, nonprofits are still businesses at their core. It’s not easier or harder to start a for-profit company! They require the same management, accounting, marketing, and collaboration expertise to run effectively, just like a for-profit organization.
Nonprofits don’t have to be a source of mystery! If you’re thinking of starting a nonprofit or another type of charitable organization, give Join It a try. You can try us free for 14 days with no credit card required!