Community Development

When does it pay to become a nonprofit?

March 12, 2024  • Weave: The Social Fabric Project

A few years ago, a group of musicians came together and formed the South Berkeley Chamber Ensemble to give concerts for unhoused neighbors in a local encampment in Berkeley, CA. It was a way of building community. And their plans kept growing from there.

The group partnered with the Life Church of Berkeley, giving regular concerts in their building and hosting community dinners afterwards, in partnership with volunteer groups that provided medical and social services. ”It’s been really amazing because there’s a lot of loneliness and division in our world, but at these group meetings, the neighborhood just comes together and talks and eats,” says Tracy Randolph, one of the Ensemble’s founders.

Now, Randolph and her team want to go even bigger and that poses a challenge. When you feed people, rent spaces, and secure more grants and donations, your impact grows, of course. But you also take on more responsibility and risk.

Up until now, Life Church has used its 501c3 nonprofit status to help the Ensemble conduct their activities and receive donations without having to pursue its own nonprofit status. “It has been kind of like training wheels. We wanted to see if we could draw in the community before investing in the whole 501c3 process, because it takes a lot of work,” says Randolph.

But like many weavers, Randolph and the South Berkeley Chamber Ensemble are now considering pursuing their own 501c3 nonprofit status to have more independence. That would allow them to rent their own space, have their own governing board, and fundraise from different sources.

“Starting a nonprofit involves all the steps that are involved in starting a for-profit business, plus a lot of oversight that has to do with getting that tax-free status,” says Anna Taylor, Executive Director of The Greater Sum, a nonprofit accelerator. “It’s a lot of paperwork and rule-following.”

“For many people who are working in their community in their free time, using inexpensive supplies, and where there is no risk of someone being harmed, pursuing nonprofit status might not make sense,” she says. “For others, like those serving food, where there is risk of food contamination, it might be important to use a structure where they can get liability insurance.”

If weavers are considering starting a nonprofit, Weave and The Greater Sum now offer a free, self-paced, online course to help. It can be completed in a few hours, but Taylor suggests you take your time. “You’re going to think about the exercises in the shower this week. You sit with it for a little while and come back to it when you have taken some time to reflect,” says Taylor. Another course, Pitching your Nonprofit, will help you promote your work to funders and other stakeholders.

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