The pros and cons of starting a non-profit organization

 It has recently been in the news that a group of local investors are interested in buying the Baltimore Sun  from its present owner the Chicago Tribune, which is in financial trouble and turn it into a non-profit organization - See Local Investors May Take Over Baltimore Sun.

I thought it would be a good idea at this time to set out the pros and cons of starting a tax exempt nonprofit organization.

There are different types of non-profit organizations and some non-profits, depending on the forms filed are not exempt from filing taxes. If a non-profit organization is created filing Form 1023 then a tax exempt 501 (c) 3 organization is created with the Internal Revenue Service and the organization qualifies for exemption status on federal, state, and local taxes.

There is a local workshop providing information on the the pros and cons of starting a non-profit organization at the Maryland State Arts Council under the Organizational Development Assistance Program - Monday March 30th 4:30pm-6:30pm.

Pros

Non-profit tax exempt organizations:

1. Pay no taxes whether it is federal, state and are also except from local taxes. They are also exempt from personal property taxes and Federal Unemployment taxes
2. Are eligible for retail discounts
3. Pay reduced postal rates
4. Can receive public and private donations which are tax deductible for the donors who can get a tax receipt
5. They are exempt from personal liability
6. A nonprofit organization has the same type of longevity as a regular corporation
7. Offers the same type of employee benefits as a regular incorporated organization
8. A tax exempt non-profit organization qualifies for cheaper advertising rates which includes being able to air free radio and television public service announcements (PSAs)
9. The organization can also qualify for other benefits depending on what they focus on as written in their mission statement

Cons

1. A lot of paperwork is initially involved in setting up a tax-exempt nonprofit organization
2. Other preliminary costs including having to use a lawyer to prepare the corporation's papers
3. A lot of time is spent on regulatory requirements - including submitting annual reports to the related state and federal agencies
4. Board of Directors do not receive any compensation
5. No political campaigning or lobbying can conducted by the organization
6. If the non-profit folds, its assets must be distributed to other nonprofit organizations
7. A number of fees that have to be paid before a non-profit incorporation status can be established