Why the Nonprofit Sector Should Worry about Sector Blurring

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sectoral blurring

May 13, 2015; Entrepreneur


As we know, there are any number of misunderstandings about nonprofits among businesspeople, in the same way that there are misunderstandings in our sector about the benefits of being a business. This article, which is derived from a new book by the staff of Entrepreneur Media Inc. entitled Start Your Own Business, sounds an alarm about the ways that the nonprofit sector is being sold to business entrepreneurs. 

The article starts by listing the reasons why you might want to start your business in nonprofit form. “Unlike a for-profit business,” it reads, “a nonprofit corporation may be eligible for certain benefits, such as sales, property, and income tax exemptions at the state level.” After reminding people in short form about the non-distribution requirement, it admonishes, “Keep in mind that nonprofits are generally organized to provide some benefit to the public.”

Then the article goes into how to organize as a nonprofit, complete with a link to download the form. The article concludes, “Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. It makes sense to reassess your form of business from time to time to make sure you’re using the one that provides the most benefits.”

Does this bother the rest of you the way it bothers me? An abomination!—Ruth McCambridge

  • james simpson, CPA

    I agree with you Ruth. I just thought I would add that they article implies that you would somehow own this nonprofit. It needs to included that there are no owners in a nonprofit and the HR rules have the same requirements as businesses do. Even with the tax benefits, many nonprofits still can’t afford to give cost of living adjustments and typically has lack of funding to invest in facilities management and capital replacement. Thanks for the article.

  • Chris Nunez

    Worrisome considering that ‘social entrepreneurship’ is being pushed in my area, considered to be ‘liberal’ and ‘social’ is very ‘sexy’… so this likely already has grabbed the interest of some folks in my area… sadly.

  • Ann Skeet


    This is important to bring to the forefront. There are appropriate ways to blend meeting the needs of stakeholders beyond shareholders with good business. In a for profit model, organizations commit to and support CSR organizations to promote corporate social responsibility. B corporations also allow organizations to signal other interests beyond the bottom line.

    Resource allocation is already enough of a challenge in the nonprofit sector without creating organizations with false intent and distracting supporters of all kinds with misleading information.

    Ann Skeet
    Director of Leadership Ethics
    Marrkula Center for Applied Ethics
    Santa Clara University

  • SophieB

    Clearly the author lacks a great deal of knowledge and understanding of what it means to be a nonprofit. Anyone who takes this advice will certainly find out how ill-informed it is if they attempt to get a government contract. Won’t they be surprised when they find out that they will not be paid for the full cost of their service, but would be paid for their costs along with a profit margin if they were a for-profit company. Or maybe they will be surprised to learn that they must have a Board of Directors. Or discover all of the other reporting requirements? Just ask the NFL.

    It’s very sad to think that people would look at becoming a nonprofit because of the business benefit they perceive they may gain. It completely undermines the purpose of being an organization focused on a mission that benefits others.

  • JR

    I am sorry but I don’t understand your concerns and disagreements with the article. I worked for nonprofits for over 25 years, in a myriad of job titles, and during the last 10 years, I tried to get the director to run certain aspects of it as a for-profit business. It’s all fine and good to have a worthwhile cause and mission, but what good does that do if the basic running of the business (financial, human resources, marketing, future projections and goals, time management, solid and enforced organizational policies, etc.) are not followed? Then the same fate awaits a nonprofit that awaits a for-profit, it fails, or limps along, like a wounded animal. The nonprofit’s worthy mission does not save it from this end. And worse, the people the organization was founded to serve and help, can do neither, at least not very well. After all this, I again say that I am not sure my understanding of your criticism of the pragmatic and soulless way the article addresses nonprofits is correct. If it is not, my sincere apologies.