Why African Americans Should Never Start A "Non-Profit" or
Why You Are Setting
Yourself Up for Failure
Feb. 8, 2017
By Cathy Harris
What You Need To Know About Organizations
When I took on the federal government, U.S. Customs Service, as a whistleblower, "The Cathy Harris Story," I formed an organization, Customs Employees Against Discrimination Association, Inc. (CEADA.com), which I have since abolished.
I was the Founder and Executive Director and other whistleblowers took other positions (President, Vice President, etc.). When U.S. Customs saw the write-up on my organization in black and white newspapers and when I attended community meetings and walked in the room, it was very powerful.
They knew that I was not just representing myself but I was also representing an organization, which in their eyes were again "extremely" powerful. They had no idea how many people were in my organization. It could have been 10 or 10,000 and you can survive from community donations, membership fees, and working with the Black Press (NNPA.org).
Many community activists and advocates form organizations to tackle community issues and that's fine as long as you don't set these organizations up as a Non-profit, with the intentions that you will receive grant money from the government or even donations from the community, especially if you are tackling issues dealing with African Americans.
Once these organizations (potential Non-profits) start bringing up grant money and 501c3 and asking for money from these crowdfunding sites at www.GoFundMe.com or www.Indiegogo.com, etc., they have done nothing but set up their organization for failure. The goal is to become "self-sufficient" and you can't do that by continuously begging for donations.
Many people who set up or is a part of these organizations have books and other products and services so they are actually business owners and don't even know it. They just constantly refer to themselves as "activists" and "advocates" instead of a "business owner," because most black people don't understand how business works.
And most of these activists and advocates have a MAJOR DISLIKE for business owners because they say we are "money-oriented." Business ownership is about making money and becoming "self-sufficient." If you ever go on these activist's websites and in their forums on the internet, they will kick you off if you bring up business ownership.
So many lack focus and are very "narrow-minded". They don't understand that business ownership is our way out and especially family businesses is how we will gain "true generational wealth" for our families.
Many activists and advocates, even though they have products and services, continue on a "small-scale" and never grow their businesses, because again most don't know they are business owners. A business owner is anyone who offers services (catering service, editing service, photography service, etc.) or have a product (book, CD, DVD, shoes, purses, etc.).
However, some do go on to become a "legitimate" successful business owner, a politician, and many do move forward and start their own Non-profit, which is never a good idea.
The main difference between activists, advocates and business owners is many activists and advocates, give out FREE stuff and try to teach people how to eat for one night, but as business owners, we teach individuals, our clients and customers, how to eat for their entire lives. So that's a big difference in the two.
Many young students and others in the community will only seek to start their own Non-profit because that's all they see in black communities. The reason students and others don't seek to become "legitimate" or "profitable" business owners is because African American business owners are not that visible in most black communities.
And don't forget that most African American business groups or
Chambers of Commerce are polluted with Network and Multi-Level Marketers, that can get the average potential business owner, especially young business entrepreneurs, off track if they get involved with those type of ventures.
So like unsuccessful Non-profits, the black community is also polluted with unsuccessful Network Marketers. So until African Americans do some serious "soul-searching," they will continue to get involved in these types of unscrupulous business structures.
What they really need are "business mentors." It's doesn't matter how old you are -- all business owners need business mentors so they can avoid making major mistakes like most "first-time" business owners.
What You Need To Know About Different Business Structures
Sole Proprietorships are the most common form of business. Many small businesses, at least 80%, are operating in the United States as a "Sole Proprietorship."
The reason that most small businesses are Sole Proprietorships is because this is the "easiest" and "simplest" form to establish and maintain. Therefore, starting off as a Sole Proprietor, just makes sense especially for youth entrepreneurs.
It can also be less costly to start a business as a Sole Proprietor. You can open a Sole Proprietorship quickly unlike a LLC (Limited Liability Company) or a Corporation. Most cities and many counties require businesses, even tiny "home-based" Sole Proprietorships, to register with them and pay at least a minimum tax.
The disadvantages of a Sole Proprietorship are the Sole Proprietor of the business can be held personally liable for the debts and obligations of the business. Since you and your business are one, if you are sued, the court can demand personal property, such as your home, car, or equipment to pay off your business debts, if necessary.
And this is why many business owners elect to structure their businesses as a LLC or become incorporated. However, a mass number of African Americans, choose to start a Non-Profit business instead - why is that?
What You Need To Know About Non-profit Corporations
Let's look at Non-profits. What's the difference between a "Non-Profit" and "Not-For-Profit Corporation? There is no difference -- they both mean the exact same thing.
A Non-profit is a type of business structure that is often referred to as a Corporation, Business or Organization. A N on-profit corporation is any legal entity, which has been incorporated under the law of its jurisdiction for purposes other than making profits for its owners or shareholders.
Depending on the laws of the jurisdiction, a Non-profit Corporation may seek official recognition as such, and may be taxed differently from "For-Profit" Corporations, and treated differently in other ways.
heartbreaking and can literally set you up for failure.
Instead of conducting their own research, many business owners, especially African Americans, have listened to someone in the community, who are usually not even a business owner, who told them the government will give them FREE grant money to start a "Non-profit" or a "Not-for-Profit" business. They also believe they will receive public donations from the community.
You should know that nothing is really free in this world, especially not today. Some African Americans have even worked for Non-profits and saw first-hand that many of these Non-profits, not ran by African Americans, receive an abundance of funds to run their Non-profits. So they break away from these Non-profits, thinking that if they did it, so can they, therefore, they start their own Non-profits, only to be met with heartache and defeat.
I have seen Non-profits, ran by African Americans, spend 5, 10, 15 and 20 years begging for money from the government and/or public. What's more alarming is that there is a whole new generation of potential young business owners coming behind them, that are also thinking about setting up a Non-profit and begging the government and the public for money. These youths and everyone must be told the truth and this is why I am writing this article.
Many African American business owners rather start a "Non-profit" than a "For-profit" business. Case in point - during my travels I met a group that already had a LLC (Limited Liability Company) with their coalition, a For-Profit business. However, to receive FREE grant money from the government or public donations, they thought it would be best to keep the LLC, but also to start a Non-Profit, under another name, however, this is never a good idea!
All they really needed to do was to put together an awesome marketing and business plan for the LLC. Most businesses fail because the owners are afraid of business plans, especially the math section on the business plans. So instead -- African Americans rather put themselves in a position to beg for public donations or FREE money from the government, which again is never a good idea.
All business owners including Non-profits should be marketing their businesses at least 75% of their time. I even heard the leader of the group make the statement that people with a 500 credit score or below, would be able to get credit and whatever they needed because they were a part of their coalition.
Don't believe that! People with a credit score between 300-500 is in "very bad financial shape," and that's what you need to believe. You need to at least raise your credit score to a 700, 750, or 850, which are great credit scores.
A 650 is a fairly good credit score also. Instead, of starting a Non-profit, since business credit is closely associated with personal credit, this group should have stayed with the LLC or become incorporated and provided classes or workshops for members of the coalition to learn how to raise their credit scores and they can do this within 90 days.
I am working with clients in my coaching services at http://www.CathyHarrisConsulting.com and will be releasing a new book entitled "90 Days To Perfect Credit: How To Take Your Credit Score from a 500 to 750 in 90 Days" so I know first-hand that you can raise your credit scores in just 90 days and especially without the help of any "credit repair" agency. This is something you can do your ownself.
Business owners and leaders who don't know what they are talking about will make these types of "empty promises," especially those running Non-Profit Corporations, so you need to be careful aligning yourself with others in the community, especially Non-Profits ran by African Americans.
Ask them before you get involved or any group when you meet them, if they are a Non-profit, especially if they make the statement, "We will pay you." These Non-profits will do nothing but take you along with them for the ride and dash your dreams for the next 5, 10, 15 and 20 years, while you sit there receiving pennies.
You should stop playing 2nd fiddle to other people's dreams, especially when they are not logical and don't make sense, and get out there and set up your own business with a LLC or get incorporated, with your own "For-Profit" business.
Sure forming business alliances, strategic partnerships and co-ops with other businesses is a good idea, but when it comes down to it, construct your own business so that you don't put yourself in a position, where you have to beg for any type of public donations and especially money from the government. The government, or "Uncle Sam", is not your daddy, as most women on welfare is learning today.
In Atlanta, I saw Non-Profits ran by African Americans at work. And it wasn't pretty what I saw and what I learned through my investigations. One group, ran by a young entrepreneur, who had everyone fooled that he was doing good work with his Non-profit,
received tons of grant money but spent a majority of his days, avoiding people by not opening his doors. So where is the money going - his own pocket?
The head of another Non-profit and his group had been around for a while, so he was able to get this free grant money, however, he was also doing very little to help people with his Non-profit, so it was all a show.
When the grant money came into this particular Non-profit, a majority of it went straight into some of the key employees bank accounts, where they paid for their kids to go to private schools or for other frivolous things, while their employees and their families, sat around without food and the other basic essentials of life (food, clothing, shelter), because they refused to pay these employees, especially when the Non-profit funds runs out.
Eventually, or sometimes these Non-profits are caught "red-handed" by the Non-profit regulators and many times they demand their funds back, and on many occasions these perpetrators have ended up in jail.
Not only would I not form a Non-profit, I would not even work for one either or even volunteer for these groups, especially those ran by African Americans, even if it was helping or appearing to help African Americans, because you will do nothing but end up in a "cycle of poverty."
Women, especially volunteer too much - anyway. You can't help anyone if your cup is "half-full" so stop all this volunteering and work on your ownself. Your motto should be "Self, Family and Community" - in that order -- so start your own legitimate business.
The grants that are passed out to a very few Non-profits are so small that when these organizations run out of money, they refuse to pay their employees. These employees end up working for FREE for three to four months or longer - even during holidays.
Not only do these employees work without pay when grant money runs out, but most people who work for Non-profits, don't have any type of dental, disability, health or life insurance.
Many people have actually put their lives on hold because they seriously believed they would receive FREE grant money to start their own Non-profit businesses, especially former prisoners. People in the movement can't seriously think that the government is going to give them FREE grant money to open up a Non-profit.
I had a really good friend in my close circle of friends that I had to stop talking to. Everytime I saw her, the only words out of her mouth was "Girl, I think they are getting ready to give me some grant money" or "My grant money is on the way - I can feel it." Because she was in total denial about her life, and in order to keep my own sanity, I had to distance myself away from her and eventually had to give up our friendship.
The Reality of a Non-Profit Corporation
The reality is African Americans are rarely the group that receives grant money for their Non-profit Corporations -- I don't care how much good you want to do. You would not know it, however, by all the "false advertising" on black radio stations and on black websites on the internet discussing ways to obtain FREE grant money.
You have to dig for this grant money and many people are not willing to do that. They are also not willing to pay others to do it either. Others will tell you they will dig for it for a fee, only to get your money and your hopes up and leave you at the end with nothing.
A lot of grant money today goes to schools and is used for scientific purposes. Even after filling out stacks of paperwork about your potential goals for your Non-profit, it's like winning the lottery. And if you are one of the lottery winners, there's no guarantee that you will ever win it again.
There are lots of steps involved in opening your own Non-profit such as clarifying roles, drafting by-laws, creating job descriptions, and providing proper orientation for new members as they come onto the board.
Some of the other obstacles that you will face with a Non-Profit Corporation are finding organizations willing to offer valuable services like accounting and payroll assistance; hiring additional staff; or where to purchase office equipment.
A Non-profit can raise much needed funds by receiving public and private grant money and donations from individuals and companies. Many Non-profit organizations apply for grants after filing their 501c3.
A 501c3 will exempt any organization or group who donate money to Non-profits from paying taxes on any donations. But this money is monitored closely by the IRS, which makes your Non-profit subject to more scrutiny.
The federal and state government do not generally tax Non-profit Corporations on money they make that is related to their Non-profit purpose, because of the benefits they contribute to society.
People with Non- profits think that if they can get in front of the right groups of individuals, the money will just start pouring in but that is usually never the case. They think because they have a good cause, black entertainers, sports figures, the public and the government will just "come out of the woodwork" to give them money. It doesn't happen with African Americans.
When you set up this type of business structure, most of the people around you, especially business owners, will know upfront that you have done nothing but set yourself up for failure by putting yourself in a "waiting mode" instead of an "action mode."
Choose Other Business Structures
What you need to understand is that whatever you are doing with a Non-profit, you can also do it with another business structure, and become successful. The bottomline is -- people set up Sole Proprietorships just to get started in business, a LLC or they get incorporated for more protection for their business and a Non-Profit, to beg to money so which business structure makes more sense to you?
What you need to remember is that Non-profits are just that "Not-for-Profit," which means chances are you are going to end up spending your own money to make your Non-profit work. The options should not be to open a "Not-for-Profit" business or corporation, but it should be to open a "For-Profit" business, by starting your own LLC or get incorporated.
For more info on how to start a business and set up your business structure read "How To Take Control of Your Own Life: A Self-Help Guide to Starting Your Own Business" (Series 2) -- available as an e-book and paperback at http://www.AngelsPress.com.
Cathy Harris is an Empowerment and Motivational Speaker, Non-GMO Health and Wellness Expert, Advice Columnist at DearCathy.com, Self-Publishing and Business Coach. She is also the author of 23 non-fiction books and provides seminars, workshops, webinars and consultations through her speaking and training platforms at http://www.cathyharrisinternational.com and can be reach through her empowerment company, Angels Press, CEO, President, Publisher, P.O. Box 19282, Austin, TX 78760, Phone: (512) 909-7365, Website: http://www.AngelsPress.com , Email: email@example.com.
Copyright 2017 Cathy Harris. All Rights Reserved
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