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Why We Chose to be “Nonprofit” vs. For-Profit

Given the emphasis on social enterprise and for-profit social good models, we are often asked why Creating the Future’s leadership chose to be tax exempt.

The following analysis uses one of Catalytic Thinking’s decision tools to compare apples to apples – pros and pros – because comparing pro to cons compares apples to oranges. (Note, we could have also compared cons to cons, asking “What’s the worst that could happen?” in each case).

What does forming Creating the Future as a NONPROFIT make possible?

For the organization

  • Flexibility of funding. A broader variety of ways to generate revenues, including donations of all kinds.
  • Ability to accept tax-exempt donations, providing immediate return to social investors
  • Discounts on products and services. No sales tax, corporate income tax.
  • Like a for-profit, able to generate revenues via earned income.
  • Like a for-profit, ability to participate in innovative social investment models that further the R&D part of our mission.
  • Potential always exists to create a for-profit arm to generate additional revenue
  • Community members are more likely to engage in helping to further our mission - sharing wisdom, volunteering, contributing dollars and in-kind donations. Before forming as a nonprofit, the founders often heard, “Why would people volunteer their time to help you make money?”
  • Social change credibility is pre-established when connecting with individuals and organizations motivated by social change (social businesses often must prove they are sincere in their motivations)

For the nonprofit sector

  • Demonstrate new ways of operating, designed by a nonprofit for other nonprofits to accomplish their own missions.
  • Inspire other nonprofits to experiment, to break with tradition.
  • Instead of being told by outsiders what “YOU nonprofits SHOULD do,” we are instead demonstrating what WE nonprofits CAN do.

For the business sector

  • Broaden the perception of the nonprofit sector as creators of significant social change
  • Provide a non-profit partner for their own efforts to create social good

For the world

  • 100% emphasis on creating benefit in the world, with no contradictory profit mandate.
  • The community / world will own the work the organization produces, not an individual or group of individuals. The work will be open source, shared vs. owned. Openly sharing our intellectual property is our mission!

What does forming Creating the Future as a FOR profit social business make possible?

For the organization

  • Speed and clarity of decision-making: At the start-up and scale-up phases, the founders could have made all the decisions without worrying about a board or other decision-making layers. This is not necessarily good for the organization, but many founders feel it is good for them (our founders disagree – they like a lot of input). Beyond start-up size, decision-making in a for-profit would have the same layers as a nonprofit, and growth often includes incorporation, which means having a board of directors as a for-profit as well).
  • Risk: For profit entities tend to be less risk-averse than traditional nonprofits. Because Creating the Future is an experiment, which is 100% about taking risks, this did not apply to us.
  • Greater market of angel investors for start-ups than start-up funding in the nonprofit world (still very difficult and highly competitive – just easier than nonprofit). This did not apply to Creating the Future, as an angel funded the first two years of our operation. Further, our board and community have emphasized that competitive funding contradicts our values and vision, rooted in Collective Enoughness.
  • Net profits could be provided to the founders. This, too, was not important to the founders of Creating the Future.

For the nonprofit sector

  • Demonstrates an alternate mode of incorporating for social good.

For the business sector

  • Demonstrate to other businesses a way of operating that adds “social benefit” as an important success factor.

For the world

  • Evidence that businesses can operate for the social good.