By Juliette Enfield,
Penn State Extension Educator, Warren Co
A farm can provide benefits to a community that are not
always easy to measure in economic terms. A farm can keep land in agricultural production,
be used as a teaching tool or be used to grow food for charity. A for-profit
farm may not have the capacity or time to focus on these types of educational
or charitable activities. Quiet Creek Herb Farm and School for Country Living
in Brookville, PA, Lundale Farm in Kimberton, PA, and The Rodale Institute in
Kutztown, PA are a few examples of nonprofit agricultural organizations in
Pennsylvania. Quiet Creek Herb Farm and
The Rodale Institute focus on agricultural and homesteading education through
classes, publications, and research. Lundale Farm preserves farmland by leasing
land to farmers.
What is a Nonprofit?
Churches, public schools, public clinics and hospitals, political organizations, research institutes, chambers of commerce, fraternal organizations, private foundations, museums, and public charities are all nonprofits. Nonprofits contribute to society by providing social and educational opportunities that we all enjoy. The most significant differences between a nonprofit organization and a for-profit business is that the nonprofit organization does not have to pay property tax, sales tax, or corporate income tax, and they have a charitable mission that drives the organization. The tax code used by nonprofit corporations is 501c3, which you may have heard of already. A typical for-profit business will pay the IRS taxes that amount to between 15-35% of their annual revenue. However, both nonprofits and for-profits have to earn enough revenue to cover their costs in order to function. Just like with any business, the nonprofit must fill a unique niche in order to earn its revenues, and should have a business plan. To determine whether or not your organization would fill a unique niche, research what other nonprofits in Pennsylvania are doing at www.guidestar.org .
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| A farm can be a valuable teaching tool. |
Churches, public schools, public clinics and hospitals, political organizations, research institutes, chambers of commerce, fraternal organizations, private foundations, museums, and public charities are all nonprofits. Nonprofits contribute to society by providing social and educational opportunities that we all enjoy. The most significant differences between a nonprofit organization and a for-profit business is that the nonprofit organization does not have to pay property tax, sales tax, or corporate income tax, and they have a charitable mission that drives the organization. The tax code used by nonprofit corporations is 501c3, which you may have heard of already. A typical for-profit business will pay the IRS taxes that amount to between 15-35% of their annual revenue. However, both nonprofits and for-profits have to earn enough revenue to cover their costs in order to function. Just like with any business, the nonprofit must fill a unique niche in order to earn its revenues, and should have a business plan. To determine whether or not your organization would fill a unique niche, research what other nonprofits in Pennsylvania are doing at www.guidestar.org .
The revenue made by a nonprofit organization is used for
sustaining the organization and accomplishing its charitable mission, not for
distribution to employees or shareholders. The only type of nonprofit
organization structure that exists in Pennsylvania is a nonprofit corporation. Corporations have a unique
structure that is very different from a sole proprietorship or a partnership. In
contrast to sole proprietorships and partnerships, corporations allow business
owners to claim the business’s assets instead of the owners’ personal assets if
debt or legal issues arise. The state in which the corporation is created
assumes some liability for the business and therefore, all finances of the
corporation, including salaries, expenditures and revenues must be made publicly
accessible. The nonprofit corporation can work with an accountant to keep
detailed financial records which they must submit to the IRS and the Department
of State every year. These agencies could take away tax exempt status if the
nonprofit fails to file these records or if they are generating income that
does not relate to their stated mission. In addition to having a sustainable
business plan, nonprofit corporations are required to have a board of directors
and a fundraising plan.
The Board of
Directors
The board of directors must have a protocol for voting on operating procedures for the organization as well as a president, a treasurer, and a secretary. The operating procedures, or bylaws, are voted in and agreed upon by the board. A business attorney can help with the creation of the bylaws. The complexity of the bylaws is up to the organization but they can include rules such as board meeting procedures and roles of employees. Board directors are either employees of the nonprofit or volunteers who share a passion for the organizations’ mission. The board is responsible for keeping the organization true to its mission, and it ensures that programs and plans are implemented. Although the board of directors is a mandatory part of a nonprofit, offering additional board memberships is optional. Additional members can help to steer the organization, offer diverse skill sets, and help with fundraising by paying membership dues. Board members have to be at least 18 years old and do not have to be residents of Pennsylvania. NOLO gives some great considerations for forming a board.
Fundraising
Fundraising is an essential activity for nonprofits to engage in since revenues are low and accomplishing any mission costs money. Fundraising includes soliciting donations and applying for grants. Nonprofit organizations accept donations from businesses and individuals. These donations are tax-deductible for the donor, which is an incentive to donate. Many public and private grants are available for nonprofit organizations. Since fundraising is an important part of a nonprofit organization, there should be a fundraising coordinator or grant writer on staff or on the board. For example, if the goal of your agricultural organization is education, you may need to seek grants that will cover the costs for school children to come to your farm. Penn State Extension offers grant writing workshops. Look online for dates and locations.
The board of directors must have a protocol for voting on operating procedures for the organization as well as a president, a treasurer, and a secretary. The operating procedures, or bylaws, are voted in and agreed upon by the board. A business attorney can help with the creation of the bylaws. The complexity of the bylaws is up to the organization but they can include rules such as board meeting procedures and roles of employees. Board directors are either employees of the nonprofit or volunteers who share a passion for the organizations’ mission. The board is responsible for keeping the organization true to its mission, and it ensures that programs and plans are implemented. Although the board of directors is a mandatory part of a nonprofit, offering additional board memberships is optional. Additional members can help to steer the organization, offer diverse skill sets, and help with fundraising by paying membership dues. Board members have to be at least 18 years old and do not have to be residents of Pennsylvania. NOLO gives some great considerations for forming a board.
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| The board is responsible for keeping the organization true to its mission and it ensures that programs and plans are implemented. |
Fundraising is an essential activity for nonprofits to engage in since revenues are low and accomplishing any mission costs money. Fundraising includes soliciting donations and applying for grants. Nonprofit organizations accept donations from businesses and individuals. These donations are tax-deductible for the donor, which is an incentive to donate. Many public and private grants are available for nonprofit organizations. Since fundraising is an important part of a nonprofit organization, there should be a fundraising coordinator or grant writer on staff or on the board. For example, if the goal of your agricultural organization is education, you may need to seek grants that will cover the costs for school children to come to your farm. Penn State Extension offers grant writing workshops. Look online for dates and locations.
Although a nonprofit organization is mission driven and tax
exempt, it has to be just as competitive as a for-profit business in order to
succeed. Critical components of a nonprofit include a well thought out mission
and business plan, a committed board of directors, a fundraising plan, an
attorney and an accountant.
For more information on nonprofit management, The
Pennsylvania Association of Nonprofit Organizations offers workshops, publications,
and conferences. Additional questions about forming an agricultural nonprofit in
Pennsylvania can be directed to the Penn State Agricultural Law Resource and Reference Center.
