4 nonprofit myths artists should abandon, pronto

It’s safe to say that Lauri’s List is a fairly unique endeavor, and it leads to some interesting conversations as the Team and I traverse the wilds of SoCal.  One of the topics that comes up quite regularly is that of nonprofit (tax-exempt) status, and I’ve been fascinated by the opportunity to observe current attitudes about how the arts are supposed to work.  What we see happening with small orgs and individual artists, over and over, is a pattern of nonprofits established because the decision-makers think it’s the thing to do, rather than because that structure is a good fit for their circumstances.  These conversations have revealed quite a few myths about 501(c)3s, and here are four of my “favorites”:

MYTH #1
“Going nonprofit is the only way people and granting organizations can donate to your cause and get a tax deduction.”
  • FALSE:  As outlined nicely in this article from HowlRound (one of our favorite arts blogs), fiscal sponsorship can offer individuals and small orgs a great deal of fundraising options.
  • Check out Fractured Atlas for some excellent guidelines on how this sort of arrangement works.
MYTH #2
“If you set up nonprofit status, then you don’t have to worry about taxes anymore.”
  • REALLY FALSE:  It’s tax-exempt, not tax-free.  You still have to keep good records, file an annual return for the org (in California, with up to four different agencies), and track your own personal finances.  You’re still responsible for your personal income taxes.  This is no way to avoid Uncle Sam, and if this is your reasoning, you might want to get checked out for possible delusional maladies.
MYTH #3
“You can assign yourself whatever salary you want.”
  • NOPE.  This myth is pervasive and quite puzzling, because it sidesteps the most basic realities of revenue and oversight.  You can only pay yourself within the nonprofit’s means, and that with the approval of the board.  Speaking of which…
MYTH #4:
“Sure, you need to set up a board, but it’ll just be all of your friends, anyway.”
  • In order for a nonprofit to remain viable and tax-exempt, your board needs to be sound. You need people who know what they’re doing, share your vision and who can genuinely help.  They’re traditionally expected to contribute significantly to the mission, as well, which means they’ll be paying part of your salary, and will expect to have an equally significant say in how things are run.
  • Another fun fact:  Once you’ve formed a board, you work for them, and yes, they can toss you out.  It’s more common than you think, so planning carefully and gathering “your” crew with loads of careful consideration and mutual respect is absolutely essential.
TRUTH
You don’t have to go nonprofit to thrive in the arts.

It’s even OK to be for-profit (as long as you’re not blatantly taking advantage of your fellow artists).  The responsibility lies in making a sound, conscious decision based on your individual situation.  Figure it out for your circumstances, and go get ’em.


Learn more

This post is intended to get you thinking (or at least away from wrong thinking), and there are many resources available to cover the details of what it takes to create and maintain a nonprofit organization.  Try some of these as you make your decisions and plan for your vibrant future:

Thinking of Starting a Nonprofit? Here’s What You Need to Know! — article from the Foundation Center in NY

“Don’t Start Your Nonprofit Grant Writing Until You Read This” — this article from Nonprofit Hub addresses the pitfalls of haphazard grant-writing, even after your nonprofit is formed.  Doing your homework can make or break the project, so planning ahead and knowing the landscape are crucial.

Fractured Atlas —  This organization sets the standard for innovative ways to help independent artists as well as small organizations.  Based in New York, they provide more fiscal sponsorship to artists than anyone else in the US, and can also help with insurance, training, venues, selling tickets, and much more.  Get to know them, and visit the site often — they always have something new going on.

Arts & Numbers: A Financial Guide for Artists, Writers, Performers, and Other Members of the Creative Class

Author, artist, and CPA Elaine Grogan Luttrull has written Arts & Numbers to help creative professionals find the same confidence in their financial dealings as in their chosen mode of expression. It is an engaging, accessible guide that covers a variety of must-know topics, such as budgeting, cash management, visual charting, taxes, employment, and business etiquette. In a simple, straightforward style, Luttrull draws examples from smooth-flowing narratives depicting common issues within the arts worlds, as well as from her own personal anecdotes. Unlike stuffy textbooks and patronizing business books, Arts & Numbers is a lively and artfully done ally in helping creative professionals plan their present financial situations and secure their futures.

NonprofitExpert.com — general knowledge with numerous, free resources available for all types of orgs.  A good starting point.

Here’s an article from NonprofitExpert.com that is specific to this discussion:  “Fiscal Sponsorship — An Alternative To Creating A Nonprofit”

Going ahead with your nonprofit, or already have one?  These books may help:
Creativity to Community: Arts Nonprofit Success One Coffee at a Time

Creativity to Community: Arts Nonprofit Success One Coffee at a Time is both an inspiring and practical guide for anyone who values the role of art in their community. Written by Dr. Matthew Hinsley, a successful arts administrator who managed the growth of an arts nonprofit from its infancy to become the largest of its kind in America, Creativity to Community is an approachable yet detailed guide that addresses the most important issues facing community arts organization leaders.

The Art of the Turnaround: Creating and Maintaining Healthy Arts Organizations

In The Art of the Turnaround, Michael M. Kaiser shares with readers his ten basic rules for bringing financially distressed arts organizations back to life and keeping them strong. These rules cover the requirements for successful leadership, the pitfalls of cost cutting, the necessity of extending the programming calendar, the centrality of effective marketing and fund raising, and the importance of focusing on the present with a positive public message. In chapters organized chronologically, Kaiser brings his ten rules vividly to life in discussions of the four arts organizations he is credited with saving. The book concludes with a chapter on his experiences at the John F. Kennedy Center for the Performing Arts, an arts organization that needed an artistic turnaround when he became the president in 2001 and that today exemplifies in practice many of the ten rules he discusses throughout his book.

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