Q&A for How to Start a Community Center

Nonprofits are very complicated organizations. Some people think that they can run a nonprofit in the same way they'd run a business, but this isn't a good idea—you shouldn't try to make profits out a nonprofit organization.

For-profit models tend not to work for community centers, if they're even legal, as there is no real source of profit that would not involve ethically questionable practices. Community centers tend to offer services either for free or at a cost below market rate for those who can't afford to pay for those services. To make a profit, you would have to charge market rate for services and programs which contradicts the mission of helping marginalized communities. It also would violate social work ethics. Nonprofit status allows you to compete for government contracts, achieve tax exempt status, and solicit donations for funding. You should not be trying to profit off a community center.

Whether you are eligible depends on state and federal laws and whether it is a grant from a private grantmaking organization or the government. Both types will give preference to organizations that have non-profit status even if they don't require it because those organizations are subject to federal and state laws about how to use the money donated to them and must use that money for their mission or other related expenses. If you are not recognized as a tax-exempt organization, you will also have to pay taxes on any grants you do get and cannot make tax-exempt purchases.

Yes. This is often referred to as a social enterprise or hybrid model, where the two entities share resources and goals. The for-profit business may donate to the non-profit, operate with a social mission, or be structured as a Benefit Corporation. Careful planning and professional advice are recommended for legal compliance.