Decide on a path: Options for the organizational structure
You have options in how you transition to a nonprofit. Whether to close an existing business and start a new nonprofit, or to sell or transfer an LLC or other commercial corporation to a nonprofit should be an early consideration and informed by legal advice in the state where you are incorporated.
You could choose to sell your newspaper. In some places, community groups are setting up nonprofits that then buy a for-profit paper and manage it to serve the nonprofit’s mission and community good. This process can work to compensate owners for the assets they have built up, provide an exit strategy and in some cases, relieve commercial pressure to show a profit. To avoid conflict of interest if the owners of the newspaper are also involved in the board of the new nonprofit, it may require an external valuation of the paper to make sure the purchase price is fair.
Be aware that some of your activities as a commercial enterprise, if you choose to continue them as a nonprofit, may be subject to the IRS’ Unrelated Business Income Tax, commonly referred to as UBIT. Nonprofits sometimes are skittish about UBIT, in part because what is and what isn’t subject to it in the news world isn’t yet clearly defined, but you shouldn’t be. At worst you pay tax on that part of your business just as you did as a for-profit. A qualified tax professional should advise on the specifics.
If profitable business is still a substantial part of your work, you may want to consider creating hybrid structures, such as separate for- and nonprofit businesses or becoming a Public Benefit Corporation. San Francisco’s Bay City News did just that, continuing its for-profit local wire service and creating the nonprofit BayCityNews.org to support local newsgathering, news training and other public service aspects of local journalism. Keep in mind that running two business models more or less doubles your work, so hybrids are unusual and most businesses opt for one or the other. Another option is for an existing for-profit newspaper to establish a fiscal sponsorship relationship with an established nonprofit and channel grant money for specific investigative or educational journalism projects run by the for-profit. Additional reporting and due diligence is required here, but it is beneficial for a short-term journalism project. As mentioned previously, you can also ask your local community foundation to establish a fund for local journalism for this purpose.
Whatever path you choose, you’ll need to develop a nonprofit business plan. INN recommends the lean business canvas (there are many forms available online) paired with a three-year revenue and expense projection. The canvas also can help you define target audiences and articulate your nonprofit mission.
Know what’s new in nonprofit news.
Receive our weekly INNovation newsletter with top stories from newsrooms across North America, resources from media innovators and timely job opportunities, plus invitations to events.
"*" indicates required fields