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#BusinessofPreservation: Nonprofit vs. For-profit?

  • 1.  #BusinessofPreservation: Nonprofit vs. For-profit?

    Ambassador
    Posted 03-06-2019 10:11
    Hello all,
    Lately, I've had a growing curiosity (and/or fascination, if you'd like to call it that) about a topic that isn't often discussed/written about in historic preservation: the nuts and bolts that go into running a preservation business (preservation entrepreneurship for short). Particularly, I've been researching the types of business structures used in preservation businesses. I am familiar with a few nonprofit examples in the advocacy sector of historic preservation. But, I'm wordering if there are any examples of for-profit businesses in preservation? I'm also interested in learning which business structure (nonprofit or for-profit) is best used to address the different demands/needs/purposes in preservation (i.e. consultation, education, restoration/construction,etc. ) Additionally, with the rise of social entrepreneurship, is there room for new business structures (such as benefit corporations, hybrid organizations, etc.) to address the new and growing needs/demands/purposes in historic preservation?

    Looking forward to the discussion,

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    Jamesha Gibson
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  • 2.  RE: #BusinessofPreservation: Nonprofit vs. For-profit?

    Posted 03-06-2019 14:48
    I would be anxious to hear what people have to say about this as well. We are involved in a non-profit restoration project of an African American historic site. This works in New York State because of the availability of the state's Environmental protection Fund - a state fund to provide money to historic preservation projects. I don't believe this fund is available to for profit projects. I am sure there are not sources like this in other states. There are other things available to for profit projects which are not available to a non-profit. For instance tax credits are only useful to a non-profit (no profit to tax) if they can sell them to someone else. For for profit projects they can get tax credits which can be the difference between a profitable project and one that is marginal (or a loss).

    Like wise the choice of a business type (LLC, S Corp, C Corp, DBA or B Corp) is a strategic decision. If you have the blessing of thinking about a project before one forms a business, the decision to be one of those forms will be a combination of speed, costs, benefits, tax considerations and resources. In other words - what business form will get you where you want to go. They are all options. If you already have made a choice of form it seems there are still "40 ways of getting across" - there are lots of choices.

    In our community we are watching one developer who is doing creative projects for profit that are tied to housing development. It seems that there is a great deal of "public help" available for the creation of housing combined with private investment. We are watching him do housing in a restored church and restoring multi-unit apartment buildings.

    I do wonder now and then how one could jump in and be a part of this wonderful process when you have little money to invest. Where do I find investors who will back a project to reciprocal benefit?

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    Paul Stewart
    Co-Founder
    Underground Railroad History Project
    Albany NY
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  • 3.  RE: #BusinessofPreservation: Nonprofit vs. For-profit?

    Posted 03-06-2019 15:12
    The project I am working on is a non-profit project. [Restoring an Underground Railroad Site as a historic site.] This was good for us because we believed we had what was a project that had benefit to the broader community and believed what we had was a community historic site. In addition to that we understood there were sources of help that were only available to non-profits. We also understood non-profit work and felt it was a good tool to bring people together and focus volunteer energy to help bring the project to fruition. I do not have experience in doing a project in a for-profit context but I am familiar with the forms of organization for businesses. The work I do exposes me to the forms of organization and I work with many affordable housing organizations. So I have a good idea as to how a rehab can be done from the stand point of a non-profit seeking to create affordable housing. What I would love to hear more about is what are the steps involved in developing a for-profit project. I suspect the goals is to turn a building around and make it livable and be able to sell it for a profit or hold it long term with rentals toward the goal of recovering your investment and generating a profit.

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    Paul Stewart
    Co-Founder
    Underground Railroad History Project
    Albany NY
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  • 4.  RE: #BusinessofPreservation: Nonprofit vs. For-profit?

    Ambassador
    Posted 03-06-2019 16:39
    Hi Jamesha. I'm not an expert on incorporation by any means, but during my long career I have worked for public agencies, private companies, private nonprofits, and now have formed my own LLC to conduct my consulting business. In very general terms when comparing for-profit companies to nonprofit organizations, there are pros and cons to each. Regarding nonprofits, the big pro is that many public agencies actively reach out to partner with qualified nonprofits and often have nonprofit set-asides in their funding programs. Private for profits will also often reach out to partner with nonprofits in order to score higher on funding program applications. Cons of being a nonprofit is that you must adhere to both state and IRS oversight, including the requirement for having an active and involved board of directors. Having a board of directors, though, is not all bad, because it allows you to bring aboard expertise that makes your nonprofit qualified to compete for project funding.  For an individual to create a new nonprofit for a specific purpose like preserving a structure or a neighborhood, would be difficult enough, but forming one for a general purpose like preservation on a state-wide, or even city-wide basis would be very difficult, not to mention expensive.

    On the other hand you can't beat an LLC for flexibility and independence. As sole proprietor of my LLC, I work alone, and I'm solely responsible for all decisions abut everything, while my private assets are mostly protected from any bad business decisions I might make.  The cons are  I work alone and I'm solely responsible for every decision I make. I'm not a lawyer, nor do I play one on television, but i was lucky to find one who knew a lot about forms of incorporation and charged a reasonable fee. I wish the same for you.

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    Jim Sparks
    Glasgow KY
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