There are plenty of reasons why you might not want to start a nonprofit. For example, you might not trust your instincts when it comes to spotting worthy causes; you may be risk-averse, or you might simply have no burning passion for serving the public good. If that’s the case, you may think setting up a nonprofit as a way of investing in a good cause and drawing a tax deduction at the same time is out of the question.
But that’s not necessarily so. You just need to look beyond nonprofit status as your only option. There are several other options available if you want to invest in something that gives back but don’t feel ready to start a non-profit organization yourself.
Here are 13 alternatives to starting a nonprofit and still contributing to the cause:
- Trust Fund
- Grantmaking Discretionary Trust
- Limited-Purpose Company
- Charitable Endowment
- Incubator or Social Enterprise Startup
- A For-Profit Might Be a Better Fit
- A Corporate Foundation
- Start a Blog or Newsletter About the Cause You Care About
- Join an Existing Nonprofit
- Become a Professional Volunteer
- Become a Mentor
- Start a Group or Club at Your School or in Your Community
- Start a Fundraiser or Event-Driven Organization
- Join an Organization That Supports the Cause You Care About
You might be able to transfer assets to a trust and dedicate the trust to charitable causes. You may choose to do so as a gift to your heirs. But there are two advantages of this strategy:
First, you can set the terms of the trust so that the money is distributed over time, rather than all at once. That way, you can make sure the money is invested in impact investments, helping to maximize your impact.
Second, if you use an “accelerated gift” trust, you’ll also get a tax deduction. The important thing to remember with a trust is that the money must be directed toward charitable causes.
So if you want to invest in start-ups, incubators, or any other form of commercial enterprise, trust is probably not the best option.
Grantmaking Discretionary Trust
A grantmaking discretionary trust allows you to make a gift to a particular person or organization now and then, in the future, direct the trustee to apply some or all of the remaining assets for whatever charitable causes you choose.
This strategy is especially useful if you’d like to make a significant gift now without tying up all your assets. In other words, you can gift now and give later on.
An advantage of a grantmaking trust is that you can direct the trustee to hold your assets (investment capital) in a way that maximizes impact in the social sector.
Another advantage is that you can also bind future grantors of the trust so that they’re also donating to socially impactful causes.
For entrepreneurs looking to start a for-profit company, one option is to set up a limited-purpose Company (LPC) and donate a percentage of the profits from the LPC to the causes you care about.
You can choose LPCs that produce products or services that are relevant to your social sector and that generate cash flow. For example, perhaps you identify a market opportunity in the field of green or sustainable building design or construction. You could then set up an LPC that specializes in that market.
You could then donate a percentage of the profits generated by that LPC to the causes you care about. A possible disadvantage of this strategy is that because an LPC is a for-profit company, it’s subject to corporate tax rates. Another disadvantage is that, unlike a nonprofit, an LPC won’t offer you the same kind of flexibility in terms of social sector impact investing.
Another option is to gift funds to a university or other nonprofit institution that has an established program in place for managing a charitable endowment.
For example, some schools have program funds that accept gifts from donors like you who want to make a large gift with a clear intent to fund future social sector projects. An advantage of this strategy is that you’re giving the gift to the institution itself, so the money can be used for any purpose the institution deems important. Another advantage is that you may be able to claim a larger deduction than you would with a grantmaking trust.
A disadvantage is that you can’t really control how the institution uses the funds, beyond the broad parameters of the program in which you are participating.
Incubator or Social Enterprise Startup
Another option is to incubate or seed fund one or more social enterprises or social ventures that you think might do good in the world. These could be anything from a nonprofit organization to a for-profit company that generates profit and is used to reinvest in itself and the social sector.
An advantage of this strategy is that you’ll have a high degree of control over the investment and the social sector impact it generates. You can also claim a tax deduction for the investment right away. One major disadvantage is that you have to have deep pockets.
A For-Profit Might Be a Better Fit
You could start a for-profit enterprise that generates profit and is used to reinvest in itself and the social sector. This might seem to be at odds with the idea of providing charitable support, but it’s not.
After all, the for-profit company itself might donate a portion of its earnings to worthy causes you care about. You could also donate a portion of your own earnings from the company to the causes you care about.
A for-profit company would allow you to diversify your investment across a portfolio of projects that you believe in. That way, you’re less likely to be impacted by any single risk associated with any single investment.
An advantage of this strategy is that you might be able to claim a larger deduction than you would with a charitable endowment. A disadvantage is that you have to have a certain amount of capital to invest in starting a company.
A Corporate Foundation
Another option is to invest in a corporate foundation. That is, you could give funds to a corporation you believe in and ask that the corporation use some or all of those funds to make grants to causes you care about. In this process, you could name your own causes and have a lot of control over the investment. You can also take a bigger deduction than you would with a charitable endowment.
An important thing to remember about this strategy is that you have to give to a corporation that already has a foundation. If you work for such a corporation, you could propose starting a foundation.
Start a Blog or Newsletter About the Cause You Care About
Blogs and newsletters are a great way to both promote the causes you care about and make an impact. You can use them to share your passion and make a difference in the lives of others. Thanks to the internet, it’s easier than ever to create a blog or newsletter.
You can start one for free on WordPress or Medium, for example. This can be a great way to promote the causes you care about and build a following, which can make it easier to connect with funders and other people who can help you turn your passions into real change.
And, once you have followers, you can also use your blog or newsletter to collect email addresses so you can stay in touch with your readers and keep them updated on your latest activities.
Join an Existing Nonprofit
Joining an existing nonprofit can be a great way to get involved, support a cause you care about, and make an impact. You can do so as a staff member, volunteer, or donor.
As a staff member, you can help lead the organization, manage projects, or work in marketing or another role. This is often a long-term commitment, and you may need to get trained or even earn certification in order to do the job.
If you’re passionate about a cause but don’t have the skills to lead an organization yourself, you can also consider volunteering for an existing nonprofit. Depending on the organization, you can do anything from mentoring youth to staffing an office.
Become a Professional Volunteer
If you have skills that an organization needs, but you don’t want to commit to a full-time job, you can consider becoming a professional volunteer. In this model, you provide your services to an organization (such as mentoring youth or providing free consulting services) and they pay you.
Depending on the organization and your skills, you may be able to volunteer for nonprofits either online or remotely. For example, if you’re a designer, you may be able to volunteer to design graphics for nonprofits that can’t afford to hire designers.
Become a Mentor
If you have a skill or experience to share, you can become a mentor for people who are just starting out with that skill or have similar goals to yours. Mentoring others can help you build your own skills, keep you engaged with a cause you care about, and support the next generation of leaders, artists, and more.
Depending on the organization that you join, you may be able to mentor online or remotely. You may also be able to choose the topics you want to mentor in, such as leadership skills or public speaking.
Start a Group or Club at Your School or in Your Community
Whether at the high school or university level or in your neighborhood, if there isn’t a club or organization that meets the current needs of your community, you can start one.
You can focus on any topic you’re passionate about, including sexual assault prevention, gardening, or science. Depending on the type of club you start, you may be able to get funding for it.
For example, if you start a club that is focused on mentoring youth, you may be able to get grants from foundations that support youth mentorship initiatives.
Start a Fundraiser or Event-Driven Organization
If you don’t have time to start a club or other organization, another way to support the causes you care about is to start a fundraiser or event-driven organization.
You can start a GoFundMe or Donorbox campaign, for example, to support a cause you care about. You can also create an event-driven organization.
For example, you can start a charity paintball tournament to collect donations for a cause you care about. You can also create an event-driven nonprofit.
Join an Organization That Supports the Cause You Care About
Finally, you can consider joining an organization that supports the cause you care about. You can join the board of directors for an organization, for example, and help guide it in the right direction.
You can also consider getting involved with an advocacy organization that supports the cause you care about. Advocacy organizations help you get involved in local and federal government, providing you with ways to make your voice heard and help steer policy in the direction you want to see it go.
If you’re not sure which advocacy organization to join, you can also use tools like Find Your Congress to find organizations that support the causes you care about.
There are plenty of reasons why you might not want to start a nonprofit. There are also plenty of alternatives if you want to invest in a good cause and draw a tax deduction at the same time. If you decide against starting a nonprofit, you can still invest in social enterprises or social ventures by incubating or seeding funds from one or more social enterprises, or by investing in a corporate foundation.