Anyone run their dojo as a non-profit?

EastsideKyokushin · 03-30-2008, 06:56 AM

Just curious if anyone else is running their dojo as a non-profit (ie: 501c3 organization in the US). If not, did you even consider it? I know many dojo operators do karate as their full-time job, but for those who don't its an interesting option.

vapor · 03-30-2008, 07:08 AM

So you are running yours as such?

vapor

EastsideKyokushin · 03-30-2008, 07:10 AM

Quote:

Originally Posted by vapor

So you are running yours as such?

vapor

yup...we are currently a non-profit in the state of washington with our federal non-profit status pending. just curious if anyone else went that route

vapor · 03-30-2008, 07:13 AM

Was it difficult to get the status? I know that there have been some changes in the non profit laws....

vapor

Aunty Ichigeki · 03-30-2008, 07:15 AM

Our dojo is a registered non profit org and we also run a company that holds the lease on the building. The company charges the karate dojo rent as well as our BJJ & Judo club tenants. This way the club can enjoy the benefits of being non-profit (tax & community funding) but we can still run a profitable business.

EastsideKyokushin · 03-30-2008, 07:24 AM

Quote:

Originally Posted by vapor

Was it difficult to get the status? I know that there have been some changes in the non profit laws....

vapor

We are still waiting for the response. I don't know a lot about the changes in laws, but the application was certainly quite lengthy. Our scenario is probably a bit simpler than many, at least to start - instructors are volunteers, students are charged less than what it would take to run the dojo, donations cover the rest.

Bloke · 03-30-2008, 12:07 PM

I run my dojo in a local GAA hall - strictly part time - I doubt I coukld ever make money on it and certainly not enough to keep me in the manner to which I have become accustomed

Actually last year we were completely non profit - myself and the other instructor ended up funding it to the tune of about €1500.00.

Nix · 03-31-2008, 02:54 PM

Please define non-profit.

In our dojo for example, everything is run by voulenteers, but students still need to pay a small fee every quarter of a year, in order to pay the rent. Here in lovely Denmark, the government is quite generous compared to the rest of the world.

vapor · 03-31-2008, 03:07 PM

There is a difference between NON PROFIT and NOT MAKING A PROFIT...

A NON PROFIT according to investorwords.com is:

An incorporated organization which exists for educational or charitable reasons, and from which its shareholders or trustees do not benefit financially.

A NON PROFIT often has tax advantages (i.e. not having to pay them...) for itself, and in terms of supporters may offer them a tax advantage (donations given to a NP charity in some countries can be documented and presented to reduce your personal tax liability)

NOT MAKING A PROFIT, is a different situation....though not always a negative thing...some companies dilute their profit in order to receive tax considerations, or other reasons...or there is just not enough "sales" to cover the "expenses"

vapor

Bloke · 03-31-2008, 04:20 PM

You say Potato....

vapor · 03-31-2008, 04:23 PM

There is a distinction in the USA...that is for sure.

Like the OP stated, it is called a 501c3 organization, after the qualifications have been met....

vapor

Bloke · 03-31-2008, 04:29 PM

I know but it is interesting to see those differences - very few clubs in Ireland are run in permanent locations with a view to making any money.

Other than possible tax relief what are the benefits of being an NPO?

vapor · 03-31-2008, 04:30 PM

You qualify for discounts at the post office!

Oh, and limited liabilty...(from the foundation center website)

Under the law, creditors and courts are limited to the assets of the nonprofit organization. The founders, directors, members, and employees are not personally liable for the nonprofit's debts.

vapor

Kurisu · 03-31-2008, 06:07 PM

I think under a non-profit entity you can pay employees a salary. I've been wondering how many dojos in the US are non-profit versus sole proprietor, corportation, llc/llp, etc.

EastsideKyokushin · 04-10-2008, 01:22 AM

Kurisu is correct - a non-profit can pay people a salary, so long as its not considered to be unethical. Basically, if you aren't pulling in >$50k per year from the non-profit then you are generally ok, but you are also obligated to check the compensation of people in similar positions.

The big benefit for a non-profit is that they are generally excempt from taxes, plus many corporations have special programs for matching donations to non-profits when their employees donate.

akachef · 08-16-2008, 05:44 PM

I am new to the forum, as a matter fact, this is my first post. Looking forward to sharing and learning here.

I am interested in starting a dojo for the first time. I am not interested in necessarily being commercial. I want to teach in order to share karate style with others and to keep me on my toes. Best way to really learn something is to teach it to others. I taught high school years ago and, hopefully, this will be an asset to my teaching karate.

I would like to find a gym, church, civic center, etc. if possible. My husband has helped me research insurance companies that cover martial artists. So far, I have found one that will cover 10 students for under $500 a year.

Any suggestions or wisdom you can shed on this would be greatly appreciated.

Regards,
Chef (akachef)

vapor · 08-16-2008, 06:12 PM

akachef,

You are in a unique position to start a dojo! Good luck with that!

In the mean time, can I encourage you to jump over to the introductions forum, and tell us a bit about yourself, so that we can give you a proper welcome?

Introductions - Kyokushin4life

vapor

Kurisu · 08-17-2008, 01:06 AM

I'm currently doing some research on setting up a dojo with non-profit status. You can setup a corporation first then apply for 501c3 with the IRS. That basically provides a lot of protection against personal liability (especially if you have a good insurance provider). Under a 501c3 you would be eligible for certain federal / state grants plus dues that you charge members.

The only thing holding me back right now is finding the right commercial space. I know that some people like having their classes in a community center, a gym or some other shared location but I've noticed that the karate class ends up playing 2nd fiddle to other events. Even though a commercial space is usually very costly, you have nearly complete control over the usage of the facility.

EastsideKyokushin · 08-17-2008, 01:42 AM

For those of you who are going down the 501c3 route - good for you. Our application took 2 months to be initially processed, then 5 months waiting for technical review. We just sent back our first set of responses, so if things go well we will have a letter indicating that we achieved 501c3 status...heres hopeing.

Some tips on the process -
1. You can pay yourself a salary, but it will be more difficult to differentiate yourself from a commercial operation. A bad business plan does not make you a 501c3 non-profit...it jsut makes you a non-profiting commercial business. Make sure it is clear how you are different from other commercial dojos.
2. Be VERY clear about your programs, fundraisers, etc. If you aren't clear about everything, then your 2-month aproval can turn into a much longer process.
3. Think about your space carefully. A retail space is great for exposure, but possibly not worht the additional cost. commercial/light industrial type places are probably best.
4. Be careful to describe your activities correctly. One of the problems we hit was that we initially sounded like an "ameture athletic organization". If you end up like that, then you are a 501c4, and then you won't qualify for lots of corporate matching programs and such. Make sure that you describe your main activities in terms of education and the benefits that result from that. If you discuss competitions like tournaments, be very sure to list them in a way that makes it clear that you aren't a sports team.
5. Be sure you have valid bylaws, articles of incorporation, etc. The IRS wants your Quorum to be at least 51% of the board, and if you have anyone on the board that is related you must have enough other board members such that the related people can be outvoted (ie: in our case, 5 board members if two are husband/wife).
6. Since a non-profit has special rules about money, if you buy equipment for the dojo and the non-profit disolves you have to either donate the equipment to a similar organization or liquidate it and give the money to a similar organization.

I'm sure there are lots of other things to think about, but those are my top of mind stuff based on where we are in the process. I'm not a lawyer, so don't quote me on any of that per-se, but hopefully it helps someone else have a smoother ride.

Osu!
Sensei Campbell

EastsideKyokushin · 08-17-2008, 01:44 AM

Quote:

Originally Posted by Kurisu

Under a 501c3 you would be eligible for certain federal / state grants plus dues that you charge members.

Note that you can also accept donations. Since many corporations have gift matching for 501c3 orgs, you can double the power of people's generocity. The dues won't qualify as a donation though, so you will either need to teach for free and let people donate, or donations must be seperate from any fees that you normally charge.

Sponsored Links