Building a successful business is hard work. You need a great product or service, a marketing plan for getting the word out, skills in sales to convert your product or service into actual money, a head for numbers and finance, and innumerable leadership skills to tie it all together. Today, let’s talk about the marketing/branding piece. We’re often asked: Should my business name and brand name be the same? What is a DBA, and do I need one? And how do I file one here in Ohio? The Secretary of State doesn’t have a DBA form. And what is the difference between a trade name and a fictitious name?
In Structuring a Social Enterprise: Non-Profits and Unrelated Business Income, we discussed the unique problem non-profit organizations can face when they generate Unrelated Business Taxable Income (UBTI). But how your non-profit operates its social enterprise can also have a major impact on the organization's tax-exempt status.
In addition to the potential UBTI issues, non-profits often create separate corporations for their social enterprise endeavors so that the liabilities of one do not threaten the assets of the other. Like any business venture, the question has to be asked—what happens if the social enterprise fails? Will the nonprofit be accused of using funds inappropriately, particularly funds that could have better supported its charitable purpose? Could the failure of the social enterprise impact the non-profit’s financial viability, especially if the non-profit was using its own funds to start the social enterprise? Separately, does the social enterprise itself pose any risks that could be subject to litigation? Non-profit boards must carefully consider the potential risks a social enterprise activity might create. Creating a separate corporation to “house” that risk and operate the social enterprise can protect the non-profit parent organization (and its separate assets).
But (and there’s always a but), creating a separate corporation for your social enterprise activity is not a get-out-of-jail-free-card. Keep reading to learn about best practices to follow when operating both a non-profit and a social enterprise corporation.