Nonprofit organizaton is having trouble managing its membership database. This is often a tough problem to solve for a not-for-profit.

QUESTION.
Hello I am part of a membership-based nonprofit cultural educational organization. We are having problems maintaining our members membership database. We are evaulating some software as well as outsourcing membership services, but there are so many options that we don’t know what are the most reliable ones. Can you provide us some advice? We need to improve the way we manage our memebership. Thanks.

ANSWER.
You have asked me for a recommendation for software that will help you manage your NPO’s membership listings. Unfortunately I have not been involved with enough nonprofits to be able to tell you which program to purchase.
 
What I recommend you do is to contact at least 5 to 10 local YMCAs around you and ask them what software they use to manage their membership. I suspect all YMCAs you contact will be willing to tell you what software they use and if they are happy with it. If they say they are happy with it, then ask them WHY they are happy with it. If you ask 5 to 10 different facilities which software they use you should have a pretty good sampling on which to base your decision which software to choose.
 
I worked with a YMCA once that had gone through 3 different programs to manage their membership. I advised them to get software that would allow them to keep track of their members, but also would allow them to manage the members for fundraising purposes. I don’t remember the names of the software they used. None of them were particularly good.
 
It is very important that you do not be turned off by price just because it is high. It is very expensive to transition from one program to another. So don’t expect to pay a low price now and then upgrade to a higher priced program later if that is what you really want to have what the higher priced program will do for you.
 
One typical problem that usually exists with membership database software is it is easy to input membership information into wrong fields in the program. And if the data goes in wrong, then the database won’t be of much value in the future because it won’t sort correctly. Expect to pay the data-entry people a pretty good wage so they will be conscientious when they input the data. The old saying “garbage in creates garbage out” is very applicable here.
 
The rollsroyce software on the market for what you say you want can be purchased from Blackbaud. See http://www.blackbaud.com/. The blackbaud software is very expensive. But you may want to study the site and its offerings and then look for software that tries to compete with Blackbaud but does not cost as much?
 
I hope my comments are helpful. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Choice of legal entity is so important to consider when starting a new business.

QUESTION.
My husband and I are in the process of starting a bakery and cafe.  We have a solid business plan, are engaged with a number of banks who seem willing to provide a range of financing.  We are buying a building.  Our immediate questions arise around what business formation type should we set up. An LLC? An s-corp? Or what? We are hearing that we may NOT be well served by the s-corp, and that we may need two LLCs – one for building and one for business. At this point we need guidance and some definitive answers (which we have not been able to find on the Net). Please help.

ANSWER.
A few years ago NJ enacted a law that required all NJ corporations to file a tax return and pay a minimum of $550 a year IN TAX regardless of extent of income earned. Therefore, it is not a particularly good idea for a small business owner in NJ to form a corporation if it is not required. An LLC is the alternative of choice to a corporation, and I don’t know of a special tax on them. But there might be? You have to check with NJ taxing authorities. While you are checking, see if you can form an LLC in NJ and “check the box” for Federal Income Tax purposes to be taxed as a corporation. Let me know if an LLC in NJ that is taxed as a corporation gets hit with the $550 a year tax by NJ. I don’t know how the law is written – does it apply only to entities that are registered in NJ as a corporation – or does it apply to any entity that files a NJ corporate tax return?
 
If the tax applies, then form two LLCs – one for your bakery and one to own you real estate. You will have the choice of forming single-member LLCs or multi-member LLCs when you form them. Single member LLCs are easier to handle since their revenues and expenses simply flow through to the owner’s Form 1040 tax return at year end. Only one tax return would have to be filed. But if you form multi-member LLCs owned by you and your husband each, then for each LLC you will have to file a Form 1065 partnership tax return at year end. My advice is to form an LLC owned by your husband and an LLC owned by you so no partnership returns have to be filed.
 
You will be less likely to get audited by the IRS if you form a corporation to own both of your LLCs because in that case you would not be filling out a Schedule C on your Form 1040. If you did, then all your salary expenses, healthcare insurance expenses, etc would be paid to you or for you through the corporation and would be fully tax deductible. Maybe the minimum $550 a year in tax would not be a concern. Your problem will arise if you start having losses or you fold. You will have to dissolve the corporation to avoid getting hit for $550 a year. Instead of forming the umbrella entity as a corporation I would recommend that you simply form a third LLC that owns the other two LLCs and check the box for tax purposes to have it taxed as a corporation. For tax purposes you get all the benefits of being a corporation and won’t likely get hit with an audit. However, all of your LLCs’ revenues and expenses will flow into your corporate tax return. And your umbrella LLC will have to issue you and the hub W-2s. Make sure at year end you give yourselves a bonus so “corporate income” is zeroed out. Otherwise what you leave in the umbrella will be subject to double tax when you distribute it as a dividend.
 
Consider taking a look at the following book:
 
Structuring Your Business
By: Michele Cagan
(c) 2004
ISBN: 1593371777
See also, CHOICE OF LEGAL ENTITY.

I think I have answered your question. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

There is so much you can find on the Internet. Search out what you need for your small business on the Net.

QUESTION.
I have started an online website for various purposes including e-commerce. I need the privacy policy statement and the terms and conditions for the business. I cannot afford to go to a lawyer, so I was wondering if you will be able to provide the templates for the online privacy and terms and conditions which I can make the change to use it on the site.

ANSWER.
Sorry, I don’t have “templates” for what you ask. I recommend you visit various “Store” accounts at eBay and study the various privacy policy statements and terms/conditions that are posted on those sites. You may also want to visit Web sites that will be your direct compeititors and study their documents relevant to your interest.
 
There is nothing magical about putting together the documents you want to create. Generally, it is as simple as doing some cutting and pasting using your computer to create a draft document. Then just proof and edit it so it makes sense. Most of the documents out there online are already overdone – so having a lawyer proof your final version would probably be overkill. No need to hire a lawyer if you include everything you find online.
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Why form a for-profit and a related nonprofit when the whole concept can be started as one nonprofit?

QUESTION.
Can a for-profit healthcare business have a non-profit scholarship fund? Case in Point: A group of doctors is thinking of opening a treatment center for people with substance abuse issues. We will accept insurance and provide a sliding scale, but we would like to provide a full scholarship to a percentage of indigent clients. Is it possible to operate a non-profit
scholarship fund inside the umbrella of a for-profit corporation? Thank you for your guidance.

ANSWER.
What you propose is not usually done. Typically a for-profit entity makes charitable donations to a foundation that supports a nonprofit or nonprofits. Or a for-profit will make donations to a nonprofit directly. It’s not a good idea to mix the management and employees of a for-profit and a nonprofit. Appearances of impropriety will usually exist. Not to mention conflicts of interest. And doing fundraising in such a case is hard to do, also.
 
I think what you should do is create a free-standing nonprofit clinic with no ties to your for-profit practice. The doctors can donate funds and their time to it if they choose to do so. By the way, there would be nothing wrong with the doctors you refer to just open a nonprofit clinic and forget about opening a for-profit. I suspect your for-profit corporate filings could be modified easily so it will qualify under Internal Revenue Code Section 503(c)(3) for tax-exempt status. Keep in mind that nonprofit does NOT mean “no profit.” In fact, profits can be very high in many instances. The critical issue is whether the organization qualifies for tax-exempt status – not whether its employees are able to make a reasonable living given their education and talents.
 
I home my comments are helpful. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Small business owner let the client get ahead of her in fees, and now she is having trouble collecting. What’s she to do?

QUESTION.
I am a small business owner (website design) and have two invoices outstanding from the same client.  The first invoice was sent on 22-DEC-2006 (due on 05-JAN-2007) for $475.  The second invoice was sent on 14-FEB-2007 (due on 28-FEB-2007) for $2675.  I’ve made and they’ve agreed to two separate payment arrangements, but haven’t received any payment.  After not
hearing from them since 05-FEB, I sent a certified letter (received 06-MAR) requesting payment to avoid legal action.  I received an email from them on 20-MAR stating that they would call me on 21-MAR to discuss payment.  I did not receive a call.  I would like to use a collection attorney, but would like to know all of my options.  I gave them a discount on services on the first invoice due to them being a non-profit agency.  Am I within my rights to revoke this discount?  I understand it will cost me money to collect this debt and would like to recover some of that cost.

ANSWER.
SCORE counselors are business coaches. We are not supposed to provide legal advice when we counsel/coach SCORE clients. What you are asking me to provide arguably is legal advice since it is law offices that typically provide collections services. But I cross the line a bit when I provide comments to SCORE clients.
 
As a small business owner you need to become expert in how to charge for your services, how to bill for them, and how to collect your fees. As a general rule you need to ALWAYS stay ahead of your clients when it comes to doing work and getting paid. If you estimate a job should cost the client $3000, then require a $1000 payment up front before work is commenced. When you are about to finish a third of the job, then you need to get another $1000 before you start on the second third of the job. And the same goes for the last third. Never do work without having the fee paid up front. If you do, then you will find yourself in a situation similar to what you “enjoy” right now.
 
Nonprofits are notorious for trying to get something for nothing. It’s in their blood. They are so used to asking for donations that they treat their providers as if they are donors, too. However, sometimes they have every intention to pay, but they have a cash flow problem.
 
My recommendation to you is to talk to the nonprofit about payment of your fee. Ask quite pointedly whether it is a cash flow problem. If you don’t get straight answers, then you might consider finding out who the chairman of the board is for the nonprofit. And maybe find out who the other board members are? Then contact the chairman and explain the situation. No nonprofit likes bad publicity. And a letter to the editor of the local newspaper where the nonprofit operates explaining that the nonprofit is a deadbeat would probably seriously hurt the reputation of the nonprofit. The chairman or the other board members most likely will pull the necessary funds out of their own bank accounts to pay you in order to avoid having their nonprofit damaged. They will write off the payments to you as personal donations on their part.
 
If you can’t get the funds from the executive director of the nonprofit or the chairman of its board, then you will have to sue the nonprofit. You can seek the full value of your services. You don’t need to provide the courtesy discount when suing in court. I don’t recommend you hire an attorney to file suit for you. Visit your county courthouse and visit the free law library there. The law librarian can show you the “How To” book on small claims matters. You’ll be able to bring the suit in most instances. The catch would be if you are incorporated and the local court rules do not allow you to represent your corporation in the suit. You can get around that problem by assigning the Account Receivable to you personal and then the account is yours rather than the corporation’s.
 
If you are uncomfortable doing the suit yourself, then you can hire an attorney. For the size of account you are talking about I can’t imagine an attorney bringing suit for you for less than 50% of the collected amount. They will work for 20% or so if you gave them volume of business. But I doubt that is the case here.
 
I hope my comments are helpful. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

If you want to start a business, then you have to plan ahead and get your startup capital before you actually start your business.

QUESTION.
I need the start up cost for my lawyer fees (Utility Patent).

ANSWER.
You will need to account for these fees in your business plan. I assume you are in the process of writing one. Your business plan will document how much in TOTAL start up fees you will need to make your business successful. It will also explain how you will get the necessary start up capital. Possibly you will have to save the money BEFORE you start your business. Possibly you will ask friends and relatives for the money which you will in turn pay them back over time. Another option is to find a partner who wants to help you start the business.
 
I recommend you call your local SCORE chapter and sit with two SCORE volunteer counselors for an hour to discuss preparing a sound business plan. See http://www.score.org/findscore/index.html and type your home zip code to find your local chapter. The visit is free.
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Two women want to start a new business using the shell of an old one. What’s the best way to do it?

QUESTION.
We have a corporation (subchapter S) that has been inactive for about 1.5 years. It is registered as a gift company.  We want to start an Internet jewelry business under another name (selling jewelry).  Would it be better for us to use the existing corporation and set up a DBA, or dissolve this corporation and start a new company?  If it is better for use to start a new company, should we consider a partnership, an LLC, or some other type?  If we should dissolve the corporation we have now, can SCORE help us with this? Are there any resources to specifically help women in small business? Thank you for your time and consideration.

ANSWER.
I don’t advise clients to form Subchapter S corporations today. But when one already exists I rarely tell them to dissolve it. My recommendation to you is to amend the articles of incorporation so they are consistent with your new business concept. Also, file a DBA application for the name you want to operate under. That is the cheapest and easiest way to go, and what I recommend.
 
SCORE is a business coaching service. We do not do legal services or accounting services for our clients. It is not very difficult to dissolve a corporation. And it is not very difficult to form an LLC or apply for a DBA certificate. I typically tell my clients where to go to learn how to do it themselves, but you could visit an attorney to help you with the process.  Consider the following link. See
 
http://www.dos.state.pa.us/corps/cwp/view.asp?a=1093&Q=431161&corpsNav
 
You can do the filings yourself. Just study the above link and related links in the site.
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

NOTE: This rambling was written for client in Pennsylvania. Most, if not all states, have a similar Web site to the one referenced above.

Small business owner is having trouble figuring out how to access his money. Du-uh!

QUESTION.
How do I access funds in my sole proprietorship business?

ANSWER.
Normally a sole proprietorship business has its own separate bank account. Deposits related to sales are deposited in that bank account, and expenses are paid out of that account. You access that account the same way you would access a personal bank account. You can use an ATM machine, a check book, or show up at the bank teller’s window.
 
I hope my comments are helpful. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

What is involved with becoming an infopreneur? It’s really not all that difficult!

QUESTION.
I want to learn a little about what is involved in becoming an infopreneur. Can you help me with that?

ANSWER.
A link I think you should look at regarding becoming an infopreneur follows. See
 
WHAT IT TAKES TO BECOME AN INFOPRENEUR. 
 
See also, www.thedabblingmum.com.
 
I highly recommend you visit a well-stocked library that has business reference materials on a Saturday and read as many of the Business Plans Handbook volumes as possible. See BUSINESS PLANS HANDBOOK. 

See also, http://www.jlippin.com/bph/
 
Take a look at the following links on starting business. See PICK A BUSINESS, and 
  
WRITE A BUSINESS PLAN.
 
I’ve given you plenty to think about for now. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Start up capital can come in many forms and be obtained in many ways. Don’t think that banks are the only source of funds to start your business.

QUESTION.
I have a great concept, a huge market, and a business plan, but I am not looking for financing to start it. I am in my 60’s and what I am seeking is a large company that would joint venture with me. I would like to retain a minority piece of the company and an annual consulting fee. When properly implemented, this could generate annual net profits in the billions.

ANSWER.
You say you are not looking for financing. But seeking an entity to joint venture with is pretty much the same thing as looking for financing. To find what you are looking for you will have to jump through all the hoops you would when looking for financing.
 
Your email makes you sound like a salesman. That is good. But save it for the entities you want to attract capital from. Consider taking a look at the followng links. See
 
FINANCING YOUR SMALL BUSINESS & ANGEL INVESTORS
 
BOOKS ON VENTURE CAPITAL
 
You may want to call your local SCORE chapter and sit with two volunteers to go over your business plan. It might need some tweeking. Also, the counselors might be able to make some recommendations to you as to how to get it up and running? See http://www.score.org/findscore/chapter_maps.html and enter your home zip code to find a local chapter to call.
 
I’ve given you some things to think about. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com