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Not-for-profits & private enterprise

As an entrepreneur in the not-for-profit sector (not to be confused with
the non-profit sector, from which I came), I take practical interest in
this thread. Center for Book Arts had to deal with this issue very
seriously several years ago during an IRS audit. IRS had a problem with us
renting studio space to people who operated private presses. These
individuals, from the IRS point of view,  were sole proprietors, hence not
entitled to not-for-profit corporate benefits. They considered revoking our
n-f-p 501 (c)(3) status because of this profit base. I attended a meeting
with the IRS guy, our attorney (who serves on our Board of Directors), and
our Executive Director. After an emotional discussion of these issues, the
IRS determined that encouraging emerging book artists is within our
purposes, and, considering the amount of time and money these fledgling
enterprises needed to invest to establish themselves in the book arts,
renting them studio space was indeed a charitable public service (CBA is an
educational, scientific, literary and cultural organization).  But they
also put restrictions on what merchandise we could sell in our shop
(without going the MMA way and incorporating the shop as a separate

As far as the concept of "profit" goes-- The only real differences I see
between *for profit* and *not-for-profit* corporate development in a free
enterprise economy is that the n-f-p's have no private ownership of capital
(no stockholders), uncompensated Boards and no distributed earnings. In
most other ways they are similar. It becomes an issue when the n-f-p is
perceived by the f-p as using its tax status and/or charitable organization
status to engage in unfair competition. As long as an industry (e.g., small
press publishing, hand bookbinding, education, fine art gallery, etc.)
perceives the n-f-p as beneficial in training labor, expanding the market,
researching new materials and techniques, publishing information which
benefits everybody, providing symposia or conferences for evolution of the
field, etc., then there is no conflict.

Often there are f-p's and n-f-p's competing in the same arena. That is
certainly true in the fields of education, of conferences, of health care
and more.

So as far as the University web page thing goes: if I were the decision
maker there, I'd encourage and train students to make profitable web pages
that exposed their work to a global audience. I'd hope they were
successful, and ask for a share of the profits (or charge a transaction
fee). That will be a simple matter once the University has secure credit
card transactions and can act as a credit card service for the student,
taking 4% of each sale and processing the funds into the student's account.
The University acts as a bank.  And after they graduated, I'd be sure the
alumni association and development office kept in touch with them!

It certainly would attract promising applicants as word spread that this
school trained students successfully in web marketing strategies,
particularly if was in something with as small a market as fine art
bookmaking. The beauty of the web is that it can apply to any field, and a
school that prevents students from learning through supervised practical
experience is doing all concerned a disservice. What are they afraid of?


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