For Profit, Nonprofit and Beyond: Considerations for Media Start-ups

By Heather Franklin

Introduction

The last decade has seen an expansion in new journalism start-ups, both for-profit and nonprofit. However, journalists moving from reporting to running an organization face a range of questions from the outset about the kind of newsroom they are trying to build. We are asked regularly by journalists whether they should incorporate as a commercial or a charitable entity. Unfortunately, there is no easy answer.

That’s why we created this guide for journalists and media entrepreneurs. This introductory primer is meant to be a brief overview of the issues discussed at greater length in the guide “Which Legal Structure is Right for My Social Enterprise? A Guide to Establishing a Social Enterprise in the United States,” written by Morrison & Foerster LLP for the Thomson Reuters Foundation in 2016. We encourage you to check out that longer piece for more detailed information and longer discussions around issues like financing your venture.

In the sections that follow, we try to arm you with key questions and considerations to take into account as you get your organization off the ground. However, we want to make clear that your tax status is not the same as your business model. Deciding how to structure your organization is only step one, and increasingly nonprofits, for-profits, and hybrid organizations are facing similar revenue challenges and are exploring similar solutions. The tax status and structure of your organization will shape the kind of business you build, but regardless of how you incorporate, you are going to need to develop a diverse revenue mix that truly meets the needs of your community.

In addition to the key questions and considerations presented in the following sections, we have included a chart that outlines the relative ease of formation, ownership rules, liability, ease of operation, management structure, tax treatment, and lifespan of the eight business models discussed in this guide.

Nothing in this guide should be understood as legal advice or counsel. Anyone setting up a new organization should work with a lawyer and tax professional. We are indebted to the Digital Media Law Project and Morrison & Foerster LLP and the Thomson Reuters Foundation whose earlier work was the foundation of this project.

The guide from Morrison & Foerster LLP and the Thomson Reuters Foundation provides an invaluable flow chart that walks readers through a series of questions to assist them in narrowing down the right business model for them. The flow chart (below) is a great resource for figuring out what is important to you about your new venture and understanding how your decisions regarding your new venture’s guiding principles can guide what business model is best for you. In the sections that follow, we provide more background about the various legal and tax structures you can choose from.

Decision making flow chart from the report: “Which Legal Structure is Right for my Social Enterprise? A Guide to Establishing a Social Enterprise in the United States.”

by Thomson Reuters Foundation and Morrison & Foerster. Published, September 2016.