Should You Have Multiple Nonprofits Within An Umbrella Nonprofit?

Lastly, let’s answer one of the most frequently asked questions I get asked. Have you ever heard the adage “Don’t put all of your eggs in one basket?” Well, the same holds true in the nonprofit sector. You will want to set up different nonprofits for each nonprofit organization as soon as you can afford to do so.

Why? Because if all of your nonprofits are under the same organization, then someone that wants to sue you based on one aspect of your nonprofit (e.g., food pantry) will have access to your assets from the other nonprofit organizations (e.g., mentoring and tutoring, etc.) if they are all under the same nonprofit. As convenient as it may seem to have one “umbrella” nonprofit, major foundations and industry professionals almost always form separate entities to minimize the chances of someone being able to sue them and taking everything.

In previous blog posts, we learned about the Basics of Nonprofits. We also learned some more general concepts about Starting a Nonprofit. Now that we have established a foundation, it is time to get to the “good stuff” and talk about how we can structure our nonprofits so that they do not ruin our lives. In the next blog posts, we will kick-off that discussion by sharing “How to Avoid a Lawsuit When Choosing a Name for your Nonprofit.”