Running a charitable organization is a chance to do a lot of good in the world, but it is not an easy thing to do. Charitable organizations face many of the same problems that businesses do, and they have a few unique issues of their own to consider. When estate planning, many people decide to give a portion of their estate to charitable organizations. Before you do, take a look at those organizations and see how they handle some of the most common concerns of charitable organizations to see if you are making a sound investment.
Difficulty Managing Finances and Raising Money
The most common problem that charitable organizations face is generating enough cash to keep operations running. Most charitable organizations struggle with this because they do not offer value in the same way as other organizations.
For example, businesses are able to sell their value for profit, which pays for their continued operations.
Charitable organizations often rely on donations, grants, and other forms of support to operate. This makes it very difficult to establish sources of funding that are consistent and plentiful enough to support long-term operations.
High-Level Leadership Recruitment
Another common problem that charitable organizations have is recruiting high-level leadership, such as on the Board of Directors. The biggest difficulty here is that the organizations’ ability to recruit talent at such a high level is hindered by their lack of resources.
Put simply, most charitable organizations cannot offer competitive pay or incentives like business can. To overcome this, they have to offer an alternative that is of more value to board members, such as positive publicity, experience, or the chance to impact a cause that they care about.
Laws That Restrict How They Operate
Since charitable organizations are exempt from many of the responsibilities that businesses face, they often have specific restrictions from the government. There are always specific laws that restrict how they can operate, and navigating these laws can make it difficult for charitable organizations to function.
While many of these laws focus on things like taxes and how money or resources are handled, there can be laws that impact other parts of operations. For example, tax-exempt organizations have limits on what those organizations are allowed to work on.
Failing to adhere to those limits may mean stiff penalties or losing their exempt status altogether. For an organization that is not set up for profit, this would likely mean the end of it.
Finding a Steady Stream of Donors
Charitable organizations also struggle to find a steady stream of donors to fund operations. It is difficult for organizations to effectively promote themselves in a way that makes people want to donate to them, partly because they have small marketing budgets. However, charitable organizations rely on donations to function.
While small donations may be easier to get, it is the large donations that have the biggest impact. They are very hard to get in any form of regularity since it takes a long time to cultivate relationships with donors.
There are a few benefits that can help with this, such as tax write-offs for donors. This is a big part of why many high-value donors give to charitable organizations. It can significantly lower their tax burden. However, getting donors to choose a specific charity over others can be a challenge since they are all competing for the same resources.
Contact a Chicago Estate Planning Attorney Today
If you are considering donating to charity or giving a large portion of your estate to charity, it’s important to do your research first. Every charitable organization is different, and you need to be sure that you are making a good choice before you give. Work on this with a Chicago estate planning attorney to make sure everything works out the way that you want it to. Contact James C. Provenza & Associates, P.C. at (847) 729-3939 or fill out our online form to schedule an appointment.