FP Project Status and Question?

[Keith Outten]

Pens Shipped
Yesterday we received 495 pens and with the pens we turned Saturday at the Langley Air Show our grand total is 5006 pens. This is 25% of our annual goal. If our production level continues to rise we will soon be shipping over 3000 pens per month which should put us well over our goal of 20,000 pens before the end of the year. Everyone deserves to be congratulated for their hard work and dedication to the Freedom Pens Project.

Non-Profit Status
Last week we acquired the Internal Revenue Forms necessary for us to become an official Non-Profit Organization. It appears that we will have to pay a $500.00 fee to the IRS to acquire an EIN and register FPP officially. As soon as my personal schedule will allow I will visit our local IRS office and file our forms. We will have to deduct the $500.00 IRS fee from our donation fund.

Decisions We Must Make
From the beginning of the Freedom Pens Project we have tried to make sure that everyone understood that the FPP is being run and supported by the woodworking community, it does not belong to SawMill Creek Forums or any other organization. We use SMC as a means of communicating and coordinating our efforts however the Project is much larger than our Forums and Membership at SMC. In the last five months many Woodworking Guilds and Businesses have joined us and they are as much a part of the program now as our Forum Members and we have tried to make sure that everyone is welcome to participate.

As we move toward obtaining our Non-Profit Status we will have to make certain decisions concerning rules and regulations that are necessary to comply with the IRS regulations. We will lose a certain amount of flexibility however I don't expect any major changes to the way we have been operating. We will simply have to maintain a standard means of doing business and our accounting system will have to be adjusted. We will have to acquire a checking account, this will interrupt our ability to handle Internet based transactions as we will not have a PayPal account for a short period of time.

For the most part the majority of our woodworkers have been making pens and shipping them to our office in Virginia however some groups have been working with their own mini programs and have been distributing pens and collecting money within their local community. When this happens we are unable to account for the financial contributions or verify the distribution of pens. This activity will have to cease when we become an official Non-Profit Organization.

Here is the Question
Are we sure that we want to make the FPP an official Non-Profit Organization? We will be required to comply with all of the Internal Revenue Service regulations and if I am to sign the IRS documents I will be held legally accountable as our Administrator. If everyone is comfortable with the current system or if there are other options we should consider then lets discuss them openly and honestly before we move forward.

[Chris Rolke]

i think that it should happen

btw as far as the way that i have been doing things is i have received donations from individuals and then i buy the kits from there.

i know the kits are 1.30 and i reference the 1.90 number but i figure that i can use the extra money to payfor shipping in and out and for the pen tubes ( and i know i am still paying for more stuff out of my pocket )

[Greg Heppeard]

Wouldn't you also have to supply forms for tax deductions to contributors? My wife works for a non-profit organizations and they have to provide forms for anyone who donates anything...time, money, used and unused items. It's another thing to add to the growing list of things to do with this project. You could put yourself or someone else on the organizational payroll and get some reasonable compensation for all your efforts. After all, time is money, and I'm out of both.

[Dick Parr]

Keith, as an individual it makes no difference to me. I will continue to make the pens and send to you for distribution and there is nothing to write off for me which is fine. I will make them as long as they are needed. I am wondering though if we are the right people to ask. I would think our major contributors would need to have a say in it since they are at present writing off whatever they give us. By going non-profit will this help them to continue to donate at their present rate and possibly increase their donations? Will going non-profit attract other major contributors? By going non-profit it would seem that this project would grow. So you need to ask yourself, how big you want to get since at present yourself, Jackie and Ken are doing the majority of the work. Can you handle more volume and the paperwork to go with it?

I will go with whatever the majority agree on since like I said, it makes no different to me, I will continue with what I am doing.

You have done a great job so far with everything you are doing, don't work yourself into a corner.

[Daniel Yourdon]

As Dick points out above,
What are the expenses and liabilities of going non profit in comparison to the benefits. are there other major contibutors on the side line waiting for non profit status. what will be the cost of keeping up with the paper work of non profit status. adn also the cost of giving up at least some of the freedom we have in how this is being ran.
for me it would not effect how i have been making and submitting pens. but this would not be true for everyone. so far the program is moving along quite fine and I am not sure I see the other side of the coin.
for me I don't think giving someone a tax detuctable reciept would make the difference in wether they make a donation or not.
I see alot of the cost for being non profit int he post, what benefit do we get for that.

[Ken Salisbury]

are there other major contibutors on the side line waiting for non profit status.

for me I don't think giving someone a tax detuctable reciept would make the difference in wether they make a donation or not.

Most businesses they will not contribute unless it is deductible.

Most individuals, especially if they are making a small, one time donation could care less.

The real key to continued success (in my humble opinion) is funding. I believe operating under a tax exempt status is not as difficult as it may seem.

Of course one of the things which would be required is a CPA to manage financing. If a CPA who would donate their time as a Treasurer to this worthy cause it would help greatly.

I am on the Board of Directors of a tax-exempt organization and find it fairly simple to comply with.

[Waymon Campbell]

I agree with Ken that the tax exempt status is preferable if our goal is to increase monetary donations. Without additional funding we are going to run out of steam. My personal belief is that if you weigh the pros and cons of going tax exempt, we come out ahead by doing so.

Further, if we decide to go tax exempt, I'll pledge to cover the $500.00 IRS filing fee.

[Chris Rolke]

waymon all i can say is wow

and thanks

[Jerry Stringer]

. . . and collecting money within their local community. When this happens we are unable to account for the financial contributions or verify the distribution of pens. This activity will have to cease when we become an official Non-Profit Organization

Why would we have to cease collecting money locally? Couldn't we collect the money locally and then send it to the main FPP account like we have been doing anyway?

I'm with Ken . . . 99.9% of the donors couldn't care less about a receipt. The big donors NEED a receipt so that they can get a benefit from helping out.

The initial setup will be a pain, but after that the on-going duties will be negligible, except for the record keeping.

I vote non-profit!!! It's time we step up to the plate . . . we can't hit a home run if we don't go to bat!

Thanks!

Jerry

[Perry Schmidt]

Having a little experience working the 'business side' of non-profit organizations, a few comments:

1) The big win is corporate and small business sponsership. You can't get in the door unless you can start with "we're a non-profit organization". For the smaller businesses it's good advertising/image and a tax break. Same w/ big corporations, but you also get the added benefit of being considered for 'matching' programs. The company I work for has a dollar for dollar matching program. If I donate through my company to organization X, they'll match my contribution dollar for dollar. Won't even consider it if it's not non-profit.

2) Reguarding individual donations: 'Most don't care about deduction'. Although this may be true, it's not 100% true. Maybe I'm the exception, but I track this stuff very closely. Even $20 donoations I make to non-profit I deduct from taxes. It adds up! Last 5+ years I've saved at least $500+ on taxes paid just for the 'small stuff' - donoations less than $50. And if you write a check, FP doesn't need to provide a receipt. If I remember correctly it's only donations totaling more than $500 for the year to a single organization. So again, it's a selling point that can be used. Plus you can always use the 'if you donate a $1 it's really only costing you $.75 if you deduct it on taxes' selling point.

But a point to take from this is two-fold: Some people do care, and if you currently don't, look into it - it can be quite a savings at tax time.

3) Reguarding a CPA - should not be necessary. The two organizations that I deal w/ a lot do not have CPA's. They use Quicken and Quick books, done by average Joe. I do not beleive any additional 'accounting paperwork' is required to be turned in. Still need to keep good books incase you get audited, but once you have your non-profit status, you don't have to do 'additional paper work' as far as I know.


I think going non-profit will open may doors that are otherwise closed. Even collecting $$$ locally - if it's made out to 'Freedom Pen Project' you can advertise tax deduction and don't have to give out receipts (i.e. no extra work) unless it's a sizable amount. And I'm thinking the extra work for a 'sizable amount' is something people won't complain about too much

It's also easy to publish/print up sales tax-free forms where you can buy kits (or any supplies needed) w/out tax - again in the end it adds up to lots of $$$. (The organizations I work with save literally tens of thousands dollars a year just on the sales tax break alone.)

If you can get it, don't pass it up - that $500 application fee will pay for itself in no time.

My 2 cents.

Perry

P.S. An additional note - many businesses do their 'pledge drives' near the end of the year - Oct. and Nov. I know you aren't trying to do real pledge drives, but keep that in mind if you try to get sponsership from businesses/corporations. Quite a few won't talk to you til Sept./Oct./Nov. time-frame. For their book keeping and tax breaks they allocate it once a year, near the end. I think their 'drives' actually start Aug./Sept. but they don't 'pay out' til Nov.

[Keith Outten]

Jerry,

There is a group that is working totally outside of the FPP, they are collecting their own donations, making their own pens and distributing their pens to whom they prefer. Generally they are making pens for their own local military and not contributing to the pens we send to the Middle East. These folks are publicly using the FPP name but not our system.

I understand that they mean well but this could be a problem for us in the future.

[Jerry Stringer]

Jerry,

There is a group that is working totally outside of the FPP, they are collecting their own donations, making their own pens and distributing their pens to whom they prefer. Generally they are making pens for their own local military and not contributing to the pens we send to the Middle East. These folks are publicly using the FPP name but not our system.

I understand that they mean well but this could be a problem for us in the future.

Keith,

So who are these folks???? Can we send out a couple of "contacts" we have to knock on their door about 3:00 am?

Jerry

[Martin Shupe]

Perry has made valid points, and I agree that we should go non-profit.

Some individuals may care, some may not.

Most, if not all, businesses will care. Matching programs can mean big bucks to FPP.

Also, how many people have to fill out a United Way form at work? If we could put FPP on those, that could really help out!

Small donations do not need a receipt. I know there is a cutoff point that requires "a letter from the non-profit acknowledging the donation". This letter must also state that the individual did not receive compensation for his donation. I thought this cutoff was $250, but it may be $500. If someone gives that kind of money, we should spend the $0.37 for the stamp and whatever the stationary costs.

My church sends a letter once a quarter, but I think all you need is one letter for the year.

About the guys working "outside the program". If we go non-tax, they need to be encouraged to work within the program, or not use the name. Now, I am not one to display tact, but someone who has more than I do should explain the situation to them in a way that will not drive them out of the program. We want to keep them involved, but explain that they need to follow the rules, or perhaps one of them would like to be our volunteer accountant, and put him/herself on the line?

Is "Freedom Pen Program" copywrited? If not, perhaps it should be.

Congratulations to all concerned for the success of the program.

[Daniel Yourdon]

The way I see it this will really be on Ken and Keith, or those they can noose into taking it on

I am definitly on the front lines when it comes to the big companies so I don't know what potential there is in tapping there pockets by offering non profit status. but it certainly wouldn't hurt.
the "other Guys" pens are just as important as our. but actually being non profit they woudl have to be asked to stop running under the FPP name. It could lead to big problems if they did not keep the records needed. Is it possible to develop chapters of the FPP? and would these "Chapters" be indapendantly responsible for there funds etc? Just a thought that crossed my mind in the last second.

[Ray Thompson]

I was involved with a large non-profit some years ago with affiliated local chapters. It is something fairly easy to do but the local/regional chapters would have to keep records that would be reported back through the national organization. We decided to go off on our own and form our own organization which we did, but at the instant we did so we had to quit using the other groups name, advertising, logo's etc. I think an approach explaining the legal ramifications would be appropriate. But first maybe setting some guidelines for local chapters to follow would be necessary. Things like reporting forms to the national, fund distribution (what is kept locally and what goes to the national), how pens are distributed, etc. If they didn't care to comply then they would not be able to use the FPP advertising, logo's etc.

As to the receipt just make a form in PDF and any member of FPP could download, fill it out, and give to the individual or company requesting it. If memory serves it doesn't have to be signed by an officer or high ranking person, any member traceble to the parent is ok.

about a cent and a half worth. Ray