Business or Nonprofit? How to Choose the Right Path for Your New Idea

This question came up during my August Office Hours where I am available for one hour for anyone to come into my Zoom room and ask a quick question or two about nonprofits or storytelling/communications. I gave a shorter, more tailored answer in the session, but wanted to expand on it here for everyone. If you’d like to join the next Office Hours session, register HERE.

Starting something new is exciting! Maybe you have an idea for a community art program, a pet rescue, or a unique product that solves a real problem. The first big question you need to answer is: Should this be a business or a nonprofit?

This choice will affect everything – from how you get funding, to your legal responsibilities, to how you measure success. In  Palm Springs and the Coachella Valley area, where community-driven initiatives and small businesses thrive side by side, it’s worth slowing down to make the right decision before you start filing paperwork.

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Step 1: Know Your Core Purpose

The clearest way to decide is to ask yourself: What is the primary purpose of what I want to build?

• If your main goal is to make a profit while delivering a product or service people are willing to pay for, you’re looking at a business.
• If your main goal is to serve the public good – without distributing profits to owners or shareholders – you’re leaning toward a nonprofit.

For example, if you want to run an after-school tutoring program that charges families enough to cover costs and generate income for you, that’s likely a business. But if your goal is to provide free tutoring to all students, and you plan to raise money from donors or grants, that’s more in line with a nonprofit.

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Step 2: Understand How You’ll Fund It

Funding is often the biggest difference between the two paths.

• Businesses earn money primarily by selling something – products, services, memberships. You reinvest profits back into growth or take them as income.
• Nonprofits rely on donations, grants, sponsorships, and sometimes earned income (like ticket sales or program fees). By law, any surplus must be reinvested into the organization’s mission—not paid out to founders or board members.

If you’re thinking, “I’ll just run it as a nonprofit and pay myself well,” keep in mind that nonprofits can pay salaries, but those salaries must be reasonable and tied to the work you’re doing – not to ownership. You can’t “own” a nonprofit in the way you own a business.

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Step 3: Consider Your Community and Market

In the Coachella Valley, many ideas could work as either model – what matters is the local demand and support.

• Ask: Are there customers willing to pay enough for this idea to be sustainable as a business?
• Or: Is there enough donor and grant support in the community to fund it as a nonprofit?

For example, a wellness retreat center could run as a business, selling packages to visitors. Or it could operate as a nonprofit if its main focus is providing free or low-cost wellness services to underserved residents, supported by grants and charitable donations.

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Step 4: Think About Control and Decision-Making

• Businesses are generally owned and controlled by one person or a small group of owners. You call the shots.
• Nonprofits are governed by a board of directors. Major decisions are made collectively, and there are legal rules about board composition and responsibilities.

If keeping full creative and financial control matters to you, a business might be a better fit. If you’re okay with collaborative leadership and more oversight, a nonprofit could work.

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Step 5: Look at Your Long-Term Goals

Ask yourself where you want to be in five or ten years.

• If your dream is to grow something you can sell one day, a business is the way to go. You can’t sell a nonprofit – it belongs to the public.
• If your dream is to create a lasting legacy for your community, a nonprofit could carry your mission forward long after you’re gone.

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Step 6: Get Professional Advice

The truth is, there’s no one-size-fits-all answer. Some people even create both – a business and a nonprofit – that work together but follow different rules.

Before you decide, talk to:

• An attorney who understands both nonprofit and business law.
• An accountant who can walk you through the financial implications.
• People who have successfully started, and/or worked for, similar organizations in the region.

In the Palm Springs and Coachella Valley area, there are local resources like SCORE, the Coachella Valley Women’s Business Center, and myself who can help you explore your options. (Feel free to reach out for a free discovery call with me!)

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Final Thoughts

I honestly have so much to say on this topic, but whether you choose a business or a nonprofit, the most important thing is that your structure matches your purpose. When you’re clear about why you’re starting, how you’ll fund it, and what kind of control you want, the decision becomes much easier. Some people also believe that nonprofits are easier than for-profit businesses and nothing could be further from the truth and should be taken into consideration.

Your idea deserves the right foundation to grow. Take the time to choose well, and you’ll set yourself – and your community – up for long-term success.