Starting a Non-Profit Coffee House allows the focus to be on a specific purpose and/or community enrichment program rather than only on generating revenue and profits. Starting a Non-Profit Coffee House gives you a greater view of yourself and what your purpose in life can be. You can affect change in the lives of up to millions of people. It is a way to focus on the big picture, set long-term goals, and have lasting philanthropy. A Non-Profit Coffee House does not mean the business is not making a profit. Quite the opposite, it is important for a Coffee House to strive for a profit even with the Non-Profit business model.
Having a Non-Profit Coffee House is a worthwhile, purpose-driven, community enrichment endeavor.
Starting a Non-Profit Coffee House will take these seven steps for obtaining a non-profit status: 1) Choosing a name, writing your mission statement, and creating your business plan. 2) Selecting members, directors, and officers. 3) Hold a board meeting. 4) Draft bylaws. 5) File articles of incorporation. 6) Apply for tax exemption and 7) Develop normal coffee house business operations.
Keep in mind that profits are used to fund specific special projects that relate to the core mission. Before we go into the specific steps of How To Start A Non-Profit Coffee House, let’s find out what the term Non-Profit means.
Coffee Shop Promotional Ideas: Good, Better and Best
What is a Non-Profit Organization
A non-profit organization is established to benefit the public, a social group, a school, or a religious group. A non-profit organization must adhere to the non-distribution constraint, meaning that any revenue that exceeds the cost of operating expenses must be committed to the organization’s purpose and not taken by any private person or party.
This is different from a business aiming to generate a profit for the owner(s).
Cornell Law School has a great overview and explanation of a non-profit organization. Click here, to see what they have to say.
Now that we have a general idea of what a non-profit organization means, let’s look at the steps involved in setting up a Non-Profit Coffee House.
Choosing a Name, Mission Statement, and Business Plan
Several things need to be taken into consideration when choosing a name for a Non-Profit Coffee House:
- Is the name already trademarked? To find out, go to this website: https://www.uspto.gov/trademarks/search
- Stay away from words with an illegal intent or words with ill-meaning
- Does the name you have chosen sound familiar or like another non-profit?
- Check availability for the website (domain) name and social media, there are search engines that you can access to check a domain name
- Why is this important, you may be asking. A domain name will give your Non-Profit Coffee House credibility. It tells internet users that your Non-Profit Coffee House is legitimate. For more information check out LeadChange’s The Importance of Domain Name Selection for Non-Profits, by clicking here. When you are done reading the article, just click on the back button and you should be able to continue reading the article.
The mission statement you create for your Non-Profit Coffee House will describe your organization’s unique and fundamental purpose. It communicates the value that your non-profit will deliver, what groups it will serve, and how it will serve the community.
The foundation of the non-profit coffee house will be your mission statement. This will mold and influence all aspects of your organization from start to finish. Like marketing, communication, to culture. It will tell people who you are, why the non-profit exists, who it serves, and how it serves the public.
Business plans vary as much as the different types of businesses, below is a list of the main sections of a business plan. Don’t skip this step as it will help you in other areas of starting a Non-Profit Coffee house.
- Create an Executive Summary
- Organization Description
- Market analysis
- Outline Management and organization
- Describe Programs, Products, and Services
- Document Customer Segmentation
- Strategy and Implementation of Marketing Plan
- Create a Logistics and Operations Plan
- What is the Impact Plan
- Financial plan, Projections
- What is the Positive Change with the Non-Profit Coffee House
The Small Business Administration has many resources to help write a good business plan. Check out https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan. There are other free and low-cost options available, just do an internet search.
Coffe Shops Small Business Checking Account Facts
Members, Directors, and Officers of Non-Profits
Sometimes it is easier to have a question-and-answer segment, so here goes:
Can you tell me what is the minimum number of members for a non-profit?
Three – It is recommended that your organization have at least three members since the IRS will most likely not give a non-profit status to an organization with less. The recommended number is somewhere between 3 and 25 members, based on the size and purpose of the non-profit.
Can you tell me the average size of a non-profit board?
The average size board for a non-profit is anywhere between 13 and 15 members.
Who are the board of directors in a non-profit organization?
As a governing body, the board of directors of a non-profit organization, they are responsible for supervising the organization’s activities. The board will meet to discuss and vote on the matters of the organization. At a minimum, all board members must meet annually, although more meetings can take place throughout the year.
Board members typically have a single vote each and as a body decides on the course of action that the non-profit organization will take. The Board of Directors will have specific roles and responsibilities. These roles and responsibilities are set out in the bylaws of the non-profit organization and the board is bound by the rules set out in the bylaws.
Non-Profit Board of Directors and Membership Classes
There are two different classes of voting members as a governing method for a non-profit organization.
- The most recognizable form of non-profit corporate governance is through the board of directors with absolute powers, meaning the legal powers of the organization are vested in its board and the board only.
- The other form of non-profit governance is through a class of optional voting members who may have the powers to elect or appoint board members, and consequentially have control over the non-profit board of directors.
- This system of governance is archaic, problematic, and an absolute headache. Having voting members not only complicates the organization but also creates the potential for legal pitfalls as every state has different rules and regulations regarding voting member classes and their powers.
Officers of a non-profit on the other hand by default have no voting powers, they are appointed, hired, and fired by the board of directors. And this is where it gets confusing because there are two classes of officers in a non-profit corporation:
- The bylaws define the voting officers
- and non-voting officers.
The board of directors is the foundation, they are the managers and strategic plan developers, and of course the fundraisers. They move the organization towards meeting its mission, ensure its financial stability, and are the public face of your organization.
How to Hold a Board Meeting
It’s no secret that your non-profit’s board of directors is pivotal to your organization’s success. And to be a successful board, they have to hold board meetings.
Here are some steps to help run a successful board meeting:
- Send out an agenda early
- Start and end the meeting on time – time is valuable for everyone
- Implement Robert’s Rules of Order – this will provide the structure in a simple format. Here is a 19:39 min video for more information from CT State University
- Have a note taker record Detailed meeting minutes and timekeeper for staying on track – these are not specific officers on the board
- The Focus should be on Strategy
- Give everyone a chance to speak
- Make sure everyone is aware of what they are responsible for
Drafting bylaws for a Non-Profit Coffee House is extremely important, and it can be confusing, stressful, and time-consuming. Bylaws for a non-profit are the most important document your organization will ever draft.
There will be many questions that need to be addressed throughout the lifetime of the organization. When situations arise, the board will turn to the bylaws for answers. If the bylaws are well thought out and properly structured, the board will not find them to be muddled, antiquated, or not reflective of the organization’s current practices.
The bylaws are an internal legal document and will not need to be filed with your home state. However, the IRS will require that you either attest to the fact that bylaws have been adopted or request that you attach a copy to the Form 1023 application when incorporating and applying for the non-profit exemption.
Here is a link to GiveForms, which has a lot of free information on how to write non-profit bylaws and a free template.
What To Do If Your Coffee Shop Is Broken Into (And How To Best Prevent It)
Filing Articles of Incorporation,
States can have similar requirements for filing articles of incorporation. To find the forms that you will need for your state, check with the secretary of state or the attorney general’s websites. Here is a good article by nerwallet.com to read more about it.
Apply for Tax Exemption
When they hear the term 501(c)(3), most people understand that the organization is exempt from paying taxes on their profits to the federal government. This applies to entities that are operating for a religious, or charitable purpose. For more detailed information check out Wikipedia, here.
What this means in terms of a Non-Profit Coffee House, is what was said at the beginning of this article – “a specific purpose and/or community enrichment program …”
The IRS offers the forms and information to set up a 501(c)(3), click here to be taken to their website.
Developing Normal Coffee House Business Operations
Hopefully, if you have gotten to this point of starting a Non-Profit Coffee House, you have realized that there is a lot of paperwork involved and it appears that you are not afraid to continue. So, kudos to you! Now the fun starts.
I have also written about How To Open A Café On A Limited Budget and here is the link for that article. I hope that you find this information helpful and engaging.
Best Five Locations To Start A Coffee Shop
Frequently Asked Questions
Generally when a founder is overly cautious or has a fear of there being a conflict of interest by being on the board of directors, this question will be asked. Keep in mind, that “founder” is not a designated role recognized by the IRS or any state. So, yes, a founder of a Non-Profit Coffee House can be on the board.
Board meetings are most effective when they are contained to board members, maybe a few relevant staff members, and an occasional “guest speaker” who may be sharing insights or sharing information related to an agenda item. So, unless the non-profit is a governmental entity, there is no obligation on behalf of the board to be an open meeting to the public.
Key benefits of opening a Non-Profit Coffee House include:
Additional funding sources
Not having to pay federal taxes, i.e., pay any taxes on the revenue it brings in that is used for the mission
Creates a separate entity
There are some disadvantages of starting a Non-Profit Coffee House including:
Detailed meeting records and transactions
Hard work to maintain the non-profit status Including filing tax documents for federal, state, and registration fees
Private benefits cannot occur for members or board members
To learn more on how to start your own coffee shop checkout my startup documents here
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Hi! I’m Shawn Chun
My adventure in coffee began when I first launched my first coffee shop back in the early 2000s. I had to figure out so many things on my own and to make it worse within 2 years of opening two large corporate coffee chains moved in just blocks away from me!
As I saw smaller and even some larger coffee shops in the neighborhood slowly lose customers to these giant coffee chains and slowly close up shop, I knew that I had to start getting creative…or go out of business.
I (like you may be) knew the coffee industry well. I could make the best latte art around and the foam on my caps was the fluffiest you have ever seen. I even had the best state-of-the-art 2 group digital Nuova Simonelli machine money could buy. But I knew that these things alone would not be enough to lure customers away from the name brand established coffee shops.
Eventually, through lots of trial and error as well as perseverance and creativity I did find a way to not only survive but also thrive in the coffee/espresso industry even while those corporate coffee chains stayed put. During those years I learned to adapt and always faced new challenges. It was not always easy, however, in the end, I was the sole survivor independent coffee shop within a 10-mile radius of my location. Just two corporate coffee chains and I were left after that year. All told the corporate coffee chains took down over 15 small independent coffee shops and kiosks and I was the last one standing and thriving.
Along the years I meet others with the same passion for coffee and I quickly learned that it is not only “how good a barista is” that makes a coffee shop successful, but the business side of coffee as well.
Hence why I started this website you are on now. To provide the tools and resources for up and coming coffee shop owners to gain that vital insight and knowledge on how to start a coffee shop successfully.
Stick around, browse through my helpful blog and resources and enjoy your stay! With lots of LATTE LOVE!