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A Look at Strategic
Alliances through Both a
Legal and Funding Lens
2014 Nonprofit
Empowerment Summit
Giving It Our All!
K...
A Look at Strategic
Alliances of
Nonprofits through
both a Legal and
Funding Lens
Presented by
Kelly Nowottnick of Venable...
What is a Strategic
Alliance?
• Two or more organizations combine, affiliate or
otherwise come together; and
• At least on...
Temporary/Contractual
Alliances vs.
Permanent/Fully-Integrated
Alliances
• Strategic alliances can be contractual or tempo...
Some Common Types of
Strategic Alliances
ROUGHLY RANGING FROM LEAST INTEGRATED TO MOST
INTEGRATED:
• Sponsorship Agreement...
Sponsorship Agreements
• Fiscal Sponsorships vs. Corporate Sponsorships: two
different concepts
• A corporate sponsorship ...
Programmatic
Collaborations
• Nonprofits may share policies, procedures and best
practices and pool financial and human re...
Back Office
Consolidations
• Nonprofit organizations with similar purposes can
affiliate through a common management struc...
Joint Ventures
• Relationship that arises from an express or implied
agreement between two or more parties to
undertake so...
Pros and Cons of Cross-
Sector Joint Ventures
• Pros for nonprofit:
o Greater access to capital and professional expertise...
Federations
• A Federation is generally an association of nonprofit
associations, often structured around regional lines.
...
Asset Acquisitions
• A nonprofit organization may acquire the assets of a
dissolving nonprofit organization.
• Preferable ...
Mergers and
Consolidations
• With a Merger, one entity legally becomes part of the other,
surviving entity and dissolves.
...
Tax Considerations
• Minimizing Unrelated Business Income Tax
• Maintaining Tax-Exempt Status
14
A Strategic Alliance
Can Improve
Fundraising
Capabilities by . . .
15
o bringing in new board members and staff with
new competencies and fundraising potential;
o providing the organization wi...
Your Experiences?
17
Questions?
18
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A Look at Strategic Alliances through Both a Legal and Funding Lens

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Transcript of "A Look at Strategic Alliances through Both a Legal and Funding Lens"

  1. 1. A Look at Strategic Alliances through Both a Legal and Funding Lens 2014 Nonprofit Empowerment Summit Giving It Our All! Kelly Nowottnick, ESQ, Associate, Venable, LLP John W. Dyess, Senior Consultant, Like Minds
  2. 2. A Look at Strategic Alliances of Nonprofits through both a Legal and Funding Lens Presented by Kelly Nowottnick of Venable LLP and John Dyess of Like Minds, LLC 2
  3. 3. What is a Strategic Alliance? • Two or more organizations combine, affiliate or otherwise come together; and • At least one of the organizations gives up some level of independent decision-making in order to accomplish an organizational or community goal. • Strategic alliances usually occur for common mission-related objectives. 3
  4. 4. Temporary/Contractual Alliances vs. Permanent/Fully-Integrated Alliances • Strategic alliances can be contractual or temporary in nature, such as programmatic collaborations, administrative back-office consolidations and joint ventures. • Alternatively, strategic alliances can involve more permanent, full integration, such as federations, acquisitions of dissolving organizations’ assets, mergers and consolidations. 4
  5. 5. Some Common Types of Strategic Alliances ROUGHLY RANGING FROM LEAST INTEGRATED TO MOST INTEGRATED: • Sponsorship Agreements • Programmatic Collaborations • Back-Office Consolidations/Common Management Company • Joint Ventures • Federations • Asset Acquisitions • Mergers • Consolidations 5
  6. 6. Sponsorship Agreements • Fiscal Sponsorships vs. Corporate Sponsorships: two different concepts • A corporate sponsorship is the payment of money by a for-profit company to a nonprofit to further the nonprofit’s mission, with an acknowledgment that the business has supported the nonprofit's activities, programs, or special event. • Fiscal sponsorship refers to the practice of nonprofit organizations offering their legal and tax-exempt status to groups engaged in activities related to the organization's missions. It typically involves a fee- based contractual arrangement between a project and an established non-profit. 6
  7. 7. Programmatic Collaborations • Nonprofits may share policies, procedures and best practices and pool financial and human resources to accomplish a common programmatic objective. • These programmatic collaborations are sometimes referred to as “co-sponsorships.” 7
  8. 8. Back Office Consolidations • Nonprofit organizations with similar purposes can affiliate through a common management structure, whereby the groups realize the efficiencies of coordinated “back office” operations such as accounting, meeting management, IT, human resources, and other supportive functions. 8
  9. 9. Joint Ventures • Relationship that arises from an express or implied agreement between two or more parties to undertake some common objective for their mutual benefit. • Cross-sector joint ventures between one or more nonprofit organizations and one or more for-profit organizations are becoming increasingly popular. 9
  10. 10. Pros and Cons of Cross- Sector Joint Ventures • Pros for nonprofit: o Greater access to capital and professional expertise; o Opens up business opportunities otherwise unavailable to a tax-exempt organization. • Pros for the for-profit: o New sources of capital; o Access to/exploitation of specific assets owned by the nonprofit (e.g., intellectual property rights or specific real property); o Certain tax credits o Greater community or political support o May further the philanthropic goals of for-profit company owners. • Cons for nonprofit: o May threaten tax-exempt status, if not carefully structured o May generate UBIT • Cons to nonprofit and for-profit: o May unintentionally result in a partnership whereby one partner is liable for the sole action of the other partner, if such action was carried out in the name of the partnership. 10
  11. 11. Federations • A Federation is generally an association of nonprofit associations, often structured around regional lines. • An affiliation agreement is a binding contract that sets forth the nature of the relationship between the parties. • Examples: United Way and various national associations 11
  12. 12. Asset Acquisitions • A nonprofit organization may acquire the assets of a dissolving nonprofit organization. • Preferable when one organization is much smaller in size than the other. • Also preferable when there are significant future contingent liabilities, because successor organization does not, by law, assume the liabilities of the dissolving organization. • Procedural requirements can be complicated for dissolving entity. The dissolving organization must typically satisfy due diligence requirements; obtain member approval; adopt a plan of dissolution; satisfy outstanding liabilities; transfer any remaining assets to the other nonprofit entity; file Articles of Dissolution with the State; and wind up affairs. 12
  13. 13. Mergers and Consolidations • With a Merger, one entity legally becomes part of the other, surviving entity and dissolves. • With a Consolidation, each entity dissolves, and an entirely new nonprofit corporation is created to take on the programs, resources and membership of the former entities. • Pros: o Increases assets o Reduces costs o Permits new corporation to provide enhanced services and serve larger constituency o Reduces members’ dues • Cons: o Legal fees o State filings o Member approval o New corporation may need to submit its own IRS application for tax-exempt status 13
  14. 14. Tax Considerations • Minimizing Unrelated Business Income Tax • Maintaining Tax-Exempt Status 14
  15. 15. A Strategic Alliance Can Improve Fundraising Capabilities by . . . 15
  16. 16. o bringing in new board members and staff with new competencies and fundraising potential; o providing the organization with access to donors from the other constituent nonprofit organizations; o improving the community’s awareness of the organization and its mission; o increasing administrative capacity; o centralizing decision-making; and o improving organization-wide accountability. 16
  17. 17. Your Experiences? 17
  18. 18. Questions? 18
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