Begging your wisdom... (quandary)
Printed From: Community Theater Green Room
Category: Theater Administration
Forum Name: Running Your Theater
Forum Discription: General questions about how to make it work
URL: http://www.communitytheater.org/forum/forum_posts.asp?TID=1672
Printed Date: 5/05/24 at 1:40pm
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Topic: Begging your wisdom... (quandary)
Posted By: Paramitch
Subject: Begging your wisdom... (quandary)
Date Posted: 10/16/05 at 9:13pm
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Hey everyone! About me: I've been working in entertainment officially for fifteen years (primarily as a TV/film publicist), working in the theatre on the side as a director, stage manager, and acting teacher whenever possible, as well as serving on three different theatre boards. So we have picked a medium-small city in the Pacific Northwest (WA state -- we're both originally from Seattle but felt that the Seattle theatre climate is too closed off), one that doesn't have a lot of local theatre as far as our research shows, and offering a good cost of living. We plan to move to the city in one year, launching the theatre in Winter 2006. We intend to be smart and businesslike about this and are currently working up the business plan, logo, area demographic analysis both for potential audiences as well as potential advertisers and investors, etc. The great thing about my experience is that I can do all our PR as well (and very aggressively). We also have two advisors who have run longtime and very successful for-profit theatres in South Florida. So here's the rub: I see a lot of arguments to go nonprofit, but I'm just not convinced yet. The down side to going nonprofit is dealing with a board (as far as I can see) -- does this mean, as the founders (and main funders) to start, that we will not be able to run or direct the theatre as we see fit? If we want to run the theatre ourselves, does this mean a board is just not for us? Also, if we are starting this with our own money, what does nonprofit status mean as far as the funds we are investing ourselves? (I will be consulting a lawyer on some of this so ignore me if I'm getting too specific) I'm confident of my ability to (1) do the PR, and to along similar lines, (2) bring in some significant additional funding. We are both highly experienced in theatres of various sizes and between us have done almost every job a theatre requires at least once. So the thing is, if we can run it for-profit, should we? Or, are we stupid, when obviously a lot of additional funding would be available to us via grants and tax-deductible corporate and community donations? What's good about a for-profit if we can actually do it? What's bad? Can any of you give me arguments either way? This is the decision we need to make now, before we can proceed with our plans, and we just haven't been sold either way. Also, I know from my reading that Washington state can be a bit weird on some of these issues, versus other states. Thanks everyone. I've read everything you guys have posted, and while I've seen this come up occasionally, I haven't seen the arguments put forward on both sides as such. However, if I've missed a post or topic area and this is repetitive, thanks for putting up with me. ;-) And it's great to meet you all! |
Replies:
Posted By: dougb
Date Posted: 10/17/05 at 12:15pm
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First, if you incorporate as either a non-profit or for-profit you will
have a Board of Directors. Washington requires a minimum of three
directors. In either case you can hand pick your first board of
directors who will adopt the first set of by-laws. These by-laws
will specify how future directors are chosen. I know of one set
of by-laws that allows the President of the board to nominate future
directors to the remaining board for ratification. That way you
can keep control. You are right that much of the outside funding would dry up if you are a for-profit corporation. You have another problem that may cause you problems in the future. First, you need to get your 501(c)(3) designation from the IRS. To get it, you must be a non-profit. For the most part getting IRS approval is time consuming but not impossible (there is an article on this site I wrote several years ago). There is another IRS test that you would need to pass: Section 509(a). This test determines whether you are a "publically supported" organization (desirable) or if you are "privately supported" (not desirable). The question is how much of your funding comes from the public and how much comes from large donors. I can't remember the ratio but either 1/3 or 2/3's of your income needs to come from the public or you are classified as "private". There are lots of rules governing the deductability of donations to a private non-profit. If you and your friend put most of the money into the organization, you might end up as a private organization. The reasons for being a for-profit boil down to how much of a profit you are going to make and what you want to do with that profit. Years ago I owned a for-profit business (not theater). Since the corporate income taxes were higher than personal income taxes, I paid myself an end of the year bonus amounting to the profits for the year. There was a lot of regulatory paperwork as a for-profit although there might have been an equivalent amount for a non-profit. I know dozens and dozens of small and medium size theaters and only one is on the for-profit model (they are doing quite well - actually their theater is supported by profits from their restaurant and bar). Most theaters are struggling financially now. Ticket sales are down, donations are down and costs are up. Not a good time to use the for-profit model. |
Posted By: PatrickArmagh
Date Posted: 10/17/05 at 3:49pm
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Good Luck. I am not familiar with the Pacific Northwest or laws of Washington state regrding Non-Profits, but I would imagine that if what Doug has indicated about the board of three. I would imagine that you and your friend could set up the by-laws for ten year terms of board members and elect yourselves to the board for the first 10 year term. Then recruit an Accountant for the third position and an attorney for another posistion. Leave room for the board members to step-down or resign. A board of four will keep you legal in case of a single departure. As for funding, I have seen cases where board members of non-profits are reimbursed for their work, and this is legal. Check with a lawyer and Accountant on this situation, but in essence, the board could pay you as a Marketing Director and your Friend as the Artistic/Managing Director. Just make sure to recruit like minded individuals who understand that this is your theater if that is how you want to portray it. My experience with good boards, are generally that they stand-off. They participate for appearances only, and are generally more involved in their daily line of work. |
Posted By: Paramitch
Date Posted: 10/19/05 at 8:06pm
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Doug and Patrick, Thanks so much for your input here -- I very much appreciate the advice, and you've given me some excellent food for thought. It's also something of a relief to learn that there are other options than a very hands-on board (I have had some excellent experiences there, but also a few really bad ones as well). More later as we assemble all our options and take our next steps... |
Posted By: PatrickArmagh
Date Posted: 10/25/05 at 1:13am
| Read "Running A Theater" by Volz. It came out this year and is wonderful. |
Posted By: cpnc
Date Posted: 8/29/06 at 4:32pm
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For profit/non profit. So much depends on whether you want to do ALL the funding yourself and keep control, or seek donations aand lose most of the control. And how you set up the bylaws. I was the secretary of a not for profit organization where the leader set himself up as President for life with a rotating board of directors under him. It worked. Our group is non profit and the biggest advantage is free stuff in the form of donations, BUT if there are a lot of other non profits in your area you are COMPETEINGwith them for a share. There was a time when it worked well here, no longer. All non's are suffering...just to many mouths to feed. There is a for profit group here and they are the ONLY ones thriving, because they are not dependent on anyone AND they retain complete control of their efforts, pay their actors a stipend and are a world unto themselves. I would opt for profit myself, and keep the control.....the debates and arguments are the biggest issue and the power plays are ridiculous. They are destroying our company, but for a few stalwart souls. ------------- Be theater...........breathe theater. |