How to Start a Non-Profit Coffee Shop

How to Start a Non-Profit Coffee Shop

How to Start a Non-Profit Coffee Shop

 Starting a non-profit coffee shop can have a positive and lasting impact on your community.

Over the years, I have seen several non-profits open a coffee shop to assist with their core mission. In the process, these coffee businesses have created several economic and social opportunities that have really affected individuals, families, and neighborhoods in which they operate.

We hope to see other non-profit coffee shops and sustainable social enterprises open in every city across the globe – and thrive.

So, how do you start a non-profit coffee shop?

This post will discuss the basics of opening a coffee shop non-profit, some requirements, and how you can get your planning started.

For more information, consider reading our post, How to Start a Coffee Shop Successfully.

How to Start a Non-Profit Coffee Shop

First, what is a non-profit coffee shop?

Let's begin by defining a non-profit organization: A non-profit organization is a type of business structure established by the laws of a particular state with an aim to create public or social benefits. Unlike starting a coffee shop LLC, a non-profit does not distribute its profits to its owners or members.

Typically, a non-profit organization has to be created for charitable activity. In the case of coffee shops, you can offer free barista training and education, help employ individuals and provide specific services such as resume workshops, interview skill training, conflict management training, health and safety seminars, etc.

Often a non-profit can be designated as tax-exempt, but not all the time. You'll need to provide additional paperwork to the IRS for that to happen.

What's the difference between a for-profit and a non-profit?

A non-profit coffee shop is a functioning business that doesn't distribute profit to its members. Instead, funds are often reinvested to pay back operating expenses, debt, grow, or provide more “charitable” services. So while members and other workers can retain a salary, the members don't keep the net-revenue income as a for-profit business would.

Why Be a Non-Profit Coffee Shop?

What's the point of having a non-profit coffee shop? Establishing a non-profit coffee shop can pave the way for you to fulfill your organization's core mission without necessarily emphasizing making a profit.

On the other hand, when the goal is to profit, there are efficiencies that may not allow for a more significant social benefit.

Keep in mind that a non-profit coffee shop does not necessarily mean that they are not profitable. On the contrary, it is worth it to aim for profitability regardless of your business structure.

The difference is using the net revenue or profits for other organizational spending and social benefits. For example, proceeds may go to job training, educational programs, and housing.

Additionally, there are some key benefits to starting a non-profit coffee shop.

They include:

Access to Additional Funding Sources

Opening a non-profit coffee shop to do charitable work in some capacity may increase your access to specific funding only available to charitable organizations.

Specific funding sources may require you to have non-profit status in many cases. This allows some individuals or organizations to get tax deductions or other benefits.

Access to financial gifts, money grants, and private foundational support makes a non-profit coffee shop appealing for some cafes with a particular charitable mission.

Not Having to Pay Federal Taxes

Perhaps the most significant benefit of starting a non-profit coffee shop – is not being required to pay any taxes on the revenue it brings in. That tax money can instead be used to continue with the coffee shop's mission – whatever that may be.

Creates a Separate Entity

Starting a non-profit coffee shop creates a separate entity to conduct its business in its own name. This often helps with certain liabilities that may happen while doing business. However, if you did not form a separate legal entity, you or other owners would have to act on the organization's behalf – as an individual not as a business. For example, if you needed to take out a loan or sign a contract with a vendor, you – as an individual – would have secured the loan with your personal credit and collateral

Perpetual Existence

Creating a non-profit coffee shop allows the coffee shop to continue long after the founding members have resigned, moved on, or died. The organization's mission and impact can continue long after the founding members have moved on.

Disadvantages of Starting a Non-Profit Coffee Shop?

Starting a non-profit coffee shop can pose particular challenges for social entrepreneurs.

For one, you will have to keep detailed records of all meetings and transactions. The IRS can often look at your records and financials more carefully. Holding regular meetings, and keeping detailed financial records to ensure they are on the up-and-up will be the key to your non-profit status.

You must work every year to maintain your status, including filing state and federal tax documents, registration fees, etc. In addition, a requirement for most non-profits is to prohibit any private benefit from occurring to its members or board members.

Excellent Non-Profit Coffee Shop Examples:

Home Girl Café – Los Angeles, CA

Near Chinatown in Los Angeles, Home Girl Café and Home Boy Café and Bakery offer vocational training for individuals.

Street Bean Coffee Roasters – Seattle, WA

We’ve enjoyed seeing Street Bean’s success as a local Seattle non-profit. They provide training, jobs, mentoring, and housing advocacy.

Fare Start – Seattle, WA

Provides a work and training program for individuals struggling with homelessness in Seattle.

Getting Started

While the full details of starting a non-profit are beyond the scope of this article – and we highly recommend that you do your independent research, we will review some of the general topics below.

Formation of a Non-profit Coffee Shop

To start a non-profit coffee shop, you'll need to have several members that would constitute your board members. In your first meetings, you will want to nominate officers from your members. Each officer should have their duties.

Collectively, the officers will need to form an article of incorporation. Additionally, members would also need to create bylaws – these are rules that are adopted and which pertain to the management of the coffee shop – and where all members agree to the specifics of that management. The bylaws would include specific duties of the members, board, and officers.

Check the specific regs in your state

You'll have to check to make sure you're following the non-profit guidelines in your state. States may, for example, have different classes of members – how they should be appointed and the rights of the members.

Typically, you have to conduct annual meetings too. Those meetings often have requirements of a quorum, voting, etc.  As well as the process of adopting and amending bylaws.

Also, make sure that your non-profit coffee shop is eligible for tax exemption and is granted this particular status by the IRS.

What is Required to Start a Non-Profit Coffee Shop?

If you love paperwork as much as you love coffee, you'll be in luck. The truth is that maintaining a non-profit coffee shop requires diligence, persistence, and excellent record-keeping. As you may know, this skill isn’t for everyone. Nevertheless, if you are interested in a non-profit coffee shop, I strongly recommend that you get help with initiating and maintaining good standing with government agencies.

It will be important to stay on top of your paperwork – the IRS often scrutinizes the paperwork of non-profits – which can regularly get audited.

Below is a partial list of state and federal documents you may need to file with your state the federal government to receive and maintain your non-profit status.

You may want to keep your files together in a three-ring binder or folder. Your documents should include:

• Certificate of Incorporation
• Articles of Incorporation
• Registered Agent Consent
• Passed ByLaws
• Application for Property Tax Exemptions (If necessary)
• Trademark registrations (if any)
• Names and information of directors and members
• IRS Non-Profit Determination Letter
• Meeting Minutes
• Any financial Data
• Business Licenses
• Any permits
• IRS Documents

Is a Non-Profit Coffee Shop Right for You?

Having a non-profit coffee shop can be very beneficial to the mission and finances of the organization. Making a real impact in your community will undoubtedly have lasting effects for years.

But you are starting a non-profit and a coffee shop. While it is one organization with one mission – you are looking at two different elements.

This duality can be overwhelming for many social entrepreneurs. Holding meetings, keeping tax and financial documents updated, and operating a functioning coffee shop can be difficult for the best and brightest.

Additionally, many new non-profits starting from scratch can find it challenging to secure the money it takes to create coffee shops without any support. Many established non-profits with experienced staff are also vying for available private and public grant money, charitable contributions, and other donations. This can make any non-profit startup struggle for the first few years.

If you are sitting on the fence about starting a non-profit coffee shop, there are a variety of coffee shop concepts you can choose from.

Starting and running a coffee business is hard. You may also consider starting as a for-profit coffee shop business and then reapplying or restructuring your business as a non-profit entity as well. Starting as a for-profit coffee shop will help you understand the subtleties of running a business, expose you to a wide network of roasters and suppliers, and give you an idea of day-to-day operations.

If you find it’s too overwhelming to run a non-profit coffee shop consider hiring a manager who is familiar to this type of business. While a coffee shop manager will receive a fixed salary your business will still be non-profit and pursue the intended mission.

Further Reading: How to Start a Coffee Shop Successfully

How to Start a Non-Profit Coffee Shop

Create a Non-Profit Coffee Shop Business Plan

Having a well-written coffee shop business plan is just as crucial for a non-profit coffee shop as a for-profit business.

A business plan will help you better articulate the coffee shop's vision and mission as part of a larger non-profit organization.

A business plan will help spell out a variety of elements essential for the operation and function of the business, including your concept and branding, coffee shop menu, equipment needs, training, and non-profit services, coffee financials, and projected earnings.

For a detailed article, please read How to Write Your Coffee Shop Business Plan.

Raising Money with a Non-Profit Coffee Shop

For your non-coffee shop to succeed, you'll need to secure adequate funds to reach sustainability. This sustainability may include financial health and other goals established for the coffee shop.

To raise the appropriate amount of money, you will need to determine your anticipated total costs and financial revenue projections. Once you complete the cost and revenue analysis, you will develop your coffee shop funding mix.

Your coffee shop funding mix will spell out the pools of available funding sources that will allow you to open your coffee shop successfully.

For an in-depth look at your coffee shop funding mix, please read How to Determine Your Coffee Shop Funding Mix.

Setting Up Your Non-Profit Coffee Business Structure

You'll want to set up your non-profit coffee shop in the state you plan on operating in. I strongly recommend reviewing the state-specific requirements and fees you'll need to do. While states' requirements vary, you typically need to:

• Incorporate
• Write your Bylaws
• Apply for a Tax Exemption
• Keep records

Create a Clear Non-Profit Coffee Shop Strategy

Many non-profit coffee shops struggle to deliver their mission to other people. Before opening up you need to know exactly what your mission and vision are, how you are going to help others, and how your marketing strategy will help you reach your goals.

This means understanding what social impact you want to produce and writing down how your non-profit coffee shop will help with it. This might include your branding, marketing, and promotional efforts.

Non-Profit Coffee Shop Checklist

Below is a more specific list that most non-profit organizations will need to create their non-profit status.

• Choose a name
• Create your Articles of Incorporation
• File your articles with the Sec of State (of your state)
• Create your Bylaws
• Notify board members of a first meeting – where you will:
  • Adopt your bylaws
  • Elect your officers and members
  • Figure out your banking and financing
  • Authorize and prepare filing forms to submit to the IRS
  • Propose and ratify any actions and money needed
• Complete IRS forms
• File for a charitable solicitation registration in your state (if needed)
• Apply for your business license

Further Reading: How to Start a Coffee Shop Successfully

How to Start a Non-Profit Coffee Shop

We've written detailed articles on the steps to starting a coffee business in previous posts. But there may be specific considerations to those tips and recommendations I would like to point out when starting a non-profit coffee shop.

Your Coffee Shop Location:

Choosing the right coffee shop location for your non-profit is just as important if you were a for-profit organization. Your coffee shop location choice will be vital to generate sales and serve the people you are meant to serve.

However, since you are a non-profit, you may be able to reach out to other non-profits and determine whether or not they have any available space that they could provide for your coffee shop.

For example, you might be able to set up your coffee shop on church property or another non-profit's unused business-zoned space. In addition, having no rent or reduced rent would provide your non-profit coffee shop the financial flexibility to perform your mission with funds appropriated elsewhere.

Your Coffee Shop Menu

Determining your coffee shop menu will be vital for your business because it will impact the physical space you'll need to have and what target market you will serve.

Additionally, your menu might be a significant factor in your training program. For example, if you intend to serve coffee and a lunch or dinner menu, you may want to hire a chef or chef who could teach your trainees. This vocation training could be a part of your overall non-profit mission.

Your Hiring Practices

Your hiring practices play a crucial role in your coffee shop's success. However, as a non-profit, you may want to hire individuals who may not always be the best candidates for hire.

This is where your coffee shop can shine and provide opportunities to individuals who may not be able to get quality employment for any number of reasons.

For example, you may want to hire individuals with mental or physical disabilities, formerly incarcerated people, or homeless persons who struggle to keep a job because of their situation.

A non-profit coffee shop cannot only be a place for them to learn skills but to provide them with a positive social network, mentoring career guidance, and the ability to make money. Your program can turn individuals into amazing baristas who can be hired to work elsewhere after they finish your program.

Cafe Point-of-Sale System

Keeping and maintaining good records is a requirement for your non-profit coffee shop. To help with your record-keeping, you will want to use a robust coffee shop POS system.

A POS system can help you maintain appropriate sales records and staff hours, inventory management, and other vital data.

How to Start a Non-Profit Coffee Shop

Conclusion

Starting a non-profit coffee shop can significantly impact your city and town. If you are thinking about starting a coffee shop, you will want to dive into the non-profit requirements in your state.

Additionally, you may want to set up your coffee shop similarly to a for-profit business. Of course, there will be differences in concept, mission, and vision, but the essence of serving delicious coffee to customers will be primarily the same.

Additional Questions:

How Much Do Non-Profit Coffee Shops Make?

Non-profit coffee shops want to be successful in their mission and vision. In many respects, success should be measured with sales or revenue and the achievement of core benchmarks. For example, the success of a non-profit coffee shop may be achieved by helping a certain number of people get trained and into housing.

Nevertheless, sales are essential. Your total revenue depends on various factors, including how many daily sales you have and the average receipt ticket.

For a thorough analysis of how much money coffee shops make, please read our post, How Much Does a Coffee Shop Make?

What other coffee shop business structures are there?

Starting a non-profit business structure is just one structure available to coffee entrepreneurs. Other business structures might suit you, including a corporation, partnership, or limited liability company.

Each business structure provides its own benefits depending on the type of business it is and whether or not it works for the founding members.

We detail this in our post, The Benefits of Starting a Coffee Shop LLC.

Is it hard to open a coffee shop?

Starting and operating a coffee shop is an undertaking. It is easier, however, if you have the right help and have gained the knowledge to succeed. We share some pearls of wisdom that current and former coffee shop owners can give to maximize their success.

Our business model brings the wisdom and knowledge of experienced coffee experts right to you in our Complete Coffee Shop Startups Kit.

For a more in-depth look at this subject, consider reading, Is It Hard to Open a Coffee Shop?

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Info Sources:

How to Form a Non-Profit Corporation in Washington State by Seattle-King County Bar Association, Young Lawyers Division, Community Involvement Committee

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