EOTV: For-profit or Non-profit? The Existential Crisis of Fair Trade Retail
So you want to start a fair trade organization. You're going to sell products, so of course you need to be legit and register somewhere, so that you can do your American duty as a tax-payer. It's decision time - what's One Mango Tree?
I have no idea. As it turns out, One Mango Tree is also like it's owner - the mid-twenty-something trying to figure out the meaning of life. Perhaps not QUITE that existential, but One Mango Tree's tax status over the past year has been a bit, well, nebulous.
The conversation in my head sounds sort of like this:
Well, I sell products, so I'm a retailer. But, I'm also contributing the profits back to the producers to help improve their local businesses. And I'm also contributing some profits to buy bicycles and pay school fees for their kids. Then someone calls me up and says "we have a family foundation and want to give One Mango Tree a donation - what's your tax status?" So really, since we're contributing our profits back to the organization and producers, we don't want to be taxed on profits...so maybe we should be a 501c3? But just because we're doing positive work and investing in the livelihoods of our producers, that doesn't mean we are a charity - can't a for-profit business invest in its producers too?
One Mango Tree still is and always has been a for-profit sole proprietorship. While this status with the Feds hasn't changed, my thinking about One Mango Tree's future has been a bit like a ping-pong as i navigate the waters of starting an organization.
First I looked to predecessors:
Ten Thousand Villages and SERRV, the two oldest fair trade organizations out there, are both non-profit.
World of Good employs a unique hybrid model, with a for-profit arm doing the selling and a non-profit arm furthering fair trade initiatives. And then there are all the relatively small fair trade retailers and wholesalers that source from a variety of producer groups - most of them are for-profit.
And then I read Muhammed Yunus's latest book, Creating a World Without Poverty, which explores a new model, which he calls the social business - a call for an "enlightened capitalism." The model aims for full-cost recovery (a feat not even attempted by non-profits), accompanied by social returns. The vocabulary changes from fundraising and donations to investment with a return of social impact instead of cash dividends. While the current tax structure in the US isn't arranged to promote this type of business, it doesn't mean we can't start thinking about the model as a possibility for fair trade ventures.
So what's the right business structure for you? Let the ping-pong match begin.
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