Paul Miller
Founder’s Beware! Do you have a great idea to found a program to help others in need or benefit a worthy cause or a unique artistic goal? If so please ask yourself the following questions:
• Should you establish a nonprofit, a for-profit, or a low-profit organization?
• Are your ideas protected?
• Do you have a clear exit strategy?
• If you’re successful and your project takes off, will you be ready to deal with people who have power and resources and are used to getting their way but who do not understand the creative process?
I believe the fiduciary responsibility of the members of a board of directors of nonprofits can be too easily compromised and have witnessed people outsource their responsibilities to search firms, delay tough choices, and resign when it gets tough. You may lose control and be ousted from the very program you founded! Should this happen, you may be tempted to rush back in to try to save your creation—but beware.
Nonprofits are founded with the best of intentions but make no mistake, they are businesses and some of them make huge sums of revenue, such as hospitals and universities, but few last more than five years.
A Circus Story
I speak from personal experience. I had an idea I strongly believed in, and formed a for-profit S-corporation, which is very easy to do. This business was successful but I needed capital to grow in order to serve my clients – poor people who could not afford to pay. So I worked with an incredible group known collectively as the Lawyers for the Creative Arts (LCA) in Chicago.
I wanted to take seven kids (who could not afford to go) to a convention, so I set up a nonprofit with the help of LCA. For five years, I established and ran two parallel organizations under the name CircEsteem—one was a for-profit and the other as a nonprofit. The for-profit clipped along and earned about $70,000 per year. The non-profit grew to over $650,000 in annual revenue in five years. I created them both, which included my intellectual work, but not my legal intellectual property (IP).
Our tagline was “The Greatest Kids on Earth” and I claimed responsibility for crafting that, too. Soon after, I received a call and a cease-and-desist letter from Ringling Bros. Circus claiming I was infringing on their trademark, “The Greatest Show on Earth.” (I should also note, I’d dropped out of college my senior year to tour as a professional clown with Ringling Brothers.)
My response to the cease-and-desist letter—“Bring it on! I am serving refugee kids from Sudan and you are worth $750 million.” What else could P.T. Barnum do?
We settled out of court and they gave me money to purchase new banners and shirts for the kids at CircEsteem. As a consequence, Mayer Brown who defended me/CircEsteem pro bono (thanks to LCA) offered to trademark CircEsteem. I signed the papers and appreciated their help.
I cannot stress this enough—Founders: put your IP in your name NOT in the name of your organization. If you fail to do this, your IP is no longer yours and you may as well offer it up as a gift to the organization.
Tale of Another Circus
The hugely successful Cirque du Soleil was founded by a street performer, but he grew his ideas as a nonprofit and received a grant to celebrate the 400-year anniversary of Montreal. Once Cirque’s founder, Guy Laliberte, realized the potential impact of his business, he changed the legal form back to a for-profit venture. Now he controls 80 percent of Cirque du Soleil and is personally worth approximately two billion dollars. In 2008, Cirque earned $733 million with profits of $175 million.
Cirque is the leading funder in the world for social circus programs. Through my work creating CircEsteem, I’ve learned many things from Cirque and have worked closely with their Social Action and Responsibility department.
At present, I’m working in the social circus market again and am proving it works as a successful business.
But one thing is different: This time I’ve established a Low Profit Limited Liability Company (L3C)…
Return to ARTSblog on Thursday for more of Paul’s experiences working with an L3C.