Undoing a Big Mistake by Reinventing the Rules
by Mat Probasco
When Melody Nolan realized she’d made a big mistake incorporating her new venture, the well-intentioned but inexperienced business owner wasn’t sure what to do.
Serial entrepreneurs know all sorts of the tricks and canny maneuvers that can easily trip up first-timers. There are some obvious ones—like don’t start manufacturing until you are sure you have a customer, and research your company name thoroughly. (We know a restaurant in New York that initially chose the name of the age-old publisher that once occupied their space, only to find out they published racist books! The name change took a year.) Then there are more subtle choices that can come back to bite you.
When Nolan incorporated TreasureLives, an organization dedicated to suicide prevention and mental health awareness, she feared operating a not-for-profit would be too complicated for someone relatively new to running her own business. So, instead of filing her paperwork as a 501(c)(3), she incorporated her San Diego-based business as a private stock company—something more in her comfort zone.
What she didn’t realize, however, was the value of being a not-for-profit for an organization like hers.
To gather supporters, she needed both the government endorsement that comes with being a non-profit, as well as the tax incentive of donating to a non-profit, Nolan said.
It might sound like an easy enough problem to fix, but Nolan found, much to her dismay, that California had no mechanism for such a change. She thought she could fill out a form, pay a filing fee, and be done with it. “I was in for a rude awakening,” she said.
To re-incorporate as a 501(c)(3), she’d have to undergo the entire process of incorporation from scratch: rebrand everything, from the web domain to the social media pages, print new business cards— all with money she and TreasureLives didn’t have.
To make matters even more difficult, Nolan suffers from a health condition that makes it difficult for her to leave her home. She called her attorney, did loads of research, and then as a last resort did something audacious. She reached out to California’s secretary of state, the office that oversees business incorporation. With her attorney’s help she crafted a form that would allow her to transfer TreasureLives from a C-corporation to a not-for-profit. She crossed her fingers and sent it in.
To her great surprise she received a letter back from the legal department of the secretary of state with a copy of the form. The letter asked that she make a few minor technical changes. Considering how busy the secretary of state of California is, just receiving a response astounded Nolan. “My lawyer said, ‘This is amazing, because it means someone actually read this.’”
She made the revisions and sent it back. Soon after, a copy of her form arrived with the word FILED stamped on it. “I didn’t know what it meant, so I called my attorney and he said, ‘Well, you did it,’” she said.
The whole experience boosted Nolan’s faith in local, regional, and state governance. “That just tells me that there are still people in the government who are working for the people.”
Every state and municipality has different rules and different offices for you to contact if you find yourself in a similar situation. In Nolan’s case, it was reaching out to the California secretary of state. In other cases, contacting a county manager or city hall official may be the right direction. For example, in New York City, the Mayor’s Office of Minority and Women-owned Business Enterprises helps untie the red tape (rules, regulations, paperwork, etc.) around doing business with the city itself. On the federal level, the US Small Business Administration and North American Industry Classification System takes on that role.
If you are truly lost, or have an issue on a federal level, reaching out to the United States Small Business Administration may be a good move.
Of course, it’s better to avoid such problems in the first place. Nolan said she hopes her story of persistence and resilience illustrates that people with mental health issues can overcome professional obstacles like anyone else. That said, she’s happy that this particular challenge is behind her.