Media innovation projects: Legal structure matters

Knight News Challenge finalists have great ideas to speed media innovation. However, like all entrepreneurs and innovators, they need to create an organization that has a legal structure in order to develop their ideas.

Deciding how to incorporate a media innovation or online publishing project is important. The legal structure will have an impact on the organization’s liability for defamation and other claims. It will also have an impact on the organization’s tax obligations, its assets and its management.

Many of Knight Foundation’s journalism and media innovation grantees have structured their operations as nonprofits. Some examples include, DocumentCloud, ProPublica, Voice of San Diego, Texas Tribune and Bay Citizen. However, a 501 (c)(3) is not for everyone. Other grantees have chosen to incorporate as for-profit companies, like NowSpots and Front Porch Forum.

Choosing the best legal structure is not easy; there are many considerations that need to be taken into account. Here are two useful resources that might help you figure out the best structure for your start-up:

  1. For Love or Lucre by Jim Fruchterman, published in the Stanford Social Innovation Review.
  2. How to decide: nonprofit vs. for-profit [SLIDES] by Ben Wirz, Knight Foundation’s Director of Business Consulting.

You can learn more about how to set-up the legal framework for your organization on the Creating a Business page on the Citizen Media Law Project Web site.

If you prefer one business structure over another, please tell us why and comment below. And look out for the announcement of the 2011 News Challenge winners on June 22.