Do we need a new organization?

Is it necessary to create a new organization to administer and organize the Water Fund, or can existing organizations guide the effort?

Businesses evolve over time. In the United States, you can start a business without forming a new legal entity – just sell goods or services as a sole proprietor and pay individual taxes on your income from the business. If the business grows and you need to bring in other people to help you finance or operate the business, you can establish a partnership through an agreement or incorporate a limited liability company. If the business grows further and you want to permit persons not actively involved in the business to invest in the business and obtain a right to a portion of its profits, you might establish a corporation in which outside contributors can invest as common stockholders. Similarly, you do not have to establish a new legal entity in order to start a water fund. As interested persons consider the establishment of a water fund to promote water conservation efforts, one of the first questions should be whether existing organizations should be engaged to organize the fund, either initially or in the long-term, or a new entity should be created as the home of the fund.

Key topics to address

  • Timing

    How soon does the conservation work need to start? How soon do you need to start collecting and distributing funds for the work?

  • Cost

    Does the anticipated scope of the project over the next couple of years justify the time and expense that would go into establishing a new entity, or is the time and expense better spent using an existing entity to organize the fund and implement its mission? Does the size of the project justify the ongoing administrative costs – both time and money for record-keeping and related matters – necessary to keep a new entity running?

  • Existing entities

    Are there any existing entities that could act as a host for the planning or implementation of the conservation projects – acting as a temporary or permanent “host” for the water fund? Can one or more existing entities cooperate with one another to get the water fund activities started before transitioning to a new entity for long-term implementation of the fund activities?

  • Human resources need

    Can existing governmental, non-profit or for-profit organizations provide employees, either part-time or full-time, to organize the water fund? Should an existing organization hire new employees or pay contractors to organize the fund or would it be best to establish a new organization to hire such employees and establish the fund? It is important to remember that if a new organization is going to be established to organize and implement the fund it will be necessary for the organization to obtain funding and hire employees – otherwise it may be an expensive empty box. Who will be designing and implementing the conservation efforts to be organized and financed by the fund? Will one or more existing entities be engaged in those efforts? Or is it necessary to establish a new entity (either immediately or in the long-term) to administer funds, design the conservation efforts or implement the conservation efforts?

  • Scale

    How large is the project, in terms of the land area covered and the complexity of the conservation efforts to be implemented? Do one or more existing organizations have the capacity and expertise to carry out the project or should a new entity be created to coordinate the efforts of all the parties involved in the project?

  • Size of fund

    How much money will be involved? Do any existing organizations have the administrative capacity to collect, invest and disburse funds and report on the use of the funds to interested stakeholders? Does a new entity need to be established for this purpose? Does a third party custodian of the water fund assets, such as a bank acting as the trustee for a trust, need to be engaged?

  • Stakeholder dynamics

    Can existing entities that want to sponsor and participate in the fund work together to finance and implement projects through a contractual arrangement, or would it be best to use a single new or existing entity to administer funds, decide which projects should be funded, and plan and implement the projects? Will such sponsors want to retain direct control over individual projects they fund, or are they willing to contribute to a general fund that will select projects? Will they require a vote (or a controlling vote) over project decisions if they are funding projects indirectly, through another entity rather than directly?