nonprofit

"To Nonprofit" or "Not to Nonprofit": That is the Question…We Get All the Time!

"To Nonprofit" or "Not to Nonprofit": That is the Question…We Get All the Time!
Written by Nick Armstrong

Starting a theater or comedy club is an exciting and challenging endeavor. Whether you’re launching an improv school, building a stand-up venue, or creating a multipurpose performance space, choosing the right business structure is a crucial early step. Many new theater founders ask:

  • Should I start a nonprofit improv theater?
  • What’s the best legal structure for a comedy venue?
  • Is an LLC better than a nonprofit for my theater?

The answer depends on your goals, funding strategy, and community mission. This guide will help you weigh the pros and cons of forming a 501(c)(3) nonprofit versus other models like LLCs and S-Corps — specifically for those in the comedy and performing arts world.

Why a Nonprofit Might be the Best Business Model for Your Comedy Theater

1. Funding for the Arts

YES! Improv is art, and funding for the arts can enhance community outreach, support DEI initiatives, develop educational programming, facilitate youth workshops, and ensure your lights stay on. There are more grants available to NPOs than to other business structures.

2. Tax-Deductible Donations

People enjoy supporting the arts. They also appreciate tax deductions. As a nonprofit, when someone donates to your theater, they receive a nice little tax write-off. That’s a win-win, making fundraising much easier when you can say, “Hey, this helps us AND helps you.”

3. Mission-Driven Focus

You’re not out here trying to become a corporate comedy overlord. You’re building community, teaching creativity, and making weird and wonderful art with a purpose. A nonprofit structure reinforces that mission; it tells the world (and your board, your staff, and your audience) that we’re here to serve.

4. You Can Pay Yourself (Yes, Really)

This surprises people. Being a nonprofit doesn’t mean you can’t make a living. You absolutely can and should pay staff, performers, educators, and administrators. You just need to be reasonable, document it, and ensure it aligns with your mission and budget.

5. Community Legitimacy

It opens doors. Being a 501(c)(3) provides a certain level of credibility. Schools, city governments, and foundations tend to take you more seriously when you have that nonprofit status.

Challenges of Running a Nonprofit Improv Theater or Comedy Club

1. Lots of Paperwork

Starting a nonprofit takes time, effort, and money upfront. You need to file articles of incorporation, create bylaws, assemble a board, submit your IRS forms, and maybe even hire a lawyer or consultant to ensure you do it correctly. It’s not impossible, but it’s definitely not a one-weekend project.

2. You Need a Board of Directors

You can’t go it alone. A nonprofit is governed by a board, and they technically have the final say on major decisions. That can be great… or it can feel like herding cats if you don’t have the right people. Choose individuals who believe in your mission and understand the art form. No one wants someone on the board asking, “Wait, what is improv again? It’s Stand Up, right?"

3. No Ownership

This is important for you to know: as a nonprofit, you don’t “own” the theater in the traditional sense. It belongs to the public. You can run it, lead it, and get paid by it—but you can’t sell it off one day and walk away with a check. If the organization dissolves, its assets have to go to another nonprofit.

4. More Oversight

The IRS is watching (kind of). You need to keep records, report your finances, and stay on mission. You must file a 990 every year. You can’t just start a puppet burlesque show and call it "educational outreach" without someone possibly asking questions. Just don’t do anything foolish, remain above board, and you’ll be fine.

Should You Start as a Nonprofit or Traditional LLC? 

If your goal is to create a community-centered, sustainable, long-term home for improv and comedy, and you’re open to collaboration, accountability, and a bit of bureaucracy, then yes, choosing to go nonprofit can be a significant advantage.

If your dream centers on owning your brand, expanding into other ventures, or maintaining a flexible structure, an LLC may be the better option. And that’s perfectly fine too. Different missions require different models. RISE Comedy operates as a For-Profit, while Improv Utopia is an NPO. I have distinct missions for both.

Whether you’re starting a comedy club, launching an improv theater, or building a space for live performance, choosing the right legal structure, nonprofit or otherwise, can set the foundation for long-term success. If you’re dreaming of opening a theater that serves your community and supports the performing arts, a 501(c)(3) nonprofit might be your next best step.

Frequently Asked Questions About Starting a Comedy Theater or Improv Space

  • Is it better to start a nonprofit or an LLC for a comedy club? It depends on your long-term goals. Nonprofits are ideal if your mission is community-driven, while LLCs offer more flexibility for ownership and profit.
  • What licenses do I need to open an improv theater? In most cities, you’ll need a business license, liability insurance, and possibly special permits for alcohol or live performance. Local regulations vary.
  • How do I fund a nonprofit comedy theater? Grants, tax-deductible donations, sponsorships, and fundraising events are common strategies for nonprofit theaters.
  • Can a nonprofit theater pay its performers and staff? Yes!  Nonprofits can pay reasonable wages to staff, directors, and performers. You just can’t take profits as a personal distribution like you can in an LLC.

Nick Armstrong is an actor, improviser, director, writer, and entrepreneur. His television credits include appearances on the Emmy Award-winning shows The Office and Grey’s Anatomy, as well as Brooklyn Nine-Nine, New Girl, Young Sheldon, Parks and Recreation, and Jimmy Kimmel Live. His TV Pilot Bulldozer was featured in Sundance, SXSW, and Tribeca Film Festival.

Currently, he is the Co-Owner and Artistic Director of RISE Comedy in Denver, the Co-Owner of Crowdwork, and Co-Owner of Haus of Comedy in Sacramento. He is also the Founder and Executive Director of Improv Utopia, a nonprofit network of adult improv camps that supports the improv community and other arts-related charities.