Starting a non-profit can be an extremely rewarding entrepreneurial experience. A non-profit gives you the ability to give back to your community and really make a difference unlike any other industry. But starting a charity or nonprofit organization is just like starting a for-profit business. And just like starting a for-profit business, there are steps that you need to take to ensure that you are successful. Here are some tips to consider before you start and some points on generally how to start a business.
Have a Plan and Do Your Homework
When starting a non-profit organization you have to ask yourself a few initial questions:
- What is my objective?
- Who am I trying to reach?
- Do I have the resources to achieve this goal?
- What is my timeline?
As you begin the process of documenting your idea, mission, and vision as well as the formation path of your non-profit consider investing a good amount of time in the beginning writing a detailed business plan. This is an important step because you will need parts of your business plan to include in your federal Form 1023 application for tax-exemption status and future fundraising.
One of the critical elements of your business plan to determine is your initial startup costs and your future operating costs. Some of your initial startup costs may include:
State Filing Costs
You can find some information on this chart that illustrates the costs necessary to file in each state. To determine what you may need be sure to visit your state association of nonprofits and speak with a legal counsel that is familiar with nonprofits.
Incorporate Your Nonprofit & Establish Governance
Nonprofits cannot escape the paperwork that is required in starting a business and may even require a few extra steps to obtain a 501(c)(3) tax-exempt status. This will be where most of your time will be focused on in the beginning. To make the process to incorporation easier and getting to 501(c)(3) faster here is a checklist:
Pick a creative and relevant name. This is important because it will be your brand, your rally cry and your identifier. Make sure whatever you choose is available by doing a name search with your Secretary of State or through nonprofit search engines.
Assemble a Board of Directors. This group is very important and requires a large commitment by them because they will be legally accountable to help your organization meet its vision and mission. The requirements set upon them are different state to state, so be sure to check with your Secretary of State.
Draft your bylaws with your Board of Directors guidance. This will be your operator’s manual for your nonprofit. You will need to have a copy of this on premise at your office on record for filing your Articles of Incorporation and will need to submit these when applying for your federal tax-exemption.
Decide on a Legal Structure. Below is a list of potential legal structures to consider. Be sure talk with legal counsel and your accountant to determine what will best work for you.
Prepare & File Articles of Incorporation. This is done with the State your nonprofit is headquartered in and some of the information that you will need includes:
- Purpose of organization
- Name of Initial directors
- Name of incorporator
- Name and address of registered agent
- Statement membership
Get your Federal Employer Identification Number (EIN). You can obtain your EIN by filing out IRS Form SS_4. This can be done online at the IRS EIN Online page.
Get your 1023 Federal Tax-Exemption to get 501(c)3 Status. Next, you will want to do all your research to figure out if your nonprofit is eligible for any tax exemptions. What you need to include when filing for your 501(c)3 Status:
- Certified copy of certificate of formation from your state
- Copy of bylaws
- Details pro forma financial statements, including revenue and expense statement for current and three preceding fiscal years
- Proposed budgets for the next two fiscal years; including a list of anticipated financial support
- Narrative description of past, present and future planned activities with an emphasis on broad public benefit of organization’s activities
- Names and addresses of director and officers
- Annual accounting period (what is your fiscal year)
- Statement as to whether the org is claiming status as a private foundation or public charity
- Fee of $400 or $840
Finally register for Charitable Solicitation and Fundraising. Many states require this registration prior to soliciting funds or hiring solicitors.