Starting Your Own Nonprofit
Great nonprofits, like all great businesses, tend to start with a great idea. Socially conscious people see a need in the community and start a nonprofit organization to help fill it.
But what happens after that? How do you fund a nonprofit, get incorporation for a nonprofit, and create a nonprofit Board of Directors?
Beyond the Big Idea
When you have a big idea, it can be hard to deal with all of the little details. But starting your own not-for-profit organization is all about the details, and the steps that you have to follow to get your nonprofit up and running. The first step is a business plan, which is the way in which you are going to carry out your “big idea”. It should answer questions like “Does the community need these services?” “How will I fund this organization?” and “How many people do I need to run it?” Your business plan will be your guide as you move through the process of starting your own nonprofit.
You’ll have to think through a number of issues before you can begin to file all of the paperwork that can get your organization the official status that it needs. In order to become a nonprofit organization, you must qualify for 501 c 3 status (or 501c4 for faith-based organizations). 501c3 is an Internal Revenue Services designation that makes charitable organizations tax-exempt. In most cases, only 501 c 3 nonprofit organizations will be eligible for grants and other large donations.
To find out if your idea for an organization would qualify under 501 c 3, you should check the 501 c 3 guidelines on the IRS website . If you think that you can qualify for tax exempt nonprofit status, its time to get organized!
The term “organization” can mean many things. Some nonprofit organizations have 1,000s of employees, while other only have a few, or even one paid employee! Nonprofit organizations operate for a number of reasons, and on a variety of budgets sizes. But all nonprofit organizations have one thing in common: they all have to be incorporated.
In order to become incorporated, you will have to choose a state to establish your business. Most organizations incorporate in the state where they conduct this business; if you operate in a number of states, you can incorporate in any of them. Rules for incorporation vary from state to state, but there are a few things that every organization will have to do to become incorporated:
1) Think of an organization name, and make sure it is available in your state or incorporation.
2) Create a board of directors. The board of directors is the governing body of your nonprofit organization. The number of board members required varies by state.
3) Write your “Articles of Incorporation” and “Bylaws”. Don’t worry if you don’t yet know what those are! Most states offer templates or examples that you can use when you incorporate. You can also find these at the National Association of State Charity Officials.
Once You’re “Official”
If you’ve successfully incorporated your new nonprofit organization, you can now apply for tax-exempt 501c3 status, and being to accept donations! Filing for not-for-profit status with the IRS takes a lot of paperwork, but you already have a lot of what you need from your incorporation. A complete explanation of all of the rules and regulations for 501c3 tax exempt status is available from the IRS website . You can read more about filing your 501c3 on JobMonkey..
The IRS will send you a letter of determination granting you 501c3 status within a few months of your filing. Once you receive your letter, congratulations!
You now have an official non-profit organization, and you can begin the process of fundraising, hiring staff and delivering services. But make sure that you hold on to your letter (and make lots of copies)…most funders and other donors will ask you for a copy, and it’s important to have it in a safe place.
Having both your incorporation and 501c3, you can start to do things like opening a business bank account, buying or renting office space in the organization’s name, and hire an accountant. You’ll want to start from the beginning with keeping good, clean financial records since you will need to file with the IRS each year in order to keep your status.
Once you have all of the paperwork filed, you can begin to focus on the reason that you started your own not-for-profit organization in the first place: your big idea!