Nonprofits

Starting Your Organization

Here are the basic steps to starting your non profit organization.

Employer Identification Number (EIN)

A non profit organization is a business and in order to apply to the IRS for exempt status, the organization must have an Employer Identification Number (EIN).

Instructions on applying for an EIN are on the IRS website click here.

Incorporation

Most states have specific provisions for the formation of nonprofit corporations. The form will typically include;

• At least three (3) board members forming the organization
• Articles of incorporation
• Bylaws
• A fee

Contact your Secretary of State or comparable office and ask them for the appropriate application forms and list of necessary attachments. Click here for more information.

Postal Service

Nonprofit organizations can send certain kinds of mail at reduced rates. Recognition by the IRS is not required to mail at these rates (some organizations that qualify with the IRS are not eligible and vice versa). A separate application to the Postal Service is required to obtain a permit to mail at nonprofit rates, and each mailing must fit within the requirements of the program.

Click here for more information.

Internal Revenue Service

When applying for recognition as a public charity 501c3 use IRS Form 1023. It is a complicated form, with many attachments related to specific parts of the application. You can do it on your own, yet we do recommend having an accountant or professional assist you with it. Once received by the IRS filings generally take six months to a year.

When applying for recognition as a social welfare organization uses form 1024. Although these organizations are also tax exempt; they are not tax deductible to your donors. Therefore they operate under much less restrictive rules about lobbying and other forms of advocacy.

The general welcome page is at http://www.irs.gov/charities/index.html. Some of the more important detailed pages are listed here.

Here are a few helpful links;

After you have established the non profit business the follow are necessary for a well run organization:

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Charitable Solicitations
More than 30 states have laws that require some nonprofits and commercial fundraisers to register prior to conducting fundraiser appeals and to report on the outcome of their fund raising efforts. If your organization plans to conduct any sort of fund raising that involves broad circulation of an appeal to the general public, you will need to review the laws that apply in every area where you will solicit.

• The Multi-State Filing Project has a website that describes the charitable solicitations rules in detail and provides a simplified process (the "Unified Registration Statement") for filing the necessary registrations in multiple states. See http://www.multistatefiling.org
  
• The National Association of State Charities Officials has information about registration and reporting requirements on its website at http://www.nasconet.org

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Many states and some localities have associations of nonprofit organizations and their supporters. The National Council of Nonprofit Associations lists many of these on its website at http://www.ncna.org. Others are found in the lists of state and local organizations referenced above under Incorporation.

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Five important questions to constantly as yourself;

• What is our mission?
• Who is our customer?
• What does the customer value?
• What are our results?
• What is our plan?
• Is it working?

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Funding Your Organization

A nonprofit organization has to have proper funding in order to run at its best. To secure necessary funding you must first know who really supports social causes. Many people think that big businesses, corporation are the main contributors. If you watch late night television infomercials may lead you to think government grants are the main money sources. Neither of those are the real support behind the movements in the social sector. Know where your money comes from so that you can take care of the ones who support you.

80 to 85 percent of all giving comes from individuals.
Knowing the above statistic lets you know how to spend your marketing and resources. Do not spend all of your time applying for grants when you can capture donations for the community around you. Spend your resources (time, energy, and money) wisely. Market to individuals, when people can relate and believe in your cause they will support it.



Ask Yourself;

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Can nonprofits make a profit?

Yes. Nonprofits can engage in revenue-generating activities that result in annual surpluses or profits. The sector may be called nonprofit, yet that does not meant that the organizations cannot charge fees, generate revenue, or income that exceeds its expenses. Unlike the for profit sector, nonprofits do not have shareholders, owners or investors and there are no dividends paid out at anytime.

The distinction between nonprofits and for-profit companies is what happens to the surplus. For-profit businesses may distribute their gains to the owners or shareholders. Nonprofits must reinvest surpluses back into the organization and its tax-exempt purpose. Excess revenues may not be distributed to individuals affiliated with the organization. It is normal for a non profit organization to have at least three years of operating capitol in reserve.

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Helpful Links

• Craigslist Foundation (An AWESOME resource, be sure to lesson to the free podcasts Non Profit Bootcamp)
• Idealist.org (another awesome resource)
• Leader to Leader Institute for developing non profit executives with the great Peter Drucker