There are many benefits to starting a nonprofit organization: the chance to start a cause that you’re passionate about, becoming your own boss, perks that come with professional independence and more! Although the impact of a nonprofit is more societal and less monetary than a for-profit business, it is still a business that functions much like any other. You’ll still have to set up financial systems, create a payroll and open a bank account; hire staff and prepare a personnel manual; buy the right kinds of insurance, and so on. The systematic functions of a nonprofit also mirror a for-profit business, as it will still need organizational structure, mission statements, long-range planning, evaluation, etc.
Though this process may seem daunting, the end benefits could be incredibly intrinsically rewarding. Most think that starting the paperwork for becoming tax exempt or partnering with a financial partner is the first step. However, your organization needs a purpose, vision or direction before you can even think about the means.
Your first task should be to create a mission statement that encapsulates the work your organization will do, who you will do it for and why this work is important. From here, you can create a vision and short-term and long-term goals to keep you focused and on track towards successful impact.
Another task that’s vital to the preparation process is creating a Board of Directors. This team will serve as your organization’s backbone. All members of the board should be eager and ready to support the organization with the individual talents and skills they bring to the table. This will give your nonprofit a solid foundation and a platform to launch. Check out HSI’s Board of Directors and mission statement for a concise and effective example of each.
Once you’re well prepared you must establish your organization within the laws of the state. Each state’s regulations vary so you’ll have to do your research on your specific state. Not only do state regulations fluctuate, but so do the benefits that states offer to nonprofit organizations. For example, states differ on when exemptions or provisions must be applied for, when fees must be paid, etc. Make sure you do your homework on all aspects of this process. You cannot function on a corporate level until you’ve been recognized by a state.
However, if you check out The National Association of State Charity Officials website, they have updates in a state by state list on the differing regulations. There’s also a book available on Amazon by NOLO Press titled How to Form a Nonprofit Corporation in Any State. (While you are there, sign up to raise funds for HSI with Amazon Smile. It is fast and doesn’t cost you anything-ever!)
Another resource that may help your cause not only for state incorporation but also for future endeavors might be seeking legal advice. Obviously an attorney costs more than a book plus shipping and handling from Amazon, but you can find people that have been through this process before, who know the boundaries and way through the system.
Tax Exemption or Fiscal Sponsorship
You will need to complete the IRS Form SS-4 to receive an EIN so that you can open a bank account.
Also, for the IRS to acknowledge your organization it must be structured as a corporation, trust or an association. Once this is established, you will need to complete an IRS Form 1023 or 1023-EZ. Then you wait. It could take the IRS anywhere from three weeks to twelve months to get back with a decision.
It is possible to shorten the amount of time you spend waiting to access tax-exempt funds by applying for and receiving fiscal sponsorship. A fiscal sponsor, such as HSI, supports the charitable activities of an organization by allowing access to its own 501(c)(3) tax-exempt status. Donors may make tax-exempt contributions to the sponsor to support your work. The fiscal sponsor accepts certain liabilities for the charitable work you do.
Humanitarian Social Innovations offers assistance along several startup pathways for non profit organizations.
Not only will you gain the information you need, but you will also create some important take-aways from each session. You will meet people who can answer your questions and be a sounding board for your ideas. Plan to bring team members! You will be able to synergize throughout the workshop and team discounts apply!
- Changing the World: Paths to Social Impact-August 13-Come away with a business structure and path forward that will best meet your goals.
- Building a Strong Foundation: Mission, Vision and Values-September 10-Walk out of this workshop with a draft mission, vision and core values for your organization.
- Board Selection and Governance-October 8-Enter with a long list of potential board members and leave with a short list (or smart list!) and your board governance documents.
- Meeting Your Legal Obligations: All-Access Pass to a Helpful Attorney-November 12-Explanation of your legal obligations, Q & A time, and the opportunity to work on your own documents with an attorney as your tutor.
- Get Out There: Building a Manageable and Cost-Effective Website-January 14-You will build a website-no prior skill needed!
If you would like a more customized experience, sign up for Humanitarian Social Innovations’ Incubation program. Set your goals at the start and enjoy our one-on-one partnership with you as you systematically meet them and begin to see the impact of your work.
Perhaps you are ready for fiscal sponsorship and are looking for a fiscal sponsor to support your charitable activities. If so, contact HSI for an initial interview and an application.
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