What do I need to know about Non-Profits?
I would like to gain a Non-Profit status for the purpose of being able to raise money and deliver my programs to the under served communities. What do I need to know about starting and forming a nonprofit?
My for profit business is event planning for sports & education. We will be helping student-athletes transition from high school to college and college to the workforce. I wanted to start a non-profit to raise money to bring same program to the underserved communities.
I formed my own 501(c)(3) non-profit using a great, affordable resource from Nolo entitled 'How to Form a Non-Profit Corporation' which you can find here -- http://bit.ly/Nolo-nonprofit. This will guide you through the process and help you determine what type of Non-Profit entity to form.
You will need to know the proper forms to file with your state and the federal IRS; whether you seek tax-exempt status or not...you will need to obtain an EIN number You should have by-laws drafted to govern your nonprofit and of course your articles of incorporation you filed with your Sec. of State to formally become a legal nonprofit (fees vary from state to state.
There are some good handbooks available at most bookstores and Amazon.com about everything you need to know to start a nonprofit. Someone here gave you some good links.
Make sure you familiarize yourself with both your state and federal laws before you make that decision to go nonprofit. Also be aware that funding nonprofits is not as easy as it used to be and you should make sure that funds are available for both the population and programs you want to provide. A good source is Foundation Center.
Be clear on your why and exactly what services you are preforming. The most important document you will have is your state corporation document. When answering why you are forming the corporation, be sure to keep it very simple and that it allows for growth.
Familiarize yourself with the laws governing boards of directors before you decide how many directors you want. Again, when just starting out, I'd keep it simple and small and start with 3, you can always amend your articles of incorporation to add more. You should try to choose directors who can help you fund raise.
If you are going to be a small nonprofit check the income limits on the IRS form because you might be able to pay the small fee.
Have a solid business plan that takes you out at least three years. The IRS requires a 3 year budget.
You don't need a lawyer to form the corporation/nonprofit, however, if you know nothing about business, a lawyer would be helpful.
Best of luck.
In today's environment and business situation, I have a more simple direction: Define your special "under served communities" and what you are going to do differently, at a decent, appropriate cost to serve your target market or target community. Then define who your donors will be. Your looking at segmentation, targeting and "People" in the Nine P's of Marketing. Good luck. They need you and others. Here to help.
You need to run it like a business and have a strong Board and Executive Director.
You to understand how to partner with corporations and how to ask for more than money in order to strengthen both your non-profit and the partnership.
You need to be educated and innovative in your outreach and connection to individual donors.
When you plan fundraising events avoid galas (table and chair events)!
One of the most important items is the subject of the nonprofit one that is needed. Research to see if you are in competition with another resources or nonprofits who do the same or similar. Find your niche. Those who definitely would benefit and why.. The process can be long and tedious. You have to have a business plan, become incorporated and find out any state rules and guidelines. An attorney is needed who understands the process and can guide you through the 501c3 application. It can be costly. But if you have a passion for what you want to accomplish, then do it.
Establishing a non-profit isn't hard. There are forms to be filled out for the IRS, you need to form a corporation, it would be good to have a Board comprised of people who would join you because they believe in what you're doing. That's all paperwork and just requires your time and attention to doing it right. If you can read and access the Internet, you can start a non-profit. The hard part is having a credible program that some philanthropic organization will find compelling enough that they want to fund it. This might be a foundation, a government organization, a religious organization, etc. Many organizations fund non-profits and if you are truly offering something needed by an "under-served community" you can probably find one that will support you.
But first, ask yourself a few questions:
1. Why am I doing this? Is there some community purpose that needs guidance and only I have the skills to provide that assistance?
2. Do I have the experience to deliver these services AND run a business at the same time? Make no mistake, at their most basic level, the only difference in terms of the business operations of a non-profit vs a for-profit company is what you do with the excess revenues -- non-profits reinvest them (roll them over,etc.) for-profits distribute them.
3. Am I doing this for the money -- most non-profits do not pay very well, and except in the case of long-established, large organizations (think the Red Cross for example) where the scope of their service delivery is extensive, they don't generate revenues to pay for the talent they require. In the majority of cases, you start/run a non-profit because you are dedicated to some project idea that needs to be brought to fruition, not because of the money.
4. Once I get this established, what sustainable revenue stream am I going to use to keep the doors open? Are you just going to live by government grants? Okay, but remember that governments have specific objectives in their programming and politicians often forget this year about the programs they may have energetically endorsed last year because their policies have changed, or they have a new more pressing interest, or they feel you didn't perform as well as they'd have liked and they decide to sponsor something else.
The selection of a Chairman for your board who has the ability to attract the attention of others who will support your good works is another key element in this process. The "Champion" who can write a check or get others to write a check is an absolute requirement. Wealthy individuals who support worthy non-profits may be the most important allies you can ever recruit, as they have the power to open the doors to funding.
In other words, there are a lot of things to consider if you're going to start a non-profit and seek a 501(c)3 (federal tax exempt) status. BTW, in most cases foundations won't have anything to do with you if you don't have the 501(c)3 first.
Depending on your location, you may be able to get state-level tax-exempt status and that may be a benefit, but only in certain circumstances.
Most important, like any business, take the time to write a business plan and have a very good idea what you're going to do if you are successful in obtaining funds. Delivering programs to "under-served communities" is awfully vague. There are many thousands of organizations with exactly the same mission, and as a new organization you need to distinguish yours from that of others.
Regarding the expense, plan on spending several thousand dollars in establishing a 501(c)3 (in California, plan on even more) if you intend to engage an attorney. It's not cheap, but if you're serious you have to make some investment in the process yourself.
If you haven't done this before, you might consider working for a non-profit for a couple of years, and learning the management issues before embarking on doing it yourself.
Many industries have trade associations that offer training in starting/managing programs in their area of interest. Research them (they almost always have a website) and find out what the important issues are, if they offer training, who the thought leaders are and what it costs to do what you are considering. This will be invaluable in preparing your business plan and marketing your ideas.
In sum, take the time to figure out what you want to do and write a plan that will put your thoughts in order and demonstrate your ability to plan the project to anyone who might inquire. (You'll find it will help clarify your thinking to put it on paper as well.) Second, find someone who has the time, interest, and influence to help you as the Chairman of your Board, who can open doors and whose reputation in the community is highly regarded. Third, plan ahead regarding how you make the program sustainable or you will have a short career as a non-profit executive. Last, if your industry has a trade association check them out -- chances are pretty good someone in the association has already experienced all the problems you will and can be a mentor.
Good luck - it takes time and effort but can be highly rewarding (if not monetarily, at least emotionally) and have fun.
When people talk about Non-Profit they always miss the third word 'distributing'. That is key, because otherwise people think that there is no need to make a surplus from their activities. Non-Profits are no different to any other business in that failure to remain solvent results in closure. Never mind how worthy people think their cause is, no business, whether for profit or non-profit, has a divine right to exist. Make sure you get as much business advice as possible from the best possible sources.
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