So you are interested in started a nonprofit organization? That’s a great way to help your community. However, you’ll do well to know the basics before diving in. This way, you’ll avoid setting up a new business that won’t be productive. While it’s called a nonprofit, you still need to make a “profit” so that you can stay in business. That said, here’s a short guide on how to start a nonprofit organization
1. Do some research.
There are things to consider before starting a business, and starting a nonprofit organization is no exemption. Your research should entail finding out if there are no existing charities already championing the cause you’re about to support. While there’s no crime in having multiple agencies or organizations supporting a particular cause, you should know that it might be more challenging to get sponsors since many of you have the same mission.
What’s more, you also want to make sure a nonprofit is right for you. Make sure you’re truly passionate about helping. More so, if you’re also looking to make a decent living, sadly, the money might not roll in that easy.
2. How do you intend to generate revenue?
It’s great if you’re truly passionate about the niche you want to support. This is because many nonprofit organizations find it hard to stay in business due to a lack of steady revenue flow. To make the setup process swifter, try to write a business plan or plan some business ideas.
A common way of fund generation among nonprofit startups is the peer-to-peer (P2P) system of fundraising.
So, exactly what is peer to peer fundraising? Well, it’s an easy way of getting volunteers or donors to support your mission by organizing fundraising events. Participants of the events can form a P2P network and donate money as individuals or teams.
3. Incorporate and file for tax-exempt status.
Incorporation means registering your organization. It costs money, depending on the date. This move will give you some credibility, possibly attract grant/funding, and limit the liabilities of the organization’s officers and directors. Being a nonprofit doesn’t automatically mean tax-exempt. For example, if you’re in the United States, you’ll have to file for 501(c)(3), which isn’t free as well. You may pay around $300 to $600.
4. Put together your board & develop your mission.
You want to make sure your board members are passionate about the cause or mission to a reasonable extent. If they’re not, you’ll be faced with the challenge of frequently replacing board members. It’s also a good idea to put a training and development operation in place to ensure all board members are on the same page. In terms of your mission, it must communicate your purpose to the public. It must also communicate how you’ll serve society. All of this information will be on your organization’s website.
5. Remember the state agency registration.
In the United States, every state has an office that monitors charitable organizations. Note that you’ll need to make multiple registrations with state agencies if you decide to spread your fundraising tentacles to more than one state.
As part of ensuring compliance, you must make your finances available to the IRS annually and abide by the below rules, otherwise, your organization may be sanctioned with your tax-exempt status denied.
- An insider of your organization can’t benefit substantially from your activities.
- There should be a limit to income generated from businesses unrelated (UBI) to your mission statement.
- You or any other representative can’t campaign in favor of any politicians or political party.
- You’re obligated to submit an annual report known as form 990 to remain compliant every year.
- Any changes to your modus operandi must be reported to the IRS.