Nonprofit organizations exist for a good cause in society. They can be involved in various community activities ranging from scientific, religious, educational or charitable endeavors with no aim of making profits. Although these organizations can be very rewarding, setting them up and funding can be a huge challenge.
Therefore, there has to be a long-lasting and effective organizational structure, which will call for sheer determination and planning. However, if you are prepared and you understand the basics, it will help a great deal in easing the whole process. Read on to learn more.
How to Start A Nonprofit Organization?
The planning and preparation process of starting a nonprofit organization is similar to that of a corporation. However, the only difference is that a nonprofit organization has to apply for tax-exempt. The Internal Revenue Service is responsible for allocating the tax-exempt status. The status protects the organization from tax burdens. Here are the steps:
Define the Mission Statement of Your Nonprofit Organization
A nonprofit organization’s mission statement is the foundation that gives your organization a bearing. Moreover, a mission statement explains the purpose of your organization. Individuals will use it to understand and explain why you exist and what you do. Therefore, it is vital to create your mission statement such that it perfectly describes the core objective of the organization.
A nonprofit organization should opt for a clear, simple, and concise mission statement. However, the statement should be simple enough to define the purpose of the organization. Furthermore, a mission statement should depict the future of a nonprofit organization. Organization staff should be able to relate and predict the future of the organization through a mission statement.
Generally, a mission statement should be a simple summary of an organization’s values. Besides, it should show the objective of an organization as well as its strategic planning. In figuring an organization’s mission statement, experts should avoid technical words.
Financial Support for Your Nonprofit – Decide on A Funding Model
Funding is instrumental in ensuring the continuity of the organization. Furthermore, these funds allow nonprofit organizations to achieve their missions and visions. A nonprofit organization should choose a long-term financial strategy. Nonprofit and funding sources should match. If they don’t match, money fails to flow to essential departments. As a result, the organization faces financial challenges, which may result in its collapse.
Nonprofit organization leaders need to research and find the right funding models. There are different options to choose from when it comes to funding. However, as the organization becomes more prominent, funding options reduce since the company now requires enormous funds. With this in mind, experts should utilize available funding options that will provide steady financial streams. If the organization does not have a finance analyst on board, outsourcing financial advice will benefit the company.
Recruit Members for The Board of Directors
The organization needs a board of directors to help in making critical decisions. Due to the technical responsibility of the board of directors, recruiting them should be done professionally. Here are the key steps to follow during the recruitment process.
- Set up a Nominating Committee: In the formative stages, the leader should put together transparent advisors. These advisors will assess the skills of board members and select the most qualified.
- Begin board member search with volunteers: Considering current volunteers in the organization is essential. It is because they know and understand company operations.
- Make a donor database record: Loyal donors make the best board members. They already show commitment through donations.
- Broaden the search: diversify on leaders in the community as well as ambitious young adults.
- Utilize volunteer recruitment social media and website platforms: Create a connection with your supporters and identify those interested in being on the board committee.
File Your Article of Incorporation and Write Up Your Bylaws
When starting a nonprofit organization, it is a requirement to file for an article of incorporation. Also known as a charter document, it refers to official documents that one files with a government body to create an organization legally. The government files this article of incorporation at a fee. An organization also needs to write its bylaws. An article of incorporation is a public record. On the other hand, bylaws are not public records, and they govern a company’s operations. An article of incorporation comprises of the following:
- Name of the organization
- The main location
- Name and address of a corporation agent
- Corporation’s mission statement
- Duration of operation
- Information on stocks the corporation authorizes issue and the number of shares available
Bylaws contain corporate laws specifying internal management operation and how the organization will operate. They are simply local rules that govern domestic issues in an organization. They help employers to focus on the same direction as they work.
Become an Official Nonprofit Organization
To become an official nonprofit organization, an organization needs to register with the government. There are different ways this can be done. The first thing is to apply for an article of incorporation. Additionally, the organization has to acquire a 501c3 status, which exempts it from tax. Other things involved are:
501c3 Application – Tax Exemption Status
Form 1023 is a series application that is important in granting a non-profit organization tax-exempt status. Although the application is done online via email or fax, there may be some charges you may have to incur. Moreover, the organization should apply for staff identification number regardless of whether they have employees or not. However, Public charities with less than $5000 annual profit do not receive the treatment under 501c3.
An organization that wishes to apply for the tax exemption status has to notify the IRS 27 months from the formation date. In the case the IRS finds that an organization qualifies for tax exemption, the corporation is categorized as a private foundation. However, if the organization meets the requirements of a public charity by the Charity Navigator, it is classified as one. A charitable organization needs to be available for inspection. The inspection is to determine if it possesses all the documents under 501c3 law.
Apply for Nonprofit Startup Grants
As much as individual donors make the most significant donations in nonprofit organizations, governments also offer support. The United States government provides startup grants to those who wish to start nonprofit organizations. However, one has to apply for these grants. Applying for grants from the government makes an organization an official non-profit corporation. It is because the government will request specific documentation before offering the grant. These documents are essential as they legalize corporate operations.
The government owns several programs that help ease the grant application process. Some programs give startup grants to private organizations and those that only give to public organizations. This division helps reduce congestion in a grant application and allocation process. Also, the online form is available with only a few clicks, and you can get a grant. However, one needs to be careful to avoid scams and giving essential details to scammers online.
Search for Local Partnerships and Supporters
The local partnership strengthens nonprofit organization operations. When nonprofit organizations partner with local businesses, both benefit in one way or the other. The nonprofit spreads word about its services, which increases its donations. Contrary, the company grows its market share and participates in corporate social responsibility, which is essential for growth. It is, therefore, necessary for a nonprofit to search for partnerships and supporters.
Successful partnerships place the organization in a higher rank. However, specific documentation is relevant for successful partnerships and support. These documentations make the organization official. Besides, more people get to know it, which increases its donor base. Since donors boost corporation funding, a long-term financial strategy will be vital for consistent growth. Nonprofit leadership may get in supporters and partnerships through social media platforms. Another way to acquire partnerships and supporters is through references. It is, therefore, important for nonprofit organizations to maintain a positive reputation to obtain support.
Start Pursuing Your Mission
After all the planning and preparation process, one can now pursue the organization’s mission. One can start contacting supporters and partners and focus on helping the community. A good relationship with donors will also play a role in pursuing the mission. Other steps to follow are:
Set Up A Website for Online Donations
With the advance in technology, a nonprofit organization needs to set a website. People can make donations through the website. In the current age, online contributions are taking over in-person deliveries. Donors only need to visit the site and get all the relevant information they need to donate both funds and tangible staff. It will now be the organization’s responsibility to meet up with donors and pick up their donations. A website will also help in maintaining donors’ records. These records are essential since they can be referred to when choosing board members. Donors prove commitment and loyalty in giving. These are some of the crucial virtues board members should possess.
Start Fundraising Events / Activities
One may organize an event with an existing community helper. A fundraising event with a reputable nonprofit organization improves the image of the upcoming organization. This is an opportunity to meet with donors, hear what the community and civic leaders have to say about the startup. It is wise to have an event software before the startup event. One may also decide to sell tickets. This helps in maintaining records for those who will be attending the event. The file can be used for follow-ups in the future when looking for donors and partnerships. Besides, more event activities can be done, and the records will help in inviting those who were available in the first event.
Make Sure to Plan Ahead
Planning is essential for all businesses, whether profit-making or nonprofit making. Through planning, one will always be a step forward, which helps in avoiding risks. Planning may be in terms of finances or other relevant activities. It helps in achieving the organizational objectives. Also, an organization can handle priority events as they come. This means urgent activities are immediately processed.
Why Should You Start A Nonprofit Organization?
Nonprofit organizations exist to do good things in the world with no aim of profiting. As a result, the government provides tax-exempts and grants to boost organization operations. Furthermore, other individuals or entities come in and offer their support by donating stuff depending on the purpose of the organization. Although these organizations are eligible for tax-exempt, there are several documents required to help apply for exempt status. Moreover, partnerships and support from the public are also vital in strengthening the operations of nonprofits.
Nonprofit Organization FAQ
❓ What is a nonprofit organization?
This is a corporation that enjoys tax-exempt status by doing good things in the community. The IRS grants these organizations the tax-exempt status since they don’t operate to make profits.
💸 How does the CEO of a nonprofit organization get paid?
A CEO of a nonprofit organization has to be passionate about the job and its mission. Although the primary objective isn’t making profits, the CEO is remunerated an amount decided upon by the board members. However, the pay has to be reasonable.
✔️ Can you start a nonprofit with no money?
Starting a nonprofit organization without enough funding can be very challenging. However, it’s not impossible. You can start the organization then apply for startup grants to begin operations.
🤼 Is there a minimum requirement of board members to start a nonprofit?
In general, the IRS requires at least three board members to begin operations. However, the IRS does not state how long the board members can serve. Board members can be changed after a period of one to five years.
👌 Does your location (state) matter when starting a nonprofit?
You can start a nonprofit job in any state. However, the individual states have different requirements, which may affect how long it takes to get started.