Starting a nonprofit organization can be an inspiring way to give back to your community and help those in need. However, it is important to understand all of the steps involved in this process before moving forward.
Instead of starting your own nonprofit, you can work with an existing 501(c)(3) public charity under a formal arrangement known as fiscal sponsorship. You can ask for grants and tax-deductible donations under your sponsor's exempt status. Fiscal sponsorship can also open a world of grant opportunities to individuals, such as artists.
The mission statement communicates the nonprofit's purpose, what groups it serves, and how it plans to do so. For a new nonprofit, developing the mission statement is a critical first step in defining what the organization plans to do and what makes it different from other organizations in the same field.
Pick a state your nonprofit is connected to, either by its work, where it's board members live or where it raises money. If you don't have any particular connection, you might bypass states like California and New York that heavily regulate nonprofits.
It is essential for nonprofits to know about the public support test, because receiving the majority of funding from a single source could change a nonprofit’s IRS status from public charity to private foundation.
Bylaws are your organization's operating manual. State nonprofit laws usually address nonprofit governance matters. However, you can choose different rules, as long as they don't violate state law and are included in your bylaws.
There are a few steps you will need to take when dissolving or terminating your 501(c)(3) nonprofit organization, starting with a vote from your board of directors to dissolve the organization. Board members may not be aware of how to dissolve and organization, so the planning may take time. Throughout this process, it is beneficial to have the minimum number of board members required by your bylaws remain on your board to aid the dissolution process.
Most foundations are set up to have a perpetual life-span, spending out only the interests from their investments while keeping the initial endowment intact. Other foundations choose to have a limited life-span. Regardless of the reason for the termination, foundations dissolve by "spending down" their assets in compliance with both state and federal law.
You might consider hiring an experienced attorney or accountant to fill out the forms or at least look them over before you submit them. If that's beyond your budget, a board member might be able to recommend an experienced professional, or you might find free or low-cost help at a local law school or student-run legal clinic.
Grantmakers typically fund organizations that qualify for public charity status under Section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, scientific, religious, literary, or cultural.
Yes, a nonprofit organization may create a subsidiary with either a for-profit or a nonprofit structure. In some situations creating a subsidiary may make sense. If you think this is something your organization should do, please talk to an attorney familiar with both corporate and nonprofit law to fully understand the tax and legal implications.
Technically, yes. However, your initial support probably will not come from foundation grants since most institutional funders generally require proof of 501(c)(3) status and prefer to support organizations with a proven track record of fiscal responsibility and programming successes.
An Employer Identification Number, or EIN, is a unique, nine-digit identification number that the IRS assigns to organizations in order to track their tax accounts and annual returns, much like a Social Security Number is used for individuals.