This is the fourth in a series of articles on nonprofit organizations. Many businesses could qualify for and benefit from nonprofit status – but don’t realize the range of options available under the law. My aim is to share with you the research I’ve conducted concerning nonprofit organization. This is not legal advice, nor is it a substitute for legal advice.
In the first article in this series, we talked about vision for a nonprofit organization. Who will benefit from the service or products you provide? We then considered organizational categories recognized and approved by the IRS.
From there we talked about a step that can be the turning point – the place where you begin to believe your vision is really going to become reality – naming your nonprofit.
In this article, let’s look at the nuts and bolts of nonprofit formation. Be forewarned, though, this is the spot where many would-be social entrepreneurs turn back. The steps we’ll cover here may seem cumbersome. If the vision, organizational category, and name are the heart of your nonprofit, though, we’re now going to put some hands and feet in place.
How to Start a Nonprofit Organization – People Power
One of the primary differences between for-profit and nonprofit organizations is that you can easily work on your own in a for-profit business. A barber can set up a one-chair shop. An accountant can work from an office at home, or a mechanic can get by with a shade tree and a set of tools.
Not so with the nonprofit. It’s designed to bring people together, united in a common purpose. Every nonprofit must be overseen by a board of directors. Choose them carefully.
By Grendel93 (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
Choose Your Board of Directors
Stop and think a bit before you begin this process. Your selection of directors should take into account the problem your nonprofit is going to address. Board members don’t have to be experts in the topic, but they should certainly be sympathetic to it and enthusiastic about helping raise funding for the cause.
You should also seek to round out the board by including a representative of the various communities it will serve.
For instance, let’s say your nonprofit organization will focus on helping local landowners build gardens to grow organic produce. You might reason, then, that the board should be made up of an organic farmer, a grocery store owner, a member of the local organic co-op, a local business leader, and a consumer who supports organic principles.
Note that I listed an odd number of board members. That’s an important factor. If the number is even, votes can end in gridlock. You will want to appoint a secretary, treasurer, and chairman of the board. You can appoint yourself to the board, if you wish, although it’s usually best that the board members not be employees of the nonprofit. Chances are, you’ll want to be actively involved in the day-to-day work and draw a salary.
Remember, nonprofits aren’t limited to soup kitchens and homeless shelters. You can do just about anything as a nonprofit that you can do as a for-profit business. You may never have considered your idea could qualify as a nonprofit. Chances are really good it can. Just be sure to follow state and federal laws. The hoops are there, but they’re not all that difficult to jump through.
By Fred Freeman Aldis B. Browne E. G. Chalker Bennet Buck Henry Kreis James A. Pollock [CC BY 4.0 (http://creativecommons.org/licenses/by/4.0)], via Wikimedia Commons
How to Start a Nonprofit Organization – Paperwork Power
The Articles of Incorporation set forth the basic information about your nonprofit organization – what it aims to do (purpose) and who will guide the operations. Here’s a sample form from the National Park Service: Sample Articles of Incorporation.
You’ve already made all the decisions. Filling out this form is easy and straightforward. Just be sure to get your form directly from the state you will be incorporating in.
You will also need Bylaws, a Conflict of Interest Policy, and a budget. After your Articles of Incorporation are approved, it’s time to file with the IRS.
None of these steps are difficult. The Bylaws and Conflict of Interest Policy are fairly well standard. You can get pre-printed forms, make any adjustments your board deems necessary, and you’re good. Don’t get bogged down here and don’t think you have to pay big bucks to get started. A nonprofit can be launched on a shoestring budget.
Hurwit & Associates, a law firm dedicated to “philanthropy and the nonprofit sector” provides an excellent resource page. You can go there to find the filing and nonprofit compliance recommendations for your state. Their free-to-access nonprofit law resource library provides all the information you’ll need to get through the paperwork.
Another depository of information is the National Council of Nonprofits (a nonprofit corporation, of course). Their tools and resources page is extensive.
You Can Do It! Yes, You Can!
If you can knuckle down and get through this part of forming your nonprofit organization, you’re just about ready to launch.
In the next article, part five of the series, we’ll talk about the fun stuff. Don’t miss it.
Are you excited yet?
I am. We’re actually going to do this!