- Conduct research into the impact you're trying to make, and the regulations on non-profits in your area.
- Develop a solid foundation of your goals, management structures, mission statements, and most importantly, how you will spend the money you earn.
- Get your filing and taxes in order to start making a difference!
A time comes, and you feel inspired to give back to the community by starting a non-profit organization. The fact that it is non-profit does not make the initiation process any easier. You will need to work hard, think critically, be patient, and commit to your work. The process of initiating and sustaining your non-profit may be tedious, intimidating, and overwhelming. To succeed, you will need so much determination. Here is the step-by-step guide on how to start a non-profit organization.
Step 1: Conduct Thorough Research
Before starting a non-profit organization, it is important to know whether other organizations offer the same services to the community. Look for where there is a gap and offer new services or add value to existing ones. Ask yourself whether you are starting a non-profit company to get grants; this is not the area for you if that is the case. This is because you do not start your organization today and get grants tomorrow. It might take years before getting reliable sources of income to support your organization. It is also important to research the alternative methods of giving back to the community if the cost of starting a new organization is too high.
Step 2: Develop a Solid Foundation
After researching and deciding you want to start a non-profit organization, come up with a mission statement. This statement will define the non-profit’s purpose, the groups it focuses on, and how it plans to serve them. Specific non-profit organizations can even qualify for certain financial benefits, such as churches which are generally non-profit groups with advantages for church mortgages. You will also need to develop a business plan that will clearly outline how the organization plans to achieve its mission. Finally, you will develop a board that will fulfill various legal responsibilities and roles. To increase the effectiveness of your organization’s vital duties, you will change the board as the non-profit develops and matures. Recruiting qualified personnel is vital in this step and training, orientation, cultivation, and evaluation of future board members.
Step 3: Incorporate Your Non-Profit and State Forms
After developing a solid foundation, you will start incorporating your non-profit organization. At this point, consider connecting with the local state association to find the state-specific resources. Consult with the local legal counsel to help you follow the right channel of starting a non-profit organization.
Here is the reason why you need to incorporate.
- To have a formal structure that will offer you authority to provide your services and programs.
- To have a corporate structure that will limit directors and officers liability in your organization.
- The IRS will need governance policies and procedures and organizing documents linked with corporations.
The fees and filings for this process will vary from state to state. It is also essential to note that the incorporation will register your non-profit but will not tax-exempt it.
Step 4: File for Tax-Exempt Status
Make an application for tax-exempt status with IRS (Internal Revenue Service). The fee is dependent on the application method; however, it will be either $275 or $600. IRS takes around three to 12 months to decide, depending on the question they have regarding your application.
Step 5: Ongoing Compliance and Reporting
After receiving the determination letter from Internal Revenue Service, you can now begin the real operations. For local and state governments to recognize you as tax-exempt, you will need to complete some filings. Ensure you check with the legal counsel for your locality to make sure you have adhered to the filing requirements. In case you plan to request contributions from other states, you might require to register there as well. You will also need to file Form 990 with Internal Revenue Service since your organization is tax-exempt. This form depicts the activities, finances, directors, key staff, and governance processes. Every state has its renewal and reporting requirements. So, it is important to track your organization’s activities and finances in a way that will assist in smooth annual reporting.
Starting a non-profit organization is not easy, but the above steps will make things easy for you. You only need to go through each step thoroughly, which will relieve you a lot of stress. For instance, you will need to perform research before initiating the organization.