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How To Build A Successful Nonprofit.
A nonprofit organization is an organization which uses profits to help further the organization’s mission and goals. A nonprofit does not have shareholders, nor does it sell stock. Most government organizations, charities and public arts organizations are nonprofits, as such; they are exempt from paying certain taxes to local, state and federal governments.
The “Must Haves” of a Nonprofit
There are five things necessary when beginning to plan a successful nonprofit. They are: a clear mission, high-quality programs and services, reliable revenue, clear and transparent accountability, and facilities that can accommodate goals of the nonprofit venture. These things must be in place, or planned for, when applying for funding and revenue.
Before your nonprofit can open its doors, there are a few legal and accounting details which must be completed. These include: filing articles of incorporation, filing with the IRS and registering with the state if you plan to conduct charity fund-raisers. While a nonprofit does not require the assistance of an attorney to do these things, it is suggested that an attorney be retained to help the business organizers navigate the paperwork and government offices required for a successful start-up.
Articles of Incorporation must be filed with your state’s Secretary of State or other state agency. Information on how to file this paperwork can be found on your state’s official website.
IRS filings must be made to secure your nonprofit’s tax exempt status. The IRS website can direct you to the appropriate forms and provides filing instructions. It can take up to six months for the IRS to determine if your nonprofit meets their tax exempt requirements.
Charity Registration is required by each state(s) where you plan to fundraise for your nonprofit (if it is a charity organization). The charity registration office in your state can be found on the Secretary of State’s website.
The Board and Chief Executive
Before you open your doors, and apply for funding from outside sources, you must choose a “first Board.” Essentially, the “first Board” are the first people who sit on your Board of Directors. Your Board should consist of a few like-minded people who share the nonprofit’s mission and vision and who will assist you in making decisions and growing your organization. Once you have a board in place, you may decide to have a Chief Executive, whose job is to lead and organize the Board. The founder of the nonprofit often acts as the Board’s first Chief Executive. However, it is common practice to not have a Chief Executive, especially if Board members are volunteers and/or work very well together.
Bylaws are the set of rules which tell how the Board will run themselves and the nonprofit organization. In the US and Canada, bylaws are required before a nonprofit can file for Articles of Incorporation. Bylaw templates may be found online or may be created under the supervision of an attorney or business mentor.
It is important for the Chief Executive and the Board to lay out some basic goals for the organization. This helps everyone involved in the nonprofit to clarify their vision of the organization, its growth and its future.
Banking and Accounting
It is imperative that a nonprofit secure an accountant experienced in the ins-and-outs of nonprofit management and tax laws. It is also important that the nonprofit have a business account.
Here are the steps of forming a nonprofit, in order, in a nutshell: 1) Draft a mission statement, 2) Appoint first Board members, 3) put an attorney on retainer, 4) open a bank account, 5) consider hiring an accountant, 6) consider consulting an insurance agent if applicable, 7) draft bylaws, 8) incorporate with the state and 9) file with the IRS.