fbcode

How To Start a Nonprofit With The Right Foot

FAS CPA & Consultants

Like starting any other business, when forming a non-profit organization, you need a plan and prepare a mission statement. For small non-profits organizations the IRS offers an expedite program that grants 501(c)3 exempt status in approximately 90 days.

 

In addition to the standard requirements involved in starting any business, to form a nonprofit you need to:

⇒ Articles of Incorporation.

⇒ Employer Identification Number.

⇒ By-laws of the Organization.

⇒ Minutes of Board Meetings.

⇒ Names, Addresses, and Resumes of Board Members.

⇒ Names and addresses of all Active Members.

⇒ Inventory of Assets.

⇒ Inventory of Liabilities.

⇒ Rent/Lease Agreements and Contracts.

⇒ Revenue and Expense Statements.

⇒ Written Reason for Formation and History.

⇒ Organization Mission Statement.

⇒ Organization Activities, Operations and Programs Documentation.

⇒ Financial Support Documentation.

⇒ Fund Raising Program Descriptions.

 

The term “nonprofit” simply refers to not being commercial motivated. Nonprofit organizations can and should make profits. It is where profits come from, how much is made, and what is done with profits, that helps establish if the organization is “nonprofit” or a for-profit corporation.

 

There are three basic types of nonprofit organizations:

⇒ Informal Nonprofit Organizations

⇒ Incorporated Nonprofit (Corporation)

⇒ Tax-Exempt Organization

 

Incorporated Nonprofit Organizations

This type of nonprofit is formed by incorporating in a particular state to form and be recognized as a corporation. A corporation takes the place of individual ownership. The corporation “owns” itself, and therefore, can own its own property, have its own bank account, take out its own loan, and can continue on its own even if the founder leaves the organization. One of the major benefits of incorporation is that the corporation takes on legal liability and financial risks so that founders, officers, and board members have little or no liability and with the exception illegal acts, or gross fiscal misconduct.

 

Nonprofit corporations can be classified in many ways, including as a public benefits corporation, public charity, or educational foundation.

 

Nonprofit corporations may be formed to benefit members of an organization a club, or mutual benefit society or for some public purpose such as a disaster relief, social assistance programs, or youth development programs.

 

Informal Nonprofit Organizations

You can form an “informal” nonprofit, simply by getting together with other people to provide support or services to benefit others. There are no special benefits in being an informal nonprofit, other than personal satisfaction in helping others, but there may be certain legal liabilities.

 

Tax-Exempt Organizations

Nonprofit corporations must file with the IRS as a separate step in order to receive tax-exempt status. An organization cannot receive tax exemption unless it has first formed as a corporation with an accepted charitable structure and purpose.

 

Not all nonprofit organizations are eligible for tax-exempt status. Only those that meet certain requirements, as defined by the IRS, will receive exempt status. You will need to complete an IRS Form 1023 to apply. The form is long, the process is expensive, and it can take up to one year to receive a decision.

 

Tax-exempt corporations are required to operate their business in certain ways, file a Form 990, and meet other IRS requirements, or risk losing their exemption status.

 

Most states accept an IRS ruling of tax-exempt status, but a few states do not. For example, California.

 

Just as with forming a for-profit business, you need to do a feasibility study, write a business plan, and prepare a mission statement. In addition to the standard requirements involved in starting any business, to form a nonprofit you need to:

 

Get an Employer Identification Number (EIN)

⇒ This substitutes as a social security number for the corporation. 

 

Form a Board of Directors

All incorporated nonprofit organizations must have a board of directors.

 

File Your Founding Documents

⇒ These include Articles of Incorporation and Bylaws. You need to file these documents in the state in which you want to register your corporation. 

 

Have you ever thought in opening your own nonprofit, or has it been part of your dream, did you share your ideas with some close friends and they think is an excellent idea, everything indicates that you can do it?  But what you need to know before you start your idea?  We will give you five suggestions for the day you will open your nonprofit so that you make the walk in a firm step.

Click Here To Chat Directly With Our CPA. Make Your Consultation

Selecting An Executive Team Effectively

The first task is to call, write or notify about the nonprofit plan to those members that you may think will be interested in participating in the foundation in an effective and serious manner.

⇒ These people must be volunteers.

⇒ They will not receive any monetary payment In USA the minimum amount of volunteers is five people.

⇒ You must establish an executive team incorporating a supervisor that will be entitled to the role of approving and disapproving business proposals.

⇒ The best idea is exposing the work plan so that can others may find your idea appealing to people so they can get involved.

 

The Plan

A foundation is not a corporation, a corporation has a goal to make a profit on its own, and the foundation is nonprofit. But the foundation needs to have a core value and must attract the public attention.

 

A nonprofit has a mission based on community-related problems, such problems affect community settings, and an analyzed plan of action must be considered to correct them or minimized them. This plan must be sturdy and well presented to those possible volunteers an to those possible volunteers and sponsors. These are some steps for you to have in consideration beforehand.

⇒ Make a serious research about your plan.

⇒ The necessities of your community.

⇒ The resources that already exist.

⇒ A brief study about those who work in the related field, or similar.

⇒ Have a meticulous discussion with your supporter team, and keep the record in writing.

⇒ The vision and mission.

 

The problem that you want to confront needs to have a perspective and investigation, do not limit yourself in phrases such as “there are children without homes in the streets” you must see it from all angles.

⇒ You need a time limit on where you wish to fulfill your project.

⇒ Necessary financial resources; material, and people with specific abilities.

⇒ Possible opportunity of resources; possible sponsors.

⇒ Lastly, prepare a material in which you believe your foundation will succeed.

Promotion

Create a marketing plan, how will you know your foundation, what is your objective, what type of resources will you use?

 

For example: if you plan events, with what types of resources will you count?

⇒ Do not forget there are resources at a low cost such as emails, social media, calls or networking events.

A Clause Of Conflict Of Interest

⇒ The aspect of having an executive team each branch has to have a clause of conflict of interest in according to their policies and official proceedings.

⇒ This clause will have established that none of the members will benefit financially when sitting with the executive members of such organization.

Legal Steps

⇒ Do not forget the legal steps are the followings.

⇒ To establish a name for the company.

⇒ Send the archives or articles of the corporation to the governmental agency in which it corresponds.

⇒ Register with the state in where you will establish activities and gather funds.

⇒ Applying to status of condition of in the taxing agency (IRS)

⇒ Obtain a license and permits necessary.

⇒ If you need to obtain more information, you can visit the section of the nonprofit blog: Tax Intelligent.us.

⇒ If you follow these suggestions with enthusiasm, patience, and positivism, you will see that your foundation will obtain your goal, helping the community and fulfilling your desired dream.

⇒ If you have questions, feel free to reach us for advice.

Important Reasons For Opening A Nonprofit Organization

Today opening of nonprofit is to provide support to problematic aspects in the community.

 

The nonprofit organization not only brings support to these causes,  also provide helps to business which sponsors such organization.

 

We can see it in the next analyzes:

 

The Non-Profit Organization Establishes Loyalty Among Their Members

According to studies, when a business has opened a nonprofit organization and is part of it along with workers and they develop a close emotional bound towards the nonprofit organization.

 

Unity

Also, the nonprofit organization provides almost without thinking a unity and respect between the members, as they try to find solutions to a problem, by exposing  and they trying to work together.  This makes the ambiance a better working place for team play.

 

The Non-Profit Organizations Respond To Mutual Vocational Inclination As A Team

The nonprofit organizations and their development either by business or individual group help to fill voids to purposes of every society.

 

They also respond to the inquiries of society, helping individuals or business. 

 

Satisfying individuals in seek of solutions to aspects that are negative in the system by giving the opportunity to do something, which helps in the personal psychological development in which motivates to be a better being for each phase of life.

 

Experiences

To create and work in a nonprofit organization, makes for the individual to obtain all kind of experiences, rich experiences, making him/her grow and to be capable to work in different aspects personal and professional.

 

Knowledge

To work in a nonprofit organization or business implies to work with problematic aspects which make security and ambition to provide better service to the problems of society, leaving the individual to manifest talents to help others.

 

Relationships And Unity

The idea of nonprofit organization is not to hide from society, even if is at it the worse condition, is to help it and this involves creating relationships.

 

To work in a nonprofit organization or group; individuals need to obtain knowledge about other people, cultures, etc. with the objective to create relationships, to obtain support in events sponsorships and responses to the everyday problems.

 

All this without counting in how it helps society to bring clarification their problems, and to attempt to solve problems in best possible form.

 

After analyzing all these, rest to say that creating a nonprofit organization is totally beneficial for everyone.

Check Our Non-Profit Formation Service

Guidelines To Considering The Establishment Of A Non-Profit Organization

 

⇒ Define your community. 

Is it where you grew up? Where you live now? Where do you work? Narrow your focus to what has special meaning to you. Then get involved in that arena.

 

⇒ Serve on nonprofit boards where it is a good fit for you and for the organization. 

This provides networking opportunities and insight into community challenges and needs. Encourage your children to serve similarly.

 

⇒ Ask what organizations have made a difference in the life of your family. 

This provides a starting point in determining the kinds of organizations you want to support.

 

⇒ Keep your list of grantees manageable and tailor the size of the gift to the needs of each grantee. 

Some gifts need not be large to be effective. Look beyond the specific request and try to anticipate future needs.

 

⇒ Grantees may, and in many cases should receive regular grants. 

Encourage strategic, long-range thinking. Funding strategic planning initiatives is often vital to a grantee with whom you plan on having a continuing relationship.

 

⇒ If you are active in your community, it is not necessary to advertise for randomly submitted grant requests. 

Word will get out from your network and grant inquiries will follow. You can request specific applications when you perceive a need.

 

⇒ You can’t say “yes” to every request, no matter how worthy.

Your funds are limited and you can dilute your potential impact by spreading your support too thinly. However, the Kerns suggest that you offer written explanations to those denied requests. They might become worthy applicants in the future.

 

⇒ Make site visits to assess grant requests.

Follow up with organizations to gauge the impact of the funding, but they recommend avoiding the temptation to become overly involved. You should be guided by the outcomes, not by the mechanics of the organization.

 

⇒ Keep your ego in check. 

If you require public attention for the grants you are making, you are probably running the foundation for the wrong reasons. Recognition is only beneficial when it encourages others to give.

 

⇒ Remember that the funds disbursed are the foundation’s — not your own. 

Disbursing foundation funds does not relieve you of the responsibility of being charitable with your personal wealth.

 

Create A Strong Oversight

 

⇒ Get Rid Of Non-Performing Board Members

Never allow a board member to remain on the board if they do not show up for meetings, fail to prepare or bring little expertise to the board. It is tough to ask a board member to resign; however your duty of care, loyalty and obedience to the organization demand the replacement of those who do not perform appropriately.

 

⇒ Put Real Effort Into Planning The Yearly Calendar

Board meetings must take place at appropriate times for the members to be present and focused on critical tasks and decisions at the right times.  The cycle of the organization will inform the required dates the board has to come together. Duties like approving the audit and reviewing the annual financial statements necessitate board meetings at the due time.  There will also be the need to align board meetings with important committee meetings, so this has to be considered.

 

⇒ Recruit The Best

You have to recruit board members who possess the skills and qualities conducive to the goals of the organization.  In the real world, age, race, ethnicity and location should be considered, of course, but skills like accounting, human resources, legal, and real estate should be courted.  It is essential to keep in mind that a motivated and focused board that raises a lot of money is not quite enough.  The board must have the skills to appropriately govern the organization.

 

⇒ Take Minutes, Excellently

Taking minutes is art.  Do not record too much detail.  If you do, this can obscure essential points that demonstrate how the board performed its oversight duties. When making decisions, the names of the board members that voted against a resolution is significant for the record.

 

⇒ Train Board Members

You have to train the members of the board in their legal and financial basics.  All board members need to understand the core duties of care, loyalty, and obedience.  Equally important is the understanding of board members of the concepts of conflicts of interest and oversight responsibilities.  Board members must comprehend the financial position of the organization. Members without a finance background must be educated toward a basic understanding.

 

Proper board oversight provides the structure for a non-profit to grow and prosper. A dysfunctional board increases the odds that the organization will end up in deep trouble, many times.  It is all about the board.

 

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

Check The Video Version Non-Profits Formation

We Are Just A Message Away From You. Get A Consultation

Accounting Firm providing Accounting Advisory, Tax Planning and Offshore Strategies to grow your business and protect your assets. 

Clients Feedback

Our Clients Reviews

Fulton is a wonderful CPA who fully understands tax law and provides honest advice for his clients.

    Al Kusner
    Al Kusner

    President

    Thanks to FAS & CPA Consultants and Fulton Abraham Sanchez, CPA, I was able to resolve a debt of $479,677.71 that I had with the IRS.

      Gala Cedeño
      Gala Cedeño

      Entrepreneur

      My experience with FAS CPA & Consultants has been incredible, their professionalism is impeccable. I highly recommend them.

        Carlos Lange
        Carlos Lange

        Manager

        I highly recommend FAS CPA & Consultants, they are responsible, efficient and very dedicated.                                        

          David Barcelo
          David Barcelo

          Manager

          Our Blog

          Latest Articles

          Leave a Reply

          This site uses Akismet to reduce spam. Learn how your comment data is processed.

          error: Content is protected !!