Are You Thinking About Starting a Charity?
Are you considering starting a nonprofit organization? If so, you may be wondering what is required to make your organization official. The process of forming a nonprofit can be complicated and involves both state and federal requirements. To help you get started on the right path, the following is a simple guide on how to start a nonprofit and what you need to know about nonprofit state and federal requirements.
This is particularly true for those who have little to no experience working for a charity and lack a basic understanding of what it takes to run a charity. Reach out to formation experts or experienced individuals who have been there and done that. Their experience will help prepare and guide you with your next steps. If their advice does not send you running for the hills or force you to consider alternatives to starting a nonprofit, then proceed with it.
Clearly Define the Mission of Your Nonprofit
Why are you starting a charity? What needs are you trying to meet? How would your efforts help that need? Once you answer these questions, then clearly define and write a mission statement that explains the purpose of your nonprofit and the impact you want your charity to have. Make sure it is simple and straightforward for would-be advocates to take on and support.
Pick a Name For Your Nonprofit
I am sure you have several great ideas. Picking a name for your charity might seem like the easiest of all steps in charity formation, however, if you consider the fact that there are thousands of charities out there competing from a very small pool of donors, who often have a very short time span to consider your cause, coming up with a name that ticks all boxes becomes less easy. I don’t need to tell you what a charity like American Stroke Foundation, is about, do I?! You get the idea.
Once you pick a name, make sure to check for availability via your state’s list of existing nonprofits.
Create Founding Documents For Your Nonprofit
I doubt there is anyone out there who enjoys jumping legal hoops or navigating federal and state laws, nonetheless, these are necessary steps that you must take. My advice for you is to solicit help from reputable firms like The Foundation Group, who are best poised to advise and manage this process on your behalf from start to finish. If you do choose to do it yourself, then you might want to start by drawing up your Articles of Incorporation.
Nonprofit Organization Articles of Incorporation
Your nonprofit’s articles of incorporation is your primary corporate document that must be filed along with the State application for incorporation with the Secretary of State. The start date of your nonprofit corporation is on the date your articles of incorporation are filed with the state.
Since one of the required documents when applying for tax exemption is your articles of incorporation, it is important that when drawing up your articles of incorporation you include IRS-required provisions language which generally includes the Purpose Clause Provision and the Dissolution Clause Provision. If you did not do so, you can still file for an amendment of your articles of incorporation.
Nonprofit Bylaws
Bylaws are your organization’s internal rules or operational guidebook. In other words, bylaws establish the internal rules for the smooth operation of your organization. It establishes procedures, and structures, and demonstrates to the general public that your organization is well-managed and a good custodian of charitable donations.
Although it is not a requirement, thumbs up to nonprofit organizations that make their bylaws available to the public. This level of transparency improves the public’s trust in your organization.
Bylaws are relatively easy to create. You can simply go online and find a template from which to create yours. Some states require nonprofits to have certain provisions in their bylaws, for example, a minimum number of directors, presidents, and treasurers. So make sure to review state-specific requirements to keep your nonprofit in good standing with your state of formation.
Conflict of Interest Policy & Disclosure Statement
As the name indicates it is to prevent individuals or self-interests from interfering with the purpose of your nonprofit organization. A conflict of interest policy establishes rules and procedures to deal with potential or actual conflicts of interest.
Although having a conflict of interest policy is not a requirement when incorporating your nonprofit organization, it is required when applying for tax exemption with the IRS on Form 1023. Make sure that you draw up a conflict of interest policy that satisfies IRS requirements. Make sure to have clear documentation and procedures to document conflicts of interest when they arise.
Appoint a Board of Directors For Your Nonprofit
My only advice for you on selecting your board is to select individuals who can help you in a variety of ways, demonstrate enthusiasm for your cause and have experience in running nonprofit matters. Happy recruiting.
Organizational Meeting Minutes
Your nonprofit must hold its first meeting to approve procedures that are fundamental to the functioning of your organization. Your meeting minutes are a formal record of the proceedings and actions taken. These actions generally include setting up an accounting period, the appointment of officers, approval of bylaws, etc.
Apply for Federal Employer Identification Number (FEIN)
You can apply for this online. You will need this to file your required yearly information return.
File For Tax Exemption Under IRC 501c
Now that you have your legal documents, you will need them to apply to be recognized and operate as a tax-exempt entity.
Just because it is a nonprofit organization does not automatically exempt it from paying taxes. To benefit from tax exemption, your nonprofit organization must file with the IRS to be recognized as a 501(c) organization.
First, you must determine what type of tax exemption your organization should file for. For example,
- Charitable, Religious, and Educational Organizations 501(c)(3)s are required to file IRS Form 1023 or 1023 EZ.
- Social Welfare Organizations or 501(c)(4)s are required to file Form 8976, or Notice of Intent to Operate Under Section 501(c)(4), and then file IRS Forms 1024-A
Create a Nonprofit Website
Your website is your storefront. I couldn’t overemphasize the importance of building a great website. Take this seriously because it could make or break your nonprofit. Please, if you have no experience in doing so, hire or bring on experts who specialize in this sort of thing. Great websites must have the following characteristics:
- Clean, clear, and easy on the eyes
- Clear descriptions of your mission
- Images, videos, and testimonials of your organization’s impact
- Mobile friendly, etc.
We live in a digital age with so many distractions that attracting the attention of prospective advocates and keeping them long enough to become actual advocates is a challenge for both for-profit and nonprofit organizations. Your goal then is to design every page with the intent of capturing a viewer’s attention within 3 seconds.
Register to Fundraise
Just because you are a charity or have obtained tax-exempt status, does not give you a license to start soliciting donations. In most states, you are required to register before you can legally start soliciting donations from its residents. Make sure you look up state-specific charitable fundraising requirements before you start knocking on doors.
Get Your Name Out
There are thousands of nonprofits out there and probably hundreds with the same mission as yours competing for attention from a tiny pool of donors and advocates. Starting your nonprofit is just the first step and does not guarantee success. In fact, running a successful nonprofit is even more challenging. Most nonprofit organizations fail within the first year.
Unless yours is a foundation, has already secured grants, or already has big donors lined up, securing enough and maintaining a steady stream of funds is a never-ending problem. Furthermore, nonprofit organizations rely on volunteers to function. Your nonprofit will need to attract advocates to join your mission.
Good job if you have successfully filed and obtained your 501c designation, appointed a competent board of directors, registered to fundraise, and so on. Maybe you are already a step ahead with some planned fundraising drives. The reality is that very few people know of your existence. A website does not guarantee exposure. I would assume that you want to minimize your administrative, as well as marketing costs. After all, you want a sizeable portion of funds raised to go towards your mission. If that is the case, then the Google Ad Grant is a must.
The Google Ad Grant awards select nonprofit organizations $10,000 per month to advertise their nonprofit. With the right setup, you could get thousands of views monthly and use the platform to launch fundraising drives, etc.
Unless you are a foundation, have already secured grants, or already have big donors lined up, securing enough and maintaining a steady stream of funds is a never-ending problem. Furthermore, nonprofit organizations rely on volunteers to function. Your nonprofit will need to attract advocates to join your mission.
Good job if you have successfully filed and obtained your 501c designation, appointed a competent board of directors, registered to fundraise, and so on. Maybe you are already a step ahead with some planned fundraising drives. The reality is that very few people know of your existence. A website does not guarantee exposure. I would assume that you want any funds raised to go toward your charitable purpose rather than advertising expenses. After all, donors want a sizeable portion of their donations to go toward your mission. So why not make sure of the Google Ad Grant?
The Google Ad Grant awards select nonprofit organizations $10,000 per month to advertise their nonprofit. With the right setup, you could get thousands of views monthly, and further use the platform to launch fundraising drives, etc.
