How to Setup and Start a New "Nonprofit Charitable Organization"
Have a Goal and Purpose for your New Nonprofit Organization
A good way to simplify to yourself what you intend to accomplish by starting a new tax-free nonprofit charitable organization is to write a basic mission statement for your non-profit organization. You'll soon need this mission statement anyway if you plan to incorporate your nonprofit (more about incorporation a little later on). The following guidelines may be helpful to you when writing your first, basic mission statement.
1. At is most basic, the mission statement describes the overall purpose of the organization. It addresses the question "Why does the organization exist?"
2. The statement can be in a wide variety of formats and lengths, ranging from a few sentences to a few pages. At this stage in the development of your nonprofit, it might be best to keep your mission statement to at most about half a page.
3. When writing the mission statement, try including a well-written description of what you think will be the new non-profit's key mission:
- primary benefits and services to clients
- groups of clients who will benefit from those services
- values that will guide how your non-profit will operate
- how you'd like others to view your non-profit
4. It can be quite useful to refine the first, basic mission statement you defined by adding or deleting a sentence or a word from the mission statement until you feel the remaining wording accurately describes the purpose of the new nonprofit organization. You may pay a visit to the charitable organizations website for some non-profit ideas.
5. For more information on what contributors are thinking when they contemplate a voluntary contribution and how they navigate through the contributions decision process please do some navigation yourself to charity navigation.
What Kind of Non-Profit-Charitable-Organization Do You Want to Start?
The phrase starting a "tax exempt nonprofit" can mean several things. Read the following very basic information to begin thinking about what you mean when you set out to "start a nonprofit". Keep your mission statement in mind when thinking about each of the following.
- Help when thinking about making your business a nonprofit-organization by reading our page about becoming a non-profit.
- You can really be a nonprofit organization just by getting together with some friends, e.g., to form a self-help group. In this case, youre an informal nonprofit organization.
- You can incorporate your non-profit so it exists as a separate legal organization in order to a) own its own property, and maintain its own bank account, or perhaps get a new savings account, checking account, or loan funding in your area. Money Matters Organization is a good online-source about all aspects of financial and money matters.
- b) Make sure your new non profit organization can continue on its own (even after youre gone); and c) protect yourself personally from liability from operations of the nonprofit. You incorporate your nonprofit by filing articles of incorporation (or other documents) with the appropriate state government office. (An incorporated non-profit requires a board of directors) and may be incorporated at either state or national level.
- If you want your nonprofit (and if you think your nonprofit deserves) to be exempt from federal taxes (and maybe some other taxes, too, like state income tax), you should file with the IRS to be a "tax-exempt" organization. (The IRS states that you must be a corporation, community chest, fund, or foundation to receive tax-exempt income tax status.
- Articles of Association may also be used in place of incorporation.) (Probably the most well known type of nonprofit is a the IRS classification of 501(c)(3), a charitable nonprofit.) (Being tax-exempt is not the same as being tax-deductible.) In Canada, you can file for tax-exemption at the provincial and Federal levels.
- Depending on the nature of your nonprofit, you may also granted tax-deductible status from the IRS. Publication 526 lists the types of organizations to which donations are deductible. In Canada, the Canada Customs and Revenue Agency (CCRA) grants charitable status, and you must be incorporated to achieve charitable status.
- So, for example, you could start a nonprofit that is incorporated, tax-exempt and eligible to receive tax deductible donations.
- The particular steps you take when starting your non-profit organization depends on your plans for your own nonprofit-organization including the type of services rendered. They also depend on how the IRS interprets the nature of your organization, including its services. Again, in Canada, you can file for incorporation and tax-exempt status at the provincial or Federal levels.
"Should I Really Start a New Nonprofit?"
Before starting a nonprofit business, there is some preliminary thinking that you really should do. Doing this thinking now can save you and maybe your employees and clients a great deal of anguish. Note that by reviewing the following manual, you'll be able quickly to implement a checklist to start a nonprofit, register it with your state (if you want to be incorporated) and file with the IRS to get tax-exempt and/or tax-deductible status.
Consider Sponsorship to Jump Start Your Organization
In some cases, you might find and work with another nonprofit organization that will act as your fiscal sponsor. A fiscal sponsor might be useful to you if your nonprofit:
- Does not have sufficient resources to handle startup costs and fees
- Does not have sufficient skills initially to manage your finances
- Will address a community need and then no longer need to exist.
Do You Need a Lawyer to Start Your Nonprofit?
You Can Do Much of the Work Yourself
-- But Get Legal Advice and Guidance
You can do much of the work yourself to get incorporated and/or tax-exemption and/or tax-deductibility, but you should have some basic guidance and advice from a lawyer or from a certified public accountant who also understands nonprofit matters, especially their organization structure and tax exempt status.
For example, in the U.S. it's quite important how you characterize your organizations plans when filing for incorporation with your state and/or for tax-exemption and/or tax-deductibility with the Internal Revenue Service, or your new organization may be deemed a a for-profit by the IRS, or may have to file a federal income tax return and pay other taxes on your income. In addition, there are various reports and filings you may have to submit. A nonprofit-knowledgeable lawyer can help you a great deal. Ask other non-profits for references to good lawyers. Ask a local funder. Call the local bar association.
Nonprofit Organization Incubators
Business incubators are organizations who help businesses share resources as low-cost means to getting started. You may have a nonprofit incubator in your community. To locate a local non-profit organization contact the National Council of Nonprofit Associations NCNA