Creating a nonprofit organization can be an inspiring way to give back to your community and help those in need. However, it's important to understand all the steps involved in this process before moving forward. Growing and maintaining a nonprofit organization can take years of effort and a lot of determination. It provides comprehensive advice and materials for anyone considering starting a non-profit organization.
In my work, I constantly encounter people who feel driven to act in support of their passion, that overwhelming emotion that can seem almost uncontrollable. This philanthropic drive, this love for humanity, is wonderful and can be incredibly energizing. It can even make some people make their passion their profession, their life's work. Many people come to us at the Johnson Center to find out how to start a nonprofit organization for precisely this reason.
As Christine Mwangi, founder of Be a Rose, recently shared with me: “I didn't choose my nonprofit organization, my nonprofit chose me. Christine had a career path to becoming a pharmacist when she learned about “menstrual poverty”, a global health problem affecting women and girls around the world, including in the United States. Women and girls who suffer from menstrual poverty do not have access to safe and hygienic health products, or they may struggle to control their periods without shame or stigma. For Mwangi, it was her strong desire to help others, combined with a deep passion to address the health inequities surrounding menstrual poverty, that prompted her to make the decision to create a non-profit organization.
An individual, or sometimes a small group of people, sees a need and, because of experience or education, develops a passion to fill that gap. This is how thousands of non-profit organizations are born every year. The name may be a bit misleading, as not-for-profit corporations can make a profit. What sets a not-for-profit or charitable organization apart is how those profits can be used.
In a for-profit corporation, investors, shareholders or owners are the beneficiaries of any benefit. In a charitable organization, profits cannot be paid to individuals. They can only be used to serve the community, which the Internal Revenue Service (IRS) defines as a “public benefit.”. A charitable organization must not only create some public benefit, but it must also have the support of the community.
This is where it can get a little tricky. For most of us, when we hear the term nonprofit organization, we think of the community food pantry, the downtown museum, the local symphony orchestra, or the favorite charity we support. Under the IRS code, these would be classified as 501 (c) (public charities), which is the most common of the more than 28 types of charitable organizations listed in federal law. There are a lot of complexities in the IRS code, and if you have problems with insomnia, you can read them all in Publication 557, Tax Exempt Status for Your Organization.
However, for our purposes, it's important to understand that, in addition to creating certain value for the community, public charities must pass the IRS public support test, which stipulates that at least one-third of their operational support comes from the community. That usually means that public charities have to participate in fund-raising activities. For some, that advantage leads them to wonder if creating a non-profit organization is the best way to respond to a need they see or a passion they don't abandon. When reflecting on the question of whether or not to start a nonprofit organization, there are many things to consider.
First, take a look at your community. When passion invades us, we can feel that we have the unique knowledge and drive to address a problem. However, there is a good chance that there is at least one organization in the community that is already working on the topic and that has awakened their passion. With nearly 1.6 million nonprofit organizations in the country, it's helpful to conduct some market research not only to understand the needs of your community, but also to learn more about organizations that may already be actively working to meet them.
Donating, volunteering, or seeking a staff position in an existing nonprofit organization that works for the same passion comes with a number of benefits, probably the most important of which is that you won't do it alone. Existing organizations are likely to already have many of the critical operational functions, such as payroll systems, benefits, a donor and partner base, and a community presence. Then, when considering the needs of the community and your big idea, it's good to consider all the options you have for establishing a corporation that can provide some public benefit. As my colleague Michael Moody observed, the boundaries between business and philanthropy are increasingly blurred as more consumers and entrepreneurs seek to use their economic options to support public good outcomes.
You may have more options than you think. Many traditional for-profit corporations offer financial support to nonprofit organizations or directly to communities as part of their business activities. There are also opportunities for company formation including a low-benefit limited liability company (L3C), a benefit corporation (available in 35 states), or the certification of an existing company as a B corporation. Each of these structures comes with different requirements that an attorney and accountant can help you understand.
In most states, you can download the necessary forms and complete them without the help of an attorney, although it's helpful to seek legal advice to ensure you don't miss any details. To better understand what is required in your state, you can consult the interactive map of state registration and compliance information compiled by Hurwit & Associates, a Massachusetts-based law firm that specializes in philanthropic law. When incorporated, most states will request that the officers of the not-for-profit corporation be appointed. While some states have no minimum requirements for the number of board members, many states meet the IRS minimum of three, which generally includes the appointment of a chairman (or chairman) of the board, a treasurer, and a secretary.
It's important to read the fine print of your state's constitution documentation to ensure that the board complies with the law. Many passionate founders will appoint those closest to them as their first board members. However, it's important to keep in mind that if you want to guide your organization towards sustainability, broad community representation will be key to making good decisions. A passion for mission often drives leaders to create big changes in their communities.
There are thousands of resources to help founders understand how to work with a board, develop bylaws, raise funds, and more. One of those resources is the Johnson Center; we offer a wide range of training and thought leadership to move the industry forward. The job of a CEO is challenging and sometimes lonely. The Johnson Center Peer Coaching Cohort provides a place to establish thought-provoking partnerships and strategically advise to help nonprofit leaders do their best work.
This is the best program for you if you are looking for support as an individual. If you are looking for strategic advice, personalized capacity development or technical assistance for your organization, do not hesitate to contact our team. We offer a wide range of services to help you and your organization build a practical path to the future. One of the most important things a nonprofit organization can do to build a sustainable organization is to develop a strong fund-raising system.
Before the main event, each nonprofit organization participates in 6 to 10 weeks of training on marketing, branding, and impact. In fact, the IRS attaches great importance to this issue when evaluating new nonprofit organizations seeking 501 (c) () status. Below is an overview of the paperwork, cost, and time to start a nonprofit organization in Mississippi. Once they're adopted, keep them safely in your not-for-profit record kit.
As with a for-profit company, a business plan can help a nonprofit organization describe how it intends to achieve its mission with more specific details. Initiated by BoardSource and leaders in the field of restructuring nonprofit organizations, The Power of Possibility campaign provides resources and tools to help guide the board's debate on the possibility of strategic alliances and restructurings. New 501 (c) () organizations are particularly vulnerable to this for several reasons, in particular the tight control that is often seen in the early years. Therefore, consider monitoring your organization's finances and activities in such a way as to help ensure that these annual reporting requirements are met seamlessly.
Before creating a new nonprofit organization, make sure you have identified an unmet need in your community and that you know that there is no organization that serves your cause. This table lists board member requirements for not-for-profit organizations in each state, including age or residence requirements for directors, the positions of officers required, and the minimum number of directors. Most importantly, you will gain credibility and legitimacy for your cause, giving the public confidence in your organization. .
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