Learning how to register an organization is often the first step you'll take when starting an official charity or nonprofit business. If your organization is in the education, religious, charitable, or scientific space, you should consider forming a nonprofit.

This structure protects your venture from certain liability and gives it a tax-exempt status. Forming a nonprofit organization can be a way to feel good about the work you do because its purpose often helps those in your community, or furthers a cause you are passionate about.

Is a Nonprofit a Match for You?

If you're looking to form a nonprofit for personal gain then hit the brakes, and find an alternative like a for-profit company. Public charities must be organized and managed solely for exempt purposes as illustrated in section 501(c)(3) of the IRS. Most new nonprofits aren't equipped or eligible to receive grants.

Though rewarding, starting your own nonprofit is probably the most complex way to share your passion and help people and causes in your community. Developing reliable income streams is by far the hardest feat for a new nonprofit. Every nonprofit is different, but experts agree that less than fifty percent of nonprofit startups survive after five years. Even after making it five years, about one-third have financial concerns.

Explore options that will allow you to technically operate as a nonprofit but with less effort and cost. This will allow you to focus on what you intended to do anyway: serve your community.

Do Your Research

Organize a needs analysis. Research to see if any organizations (nonprofit, government, or for-profit) are already engaged in your community in the same space, fitting the same need you plan to provide.

If there is an existing organization that duplicates your organization's purpose:

  • See if there is a twist you can take on the existing service that will make your organization unique.
  • See how you can make your organization better than the established one, and how you can add to the space.

In your analysis, show data that illustrates a need for your services to specific demographics in the area that currently are not offered.

Articles of Incorporation

The first step to starting a nonprofit organization is incorporating your nonprofit. This means filling out your articles of incorporation paperwork. Be prepared to include this information on your articles of incorporation document:

  • Names of the principal members of the corporation
  • Corporation's purpose
  • Official address
  • Name of a registered agent -- the individual who handles the corporation's legal documents

You can either hire an attorney to write your articles of incorporation, or buy a template and write it yourself -- just be sure to use the correct language. Creating an official structure will give validity to your services and programs. Having a corporate structure protects the organization's officers and directors by limiting their liability.

Create a Mission Statement

Drafting your mission statement is a crucial beginning step. Why? Because once established, your missions statement is the compass that guides every decision and task in your organization.

Mission statements outline your organization's:

  • Name and Identity
  • Vision
  • Purpose
  • Who it helps
  • How it will function and achieve outlined goals

Board Members

Creating and cultivating a solid team of board members is imperative for long-term success. The board of directors is your nonprofit's governing body. Find qualified professionals in appropriate industries to serve as your board of directors.

Design a strategic and methodical plan for how you will sustain your board once they have been recruited -- this activity is just as important as recruitment itself. Think about on-boarding, training, evaluating and individual professional development for each board member to ensure their satisfaction and growth.

Tax Exempt Status

The IRS requires Form 1023 be filled out by all nonprofit organizations seeking tax-exempt status. It can take anywhere from 3-12 months for the IRS to send its decision, based on how many questions the IRS has regarding your application.

Anticipate the requirements for annual reporting. In many situations, an exempt organization must file a version of Form 990 with the IRS, depending on financial movement.

Each state has their own requirements for renewal and reporting. Make sure to track your activities and finances in an organized way. When the time comes to submit your annual requirements, you'll be prepared and reporting will feel like a natural, logical step and all will go smoothly.

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