by Trina Newby
Starting a nonprofit organization can mean many things. For example, it could mean a group of women meeting for cards once a week and each person contributing a dollar for snacks and such. However, they really aren’t seeking to make a profit. It could mean someone starting a neighborhood art center full-time to serve underprivileged children. It could also mean someone starting a women’s foundation with the mission to service homeless women and children.
It all depends on your vision and purpose for starting your venture. Most individuals start a nonprofit because they are serving the general public and meeting a specific and identifiable need on a local, county, state, regional or national level.
In making a decision to start a nonprofit organization ask yourself the following questions:
- What is my purpose for starting this organization?
- Who would the organization serve?
- Is there a need that the organization would fill?
- How much money or income would I like to earn personally?
- How would I fund the startup of the organization?
- Would I need employees?
- I am considering this as my personal business or a public organization for everyone?
- Would I mind it if my board of directors felt that I should step down as the CEO or Executive Director?
- Would I be able to continue the organization if it raised just enough money to cover expenses and not my salary?
- Am I prepared to accept the responsibility of maintaining excellent bookkeeping and management records for the organization and also having them examined by the IRS?
Hopefully the above questions will get you to analyze whether starting a nonprofit is for you or not.
Upon deciding to form a nonprofit organization you must consider its legal formation. According to the IRS, “A nonprofit organization may be created as a corporation, a trust, or an unincorporated association. Any of these entities may qualify for exemption. Note, however, that a partnership generally may not qualify.”
If you decide that starting a nonprofit organization is your desire the following information will be helpful in setting your foundation:
Develop your vision and mission statements.
Vision: If you were to read a magazine article about your organization, what would it say about it? What would be the good works it has done in the community? Let this be one of the ways you come up with your vision. Your vision defines the outcome of what you want others to see your organization as. Usually the vision statement is 1 to 3 sentences long.
Mission: The mission statement defines the purpose of your organization’s existence. As for structure, it should include the following:
- Description of what the organization does
- The clients it services
- Benefits of the organization
- How it will bring value to the community or market it serves
Please note: There’s a thin line between the vision and the mission and neither one can do without the other.
There are different types of non-profits. For example:
A small group of businesswomen that meet weekly and pay monthly dues are considered to be a non-profit association. Usually associations if local can apply for a business license and set up their bi-laws and that is enough to establish a checking account. The association must make sure that they do not make a profit or they are subject to paying taxes. An association that wants to go national or have tax-exempt status would have to incorporate and officially put in place a board of directors.
An organization that plans on submitting proposals for grants, developing fundraising events and wants a checking account must incorporate in the state of that organization. If that group also wanted to also be exempt from paying taxes, it would also have to file with the IRS for an exemption status. Many times the term “501 C(3)” is used for many non-profit organizations. What that means is that they have applied for a special exempt status and anyone that donates to them can deduct it via their taxes also. Many larger non-profits and corporations require a non-profit to have this type of status before they are willing to support an organization’s project.
Working with Larger Non-Profits
Sometimes new or small non-profit organizations look to the large non-profits for guidance, support and funding to provide a needed service to the community or target market. This can be especially helpful, because it can give you the opportunity to learn more about running your organization. Some examples of non-profit organizations would include:
- United Way
- Salvation Army
- Safeco Insurance (provides community grants to non-profits)
Funding Your Non-Profit
Depending on grants to fund your non-profit is not a good decision and can lead to the failure of your organization. With thousands of non-profit organizations in the US now there simply isn’t enough grants available. To ensure longevity of your organization one of the most important things you should do is to first develop a strong core program from which everything else stems. Your core program should have a well-written description, as well as budget and cost analysis worked in. It can be anywhere from several pages to a small booklet. The most important thing is that it must serve the mission of your organization.
Once your core program is written you are ready to start introducing it to individuals, businesses and organizations that might be interested in supporting you. This is the first step in determining the overall level of support you can expect.
Myths About Starting a Non-Profit
I really don’t need any money to start my non-profit; I’ll run my organization completely off of grants.
Well, if that were true I think everyone would be non-profit. Although there are grants that you can apply for it isn’t guaranteed that you’ll be the winning recipient.
I can get rich or have a six-figure income by starting a non-profit.
Again, normally most founders when starting their non-profit corporations aren’t able to receive a salary for up to a year while building the organization.
A non-profit organization can’t make a profit
Non-profit organizations can make a profit. There are many organizations that sell gift items and create for-profit ventures where the IRS considers it to be for-profit. Normally, the organization is required to pay taxes on that portion. However, non-profits have to be very careful in this situation, because having too many for profit ventures can be a signal to IRS that you are using the non-profit status as a cover.
An excellent resource for starting your non-profit and non-profit management is The Foundation Center (foundationcenter.org). Established in 1956, and today supported by more than 600 foundations, the Foundation Center is the nation's leading authority on philanthropy, connecting nonprofits and the grant makers supporting them to tools they can use and information they can trust.
The Center maintains the most comprehensive database on U.S. grant makers and their grants—a robust, accessible knowledge bank for the sector. We also operate research, education, and training programs designed to advance philanthropy at every level. More than 37,000 people visit our web site each day, and thousands more are served in our five regional library/learning centers and our national network of more than 275 Cooperating Collections.
The Small Business Administration (SBA), your local library and United Way can also provide you with resources as well. The most important thing to remember is that if it’s in your heart to help others and fill a need then do your homework, develop a team of volunteers that can see the vision, talk with other women who are doing it, figure out how to cover your income (if needed), raise funds and fulfill your dream!
About the Author:
Trina Newby is a Business Consultant, CEO & Founder of Women About Biz, a membership organization that provides small business resources, tools and networking opportunities for women.