Welcome to the Jungle!
By Reet Alexander
The word on the street is that you want to start a non-profit organization.
More awkward silence.
Yeah, I get that a lot when I consult with those brand-spanking-new to the non-profit world.
Here’s a scenario of how things typically go down:
You get all fired up to change the world – LET’S DO THIS!
You’re eager to create a solution to a problem you can’t ignore any longer.
You tell family and friends, collect thumbs up and pats on the back, and sit back and bask in that warm and fuzzy feeling.
Life is great!
Then, reality sets in.
You’re about to start a nonprofit business!
You have no clue how to start a non-profit or what starting a non-profit – specifically a tax exempt non-profit – fully entails.
Suddenly, you feel all alone and paralyzed with fear.
I’m going to hold your hand and show you how to start a non-profit organization. That’s right. I’m going to walk you through the process – step by step – of starting a non-profit business.
And not just any old non-profit business!
I’m going to show you how to start a non-profit that honors section 501 (c)(3) of the IRS tax code.
Why is honoring section 501 (c)(3) important? By doing so, your organization may qualify for tax exempt status, which means you will be able to receive tax exempt donations and other great perks.
Do I have your attention yet? Great! Let’s get started.
What Exactly is a Non-Profit Organization?
A non-profit organization is a business entity that seeks to solve a problem within the community.
Like for-profit companies, a non-profit is a business structure that must adhere to a set of state laws, rules and regulations. Although the majority of non-profits established are corporations, non-profit businesses can also be formed as associations and trusts.
Ok – So What’s the Difference Between a Non-Profit and a For-Profit?
I’m glad you asked! Even though for-profits and non-profits utilize similar business structures, the fundamental difference between for-profits and non-profits is what actually happens with the money.
For-profit businesses typically distribute profits according to the ownership structure outlined in their organizational documents. Therefore, the more stock you own in a for-profit business, the more control you can usually exercise over the distribution of profits.
Not so with a non-profit!
No individual, group or private entity of any kind can profit from a non-profit.
Revenues must be used to advance the mission of the organization and serve the targeted audience.
Any profits – referred to as surplus – must be recycled back into the non-profit business.
Starting a Non-profit Organization
Once you’ve decided to be a founder of a non-profit company, you will need to contact the appropriate state agency to get the ball rolling.
In many states, the Secretary of State will be your point of contact for obtaining and filing the necessary paperwork to form a non-profit business. For instance, when you contact the Secretary of State (SOS) in California to start a non-profit (referred to as a nonprofit public benefit corporation), you will be directed to form ARTS-PB-501(c)(3).
However, some states will have a different agency in charge of this process. To find out which office you need to contact in your state to start a non-profit, visit: www.irs.gov/Charities-&-Non-Profits/State-Links.
You will also need to apply for an EIN – Employer Identification Number – through the IRS. The IRS offers an online application process that may allow you to obtain an EIN immediately.
Done! What’s Next? Bring It.
Once you have obtained your EIN, formed your non-profit business and received your organizational documents from your state agency, you are ready to embark upon the next phase of your journey:
APPLYING FOR FEDERAL TAX EXEMPT STATUS.
If you’re ready to do that, click on my next post, Get 501 (c)(3) Federal Tax Exemption For Your Nonprofit Organization, so I can show you how to start a 501 (c) (3) tax exempt non-profit organization.
Until then, keep your head up and keep fighting the good fight for those in need.
P.S. If you’re tired of reading and you’re ready to get busy doing, click here to be notified when enrollment opens in two weeks for my crash course – Get Non-Profit Tax Exemption In 10 Days. In this online workshop, I’ll help you complete the application process and qualify for tax exemption in 10 days. Yep, you read that correctly – 10 days. Click hereto get on the list.
“I’m a non-profit expert with 20 years in the trenches. Having seen, time and time again, new non-profit organizations struggle to get off the ground and compete with established charities for monies and other resources, my primary objective is to level the playing field for emergent non-profits and other charitable start-ups so they are better equipped for long-term sustainability, increased community impact and overall financial success.” Reet Alexander