How to Start a 501c3 Nonprofit Organization'
Have you always wanted to leave the world a better place than you found it by starting a nonprofit corporation? Here's a simple, straightforward guide on how to successfully establish a 501(c)(3) nonprofit corporation.
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StepsUnderstand what a nonprofit is: an organization whose primary objective is to support some issue or matter of private interest or public concern (such as the arts, charities, education, politics, religion, research, or some other endeavor) for non-commercial purposes. There are different kinds of nonprofits, one of them being a 501,which is exempt from income and (sometimes) property tax, and able to receive tax-deductible charitable contributions. Before you spend your money, at least consult with an attorney who is experienced in the area of nonprofit law so that you do not make one of the many major mistakes that people make when they try to incorporate by themselves.
Formulate a mission statement. As a non-profit organization, you exist to accomplish your mission, which should be crafted based upon your purpose, services and values. The mission statement is a concise expression that covers in one or two sentences who the organization is, what it does, for whom and where. It should also be compelling, as it will be used in all published materials, funding requests and public relations. It should also portray how your organization is distinct from others. (See Tips for a sample mission statement.)
Form a Board of Directors. Forming a board requires careful thought and extensive recruitment efforts. Each state has regulations that determine the minimum size of the board, typically three, but the optimum number of people who sit on the board should be determined by the needs of the organization. Based on what your organization would like to accomplish, you should decide what special skills and qualities you will require of the individuals on your board. Identify qualified individuals who are supportive of your mission and are willing to give of their talents and time (see Tips for more information).
File Articles of Incorporation. Articles of Incorporation are official statements of creation of an organization filed with the appropriate state agency. They are important to protect both board and staff from legal liabilities incurred by the organization, making the corporation the holder of debts and liabilities, not the individuals and officers who work for the organization. The specific requirements governing how to incorporate are determined by each state. You can obtain the information you need to proceed with this step from your state Attorney General’s office or your state Secretary’s office. Before you spend your money, at least consult with an attorney who is experienced in the area of nonprofit law so that you do not make one of the many major mistakes that people make when they try to incorporate by themselves.
Draft bylaws. Bylaws are simply the "rules" of how the organization operates. Although Bylaws are not required to file for 501(c)(3) status, they will help you in governing your organization. Bylaws should be drafted with the help of an attorney and approved by the board early in the organization's development.
Develop a budget. Creating a budget is often one of the most challenging tasks when creating a nonprofit organization. A budget is the expression, in financial terms, of the plan of operation designed to achieve the objectives of an organization. New organizations may start the budgeting process by looking at potential income – figuring out how much money they have to spend.
Develop a record-keeping system. Legally, you must save all Board documents including minutes and financial statements. It is necessary to preserve your important corporate documents, including board meeting minutes, bylaws, Articles of Incorporation, financial reports, and other official records. You should contact your appropriate state agency for more information on what records you are required to keep in the official files.
Develop an accounting system. If your board does not include someone with a financial or accounting background, it is best to work with an accountant familiar with non-profit organizations. Nonprofits are accountable to the public, their funders, and, in some instances, government granting bodies, and it is vital to establish a system of controls (checks and balances) when establishing the