Starting a Non-Profit Organization

A Non-Profit Business

If you are looking into starting a non-profit organization, keep in mind that you will be the founder but not the owner. Most organizations apply for non-profit status when their goal is the “greater good” versus becoming a millionaire.

A non-profit is run by a board which votes and approves the workings of the business. Any profit that is made is poured back into the organization to help keep it running. Though there are numerous advantages to taking this route, keep in mind that if you do go out of business, the liquidated assets must be donated to another non-profit.

If the board decides to hire you, you can earn a salary voted on by your board members.

Examples of Non-Profit Organizations

Most non-profit businesses offer a service and work as a business that runs primarily on grants and donations in order to accomplish their goal. Some examples of non-profit organizations include:

• Domestic violence shelters
• Shakespeare/Art in the Park
• Museums and art centers
• Habitat for Humanity
• Soup kitchens
• Animal shelters

When deciding if non-profit is the best route for your business idea, ask yourself:

• Will this project assist the community and how?
• Can this business be self-sustaining or will it rely on grants and donations to stay open?
• Who is going to benefit most?

Starting a Non-Profit Organization

Now that you have decided that your business plan fits into the non-profit category, it is time to take the proper steps. Before you can begin, there is a lot of footwork that needs to be done. Just like any business, you need to have the proper documentation, research and planning.

Mission Statement

One of the first things to develop is your mission statement. This explains who you are and what your goal is. It needs to answer the question, “Why does this organization exist and what will it accomplish?”

A mission statement can be as simple as a few sentences or as in depth as a few pages. If you are unsure of how to develop a mission statement, spend time reading statements of other non-profits that are similar in mission to yours.

Tax Exempt

Before you can raise money or act as a non-profit, you need the proper documentation and IRS tax forms. Your first stop is the Federal IRS offices to file for your 501c3. This recognizes you as a not for profit organization. When businesses and individuals give your organization a donation, they need your 501c3 number so their donation can be considered tax deductible.

Every state is different, so find out the specific requirements before filing. Many states require:

• Bylaws, which act as a guide to how you operate your organization
• Articles of Incorporation
• Board of Directors

Forming a Board

Your first Board of Directors is important to the success and growth of your non-profit. In the beginning, you will need a “working” board. This means that on top of making the decisions about how the organization will run, they will also be chairing committees and doing a lot of the work.

When forming the board, invite a variety of individuals who are:

• Workers: those who will work hard to get the organization off the ground
• Wallets: those who have money to donate
• Professionals: those who have experience in areas you will need advice in, such as lawyers, teachers, architects, realtors, and accountants

Business ID

In order to open a bank account, you must incorporate yourself as a business. To do this, you need a Federal Tax Identification Number, or Employee Identification Number (EIN). Applying for your EIN is quick and easy. You can apply by:

• Phone
• Fax
• Mail
• Online

Feasibility Study

Before getting started, consider hiring a consultant to implement a feasibility study in your area. This study will give you a snapshot on how the community will react to your business, and provide insight to how much money you will be able to fundraise. If done properly, you will even have a list of businesses and individuals to approach for funding.

Now that you understand the basics of starting a non-profit organization, the next step is to do it. Keep in mind that it will take a lot of time and planning. Work with key individuals and your local government to help rally the support you need to create a successful non-profit organization.