If you have a passion for helping others and want to expand that further by helping out your community, establishing a nonprofit organization is a fantastic way to turn your idea into a reality. But before starting your new nonprofit, ensure you have determined an unmet need in your community and prepare beforehand.
Besides hiring a tax-exempt lawyer to help you manage your finances and deal with taxes, here’s what you need to do to establish a nonprofit organization.
Do Market Research and Seek Alternatives
Just like for-profit organizations, you need to find a niche for your nonprofit. Although for-profits may find success despite having tons of competition, as a nonprofit, you may find it challenging to get support from donors if there’s an existing organization doing the same work you’re envisioning. That’s why you need to understand the competitive landscape of your chosen niche beforehand.
If you find that there’s already a nonprofit providing the same needs your proposed nonprofit would offer, see if there’s an opportunity for you to join that organization as a volunteer, staff, or board member. Moreover, if there’s a national-level nonprofit that follows your same visions, you can explore the possibility of establishing a local chapter.
Recruit the Required Individuals
The incorporation is the individual responsible for signing the ‘articles of incorporation’ of your nonprofit organization. Meanwhile, directors make up your business’s governing body and are stakeholders that will fund your nonprofit. You’ll need to identify three unrelated people to meet the Internal Revenue Service (IRS) requirements. Additionally, you’ll need a registered agent to handle legal notices of your nonprofit.
Prepare and File Articles of Incorporation
The articles of incorporation officially mark the establishment of your nonprofit organization, documenting where and when your organizations were formed, capturing other information to verify it exists. Although the requirements vary per state, the IRS requires certain provisions when applying for the tax-exempt status. Meeting these requirements beforehand helps you avoid making amendments later or risk getting your tax-exempt application rejected. So be diligent and prepare and file your articles of incorporation early.
Get an Employer Identification Number
The employer identification number (EIN) is a unique nine-digit number given by the IRS to identify your organization. You’ll need this to open a business account, apply for tax-exempt status, and submit your annual reports and 990 returns to the IRS. Make sure to take care of this first before dealing with the legal matters.
Make It Legal
One of the main advantages of incorporating a nonprofit organization is that it enables you to apply for tax-exempt status with the IRS, which frees you from paying any taxes as most businesses would. However, remember that the incorporating process won’t exempt you under section 501(c)(3), and even if you’ve already incorporated, you’ll still need to formally submit a 501(c)(3) application to the IRS.
Running a nonprofit organization means you need to follow numerous regulations, and you must stay on top of all the compliance issues that may affect it. For instance, you should ensure to register with the right state office regulating charitable organizations and solicitations within your state. Other compliance problems include reporting forms and Form 990, which you’ll need to file with the IRS every year.
Staying compliant will help you ensure your organization stays afloat and help others in need long-term.
All nonprofits have the same goal, and that’s helping others and benefiting their communities. If you’re genuinely committed to these goals, with a bit of perseverance and the tips mentioned, you’re already well on your way.