The Basics of Forming a Nonprofit Organization
What is a Nonprofit Organization?
Most nonprofit organizations are established for charitable purposes pursuant to Section 501(c)(3) of the Internal Revenue Code. Most of the benefits of forming your organization as a nonprofit stem from the 501(c)(3) tax-exempt status, such as the tax-deductibility of donations, access to grant money, and income and property tax exemptions. The exempt purposes set forth in section 501(c)(3) includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.Related: Obtaining and Maintaining 501(c)(3) Tax-Exempt Status
As with a for-profit business, it is important before you start a nonprofit to create a business plan. A business plan describes in detail how the nonprofit will achieve its mission, goals, and objectives. A well-written business plan will not only set the blueprint for the organization’s future operations, but in the nonprofit context, will be a guide for funding and long-term sustainability for the organization.
Additionally, you should create bylaws, appoint the initial directors, hold the first meeting of the board of directors, and obtain licenses and permits that may be required for your organization. Additionally, all exempt organizations must file some version of Form 990 with IRS, which shows your finances, activities, governance processes, directors, and key staff which are open to public inspection.
If you are considering creating a nonprofit organization, find a lawyer to help you navigate the process by quickly posting a short summary of your legal needs to Legal Services Link and letting the perfect attorney come to you!
Before You Form the Nonprofit
The exact procedures for forming a nonprofit organization will vary from state to state, but every nonprofit should first identify its mission, purpose, vision, goals and objectives. It may be easy to lose sight of your mission in all the details of forming and sustaining your organization. Every discussion, plan, and decision of your nonprofit organization should be in furtherance of your mission.As with a for-profit business, it is important before you start a nonprofit to create a business plan. A business plan describes in detail how the nonprofit will achieve its mission, goals, and objectives. A well-written business plan will not only set the blueprint for the organization’s future operations, but in the nonprofit context, will be a guide for funding and long-term sustainability for the organization.
Forming the Nonprofit
The first step in forming a nonprofit organization is choosing an available business name that meets the requirements of state law. The next step is to file Articles of Incorporation with the state in which the nonprofit will be formed. Articles of Incorporation contain basic information on the organization, such as its name, registered agent, and address of the organization’s principal office. In order to gain tax exempt status, your Articles of Incorporation must include, among other things, language that the organization’s activities will be limited to the purposes set out in section 501(c)(3) of the Internal Revenue Code; the organization will not engage in political or legislative activities prohibited under section 501(c)(3); and upon dissolution of the organization, any remaining assets will be distributed to another nonprofit, government agency, or for another public purpose.Additionally, you should create bylaws, appoint the initial directors, hold the first meeting of the board of directors, and obtain licenses and permits that may be required for your organization. Additionally, all exempt organizations must file some version of Form 990 with IRS, which shows your finances, activities, governance processes, directors, and key staff which are open to public inspection.
If you are considering creating a nonprofit organization, find a lawyer to help you navigate the process by quickly posting a short summary of your legal needs to Legal Services Link and letting the perfect attorney come to you!
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Posted - 10/27/2016
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