Property Owning andTax Breaks

Another benefit to incorporating is that a nonprofit organization has the legal right to own property. Property can serve a number of purposes, and can be capitalized to fund the organization or even held in trust. Because of an organization’s NPO status, there is no requisite property tax. As long as the revenues gained from any held land must be turned back into the organization, the fact that an organization can use, own, and sell land can eliminate much of the need for fund-raising. For an NPO that uses its land as a wise investment, the right to own property can be a significant advantage.

Nonprofits that are lawfully incorporated have a number of rights and advantages that not only protect the founder, but that help the NPO to thrive, as well. Utilizing these aspects to the advantage of a business can make the difference between a successful and unsuccessful NPO.

Liability Protection

New nonprofit organizations must be incorporated as a nonprofit corporation community chest or foundation[i] within its particular state. For the legally established NPO, a number of protections are in place.

Financial autonomy is one benefit granted a nonprofit business. The NPO is a legal entity with all associated rights, and as such has its own finances. The founder and board members of an organization and the NPO itself have separate bank accounts, making any potential lawsuit one that will effect solely the NPO.

There are a number of banks that cater specifically to the unique needs of nonprofit organizations. Finding a financial institution that is experienced in dealing with NPOs can be a considerable benefit to the organization, as they will not only give comparatively better interest rates and help with financial reporting, but they will be able to advise on financial matters, as well.

Another benefit to incorporating an NPO is the fact that a nonprofit is able to continue operations even after the founder leaves the board or even the company itself. A potential NPO founder may work at the company for whatever length of time he or she deems fit. After stepping down from the board of directors, the founder is no longer accountable to or for the organization. This not only affords a certain amount of freedom to the founder, but it allows the nonprofit to carry on, thriving long after its creator is gone.

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[i] "The IRS states that you must be a corporation, community chest, fund, or foundation to receive tax-exempt status." Online. http://www.managementhelp.org/strt_org/strt_np/strt_np.htm

Community Support

Educational and research nonprofits typically garner considerable respect and goodwill from the surrounding community. Not only do NPOs generate support at levels vastly higher than for-profit enterprises, they can also generate real change in the business community, as well.

Nonprofits are in a unique position to support university work in their local communities. For example, a number of NPOs that have been established in small college towns have found success in creating a demand for students who have recently graduated. Through the nonprofit organization, some of the intellectual resources that may have fled a community end up remaining in it. This supports the local university as well as the surrounding community, and generates substantial goodwill.

In the same way, NPOs can support their local business community, as well. Organizations that are involved in vocational or industry-specific training can provide trained labor for local industry, a mission which assists not only nearby enterprise, but individual needs, as well. By providing these opportunities, NPOs assist the community in becoming more self-sufficient, and assist people in career shifts and additional skill training. Working to make each individual member of a community more valuable and employable is considered a public good, as nonprofits with an industry-training business model are often responsible for attracting for-profit businesses that wish to utilize the newly trained local population.

Communities that provide the foundation for educational or research nonprofit organizations gain considerable benefits. NPOs can support the local community in a way that for-profit businesses cannot. Through education and employment, nonprofits can change the landscape of a community, bring outside dollars into the community, and help individuals and enterprises form lasting partnerships and relationships.

Write offs and Fund Raising

For a typical NPO, expenses that can be written off include everything from fund-raising campaigns to grant-writing, and mailing published materials to generating incidental expenses. Effectively using the tax system and knowing what constitutes a legal write-off and what does not means increased operating within the law while saving money. Increased proceeds help a nonprofit to effectively work to accomplish its mission.

Whether funds are generated from the public, a few influential people, private funds or even federal grants, your NPO will likely require outside help. Though raising capital and operating in a business model that does not have profit as its goal can make everyday operations challenging, a number of opportunities exist to help NPOs in their missions. Volunteer workers, interns, government tax write-offs, and donation systems are all ways by which an NPO can increase proceeds and succeed.

Benefits and Perks of Being a Nonprofit

Nonprofit organizations also have the added benefit of reduced-rate mailings. The US Congress has determined that nonprofits are eligible to send mail at a lower rate than traditional business organizations. The United States Postal Service publishes complete guidelines regarding what kind of mail qualifies for the reduced rate status, as well as specifics regarding mailing policies. Provided an organization is using this mail service within the law, reduced-rate mailings can be especially useful when sending out funding requests, annual reports and membership mailers. As soon an organization is incorporated in its state, the application process for reduced-rate postage may commence. For organizations with a minimal operating budget that rely upon paid membership or donations, this tool can be particularly useful.

One of the chief methods by which nonprofit organizations receive support is through donations. Drumming up backing for an organization can be challenging, and it is important to keep in mind that almost all donations to an organization are tax-deductible to both businesses and individuals. From various children’s charities to the Humane Society, receiving support through donations is one of the most crucial pieces to smooth operations in the NPO sector. .

Alternative Saving and Revenue Sources

Generally speaking, nonprofits tend to run on minimal capital, especially at the beginning of business operations. Because NPOs do not run on a for-profit basis, most successful business models lessen the up-front financial commitment to the organization. A number of unique opportunities exist to help NPOs minimize the funds necessary to running the business.

Volunteers are incredibly valuable resources in running a not-for-profit organization. Volunteers come to a business for many reasons and at many different skill levels, and while managing them requires no small amount of skill and diplomacy, they bring significant assets to an organization. It is important, however, to remain within the confines of the law in using volunteer labor. Student labor, for example, is not considered volunteer labor without a significant educational component to the work that is being completed. Checking local and state laws regarding volunteer labor, as successful NPOs should be fully able to utilize their volunteer resources.

Nonprofits are also able to take advantage of internship labor. Interns typically work for a small stipend, and as long as they are fairly hired from a pool of candidates, and providing that hiring them does not put operations of the organization at risk[i], NPOs should take advantage of this valuable pool of labor. Interns can be a priceless commodity.

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[i] "An organization subsidized recent law graduates who provided free legal services to low income residents of economically depressed communities. Any private benefit derived by the legal interns is incidental to the public charitable purpose. Rev. Rul. 72–559, 1972–2 C.B. 247." IRS Web site: http://www.irs.gov/irm/part7/ch10s06.html

Independent Research- Flexibility and Freedom

For NPOs that are involved in political research, while the organization itself may not propose or support any particular legislation or position in the political process, it can provide the framework for others to support or propose legislation. By independently focusing research efforts on areas that are of political importance, nonprofits can work to uncover the truth of a situation. These uncovered facts can then be used by local, state or federal officials and representatives.

Nonprofit organizations are large enough to provide the facilities and the funding for pure science and applied science, but are small enough that they can change as necessary. The founder and the board of directors of an NPO are in charge of the direction and mission of the research, giving the organization flexibility and freedom that may be lacking in larger, more bureaucratic institutions. As such, nonprofits open up many opportunities for major innovative leaps.

Research and Scientific Inquiry

Sometimes truly revolutionary work requires the latitude that is often lacking in the business sector or in the confines of “publish-or-perish” university systems. An NPO can allow the freedom of space and thought that does not exist in other facilities.

Nonprofits can give major benefits to the researchers who work for them. There have always been scientists who are reluctant to work for a federal agency or a conventional university. Nonprofit foundations have traditionally helped to keep these highly skilled scientists employed and working at their most productive level.

Despite their non-profit designation, NPOs can also do major good for the business sector. For potential founders of nonprofit organizations, even if they are already involved in the business world, research done on making their work safer or more efficient is considered in the interest of the public good. Nonprofits also retain the right to change the course of their research if it does not appear to be scientifically beneficial. As long as the results of this research are publicly available, and barring any potential conflicts of interest, nonprofit work can ultimately benefit the business world, as well.

Serving and Constructing Objective Through Public Education

There are scores of ways that educational nonprofits can serve the public good. An NPO may teach people valuable life skills or provide an alternative means for community education. Not-for-profits may promote arts education or theatre. These organizations may focus their programs on children, adults or seniors, or may tailor their agendas to immigrant or impoverished members of their specific communities.

NPOs that are devoted to research can also aid the local community. A research-oriented nonprofit may work on studying medical devices or they may be apply themselves to improving a technology that can sustain the environment. These are just a few of the many ways that nonprofits impact their communities each day.

Aside from the general guideline of promoting the public good through education or research, there are a number of other allowable enterprises. These include:

• Certain types of amateur athletics
• Promoting the livelihoods of the general public
• Providing education that enhances the public safety
• Encouraging literacy
• Providing opportunities for life-long learning

Training the unemployed to enter into new careers is a perfect example of these categories. Educating the unemployed is one way to people a chance to perfect new job skills that they would otherwise not be accessible to them. Programs that work to give supervision to minors through after-school programs, that provide daytime trips for seniors to hear history lectures, or even research that is focused on safety and education are all examples of promoting the public good.

Serving Underprivileged Members of Society

Special preference is given to NPOs that specifically exist to assist members of the community who have been classified as “underprivileged” by the IRS. Such community members will likely consider the benefit of the work of these NPOs to be of greater value than those who enjoy ample opportunities elsewhere. Working to serve the underprivileged can be hugely rewarding, and the impact of the work done is immeasurable.

Groups considered by the IRS as being classically underprivileged are:

• The elderly – those over the age of 65, living in and out of public programs or nursing homes
• Minors – especially those deemed part of an “at risk” group
• Citizens living on a low income – “low income” is defined as people who make up to 2 times the federal poverty level in a given year

Simple overarching categories of racial or social groups are not considered underprivileged by the IRS, despite evidence that some low-income or “at-risk” populations are largely made up of such groups.

It may be the case that an organization that ministers to the needs of one of these demographics may also serve the needs of another. Through mission statements that are targeted to the assistance one of these groups, not only is demonstrable public good being accomplished, but nonprofit status approval by the IRS becomes that much easier.

Educational and Research Opportunities

The reasons for becoming involved with education and research in a particular field are innumerable. From altruistic motives to the desire to revolutionize an industry, founders of NPOs have any number of incentives for establishing a nonprofit organization.

If a particular community has a need, then nonprofit organizations are in a unique position to fill it. Educational and research not-for-profit organizations can provide training in areas that have been heretofore overlooked, can do research in these same areas, and radically transform the business landscape as a result of this work. For the many people who want to give back to their community through education and research, a nonprofit business model can help achieve these goals.

The Advantages of Tax Exempt Status

The tax-exempt status of non-profit organizations makes possible a number of opportunities, but at the same time, can complicate some financial relationships. NPO founders, for example, often use their own assets and talents to contribute to their organization’s start-up process. The donation of start-up costs or investments in trust can be a considerable deduction for the contributor. Because the fair market value of such gifts may be quite significant, and because of the wait time in establishing an NPO, these deductions may have to be put off until the IRS officially recognizes the 501(c)(3) status of a particular organization. Some states, however, have a process in place whereby as soon as the individual state recognizes the tax-exempt status of a nonprofit, deductions are considered legal. These rules vary from state to state.

Once the arduous process of setting up a nonprofit has been finished, and as long as the necessary annual paperwork is dually completed, there is minimal oversight from the government. Audits of organizations in the nonprofit sector occur regularly, though only a small percentage of NPOs are investigated. Typically, law-abiding NPO organizations are rarely effected, and unless a separate business is using the business model of the NPO in question for illicit purposes, nonprofit establishments are relatively free of government oversight.

Nonprofit organizations are well-known for their tax-exempt status. Operating within the law and staying true to the individual NPO’s stated mission is essential to maintaining a 501(c)(3) standing. For law-abiding nonprofits, the possible savings on taxes and donated goods and services can and often do add up to the advantage any NPO needs to thrive.

Tax Exempt Status

Perhaps the most defining aspect of the nonprofit organization is its tax-exempt status. Charitable organizations that are accessible to everyone are typically not responsible for local, state, or federal taxes.

This tax-exempt status does not mean that nonprofits do not have to file taxes every year. In fact, the tax laws for nonprofits are quite stringent, and to maintain NPO status, it is essential that each not-for-profit organization files correctly. However, once an NPO is registered and recognized as a 501(c)(3) organization, or nonprofit, by the Internal Revenue Service, all money brought into the organization stays with it until its dissolution.

It often takes a few years for the federal government to fully review all the NPO-status filings that flood their offices each year. As such, the wait to complete the process of becoming a recognized nonprofit can be as long as three full year-long tax cycles. During this time, it is a wise idea to utilize the talent and knowledge of a professional accountant. Donations from both NPO members and other organizations can be tax write-offs, but following protocol is essential to a legal business operation. Professional accountants can clarify some of the complicated tax issues that arise from new NPO tax exempt questions.

The Many Advantages of Establishing a Nonprofit

Knowledge and research into the nonprofit sector can be a significant aid when considering starting an NPO. Understanding specifics about nonprofits is essential in setting the foundation for a thriving NPO. A potential NPO founder must examine the nature of his or her commitment to the public good, the financial aspects of running an NPO, and the effect on his or her livelihood. A careful and honest assessment of potential outcomes, including the possible benefits as well as drawbacks is the best way to decide how realistic starting an NPO is.

There are numerous reasons to start an educational or research nonprofit organization. The would-be founder must consider how each of these may promote or detract form his or her ultimate goals. There are many positives and some negatives to incorporating a nonprofit. Knowing these beforehand can save a lot of unnecessary stress and anxiety.

Starting an NPO- From Finances to Personal Responsibility

NPOs are typically less expensive to start than their small business counterparts. Depending upon the method of funding the nonprofit, founders typically do not need huge amounts of capital or personal wealth. Additionally, any donations of work space, services, or other such contributions by companies are all tax-deductible. Nonprofits then have as an added bonus the ability to attract services from established companies and organizations. For those interested in founding a nonprofit, it is important to be able to network so as to find these opportunities. The desire to form community partnerships is often a personality trait of successful NPO founders.

Not-for-profit organizations are a way for the United States government to help private citizens determine through charitable industries what the public truly needs. Those wishing to establish an NPO have a clear idea of how the public can be helped, how his or her own experience supports that goal, and how to use this expertise to realize the goal of public service. People with shrewd business acumen are needed just as much in the nonprofit sector as they are elsewhere. Business-savvy individuals can contribute to realistic and effective methods of fundraising, thus playing a role in a different, more charitable aspect of the business world.

Individuals who feel close ties to their community and want to give something back to their neighbors may want to consider using their talents in an educational non-profit organization. From passionate people at the beginning of their careers to retired individuals who want to share their hard-earned knowledge with others, educational NPOs offer everyone an opportunity to contribute to their communities. Knowing the steps to found a legal and successful organization can help channel these energies into a thriving NPO.

The Non-profit Entrepreneur- Some Successful Attributes

Starting a non-profit business requires as much, if not more, self-determination and drive as founding any other small business. It takes time, talent, and patience to establish a successful NPO. For those who are interested in educational nonprofits, it is essential that a would-be founder truly believes in the importance of knowledge and the significance of the benefits of research and education on a community.

Non-profit organizations are typically operated as incorporated entities, which means that they are typically run by a group of individuals working together as members who act together under the name of the organization. In founding an NPO, it is important to keep in mind that even when other members agree entirely with the mission of the organization, working in a team can often be a challenging endeavor. The ability to compromise, negotiate, and cooperate are essential to a successful NPO team.

Motivation for Success

Starting an educational nonprofit is no simple task. There are numerous regulations in place that control the nonprofit sector, all of which must be taken into consideration before delving into the process of founding an NPO. For the truly dedicated, the commitment to a nonprofit can be a satisfying and life-changing opportunity. Before making this decision, though, it is best to reflect on some fundamentals of entering the not-for-profit sector. Some good questions to deliberate on are:

· What is my unique expertise? Do I have a strong desire to share this expertise with others?

· Non-profit organizations are heavily reliant upon team dynamics – am I comfortable working as a part of a team?

· How comfortable am I in dealing with excessive paperwork?

· In what field do I most want to work?

· How does this field support the public good?

· Is this field distinct or interesting to others?

· Nonprofits typically take a fair amount of time to establish – how willing am I to wait?

· A non-profit is by definition a business that does not have turning a profit as its main goal – how important is money to me? What is my ideal income?

· What is my motivation for starting a non-profit? The legacy of family name? The respect of my peers? My desire to impact the community?

An Introduction to Nonprofits

From the arts to the environment, from politics to humanitarian aid, non-profit organizations do incredibly worthwhile and beneficial work in a wide-ranging assortment of fields. Non-profits, also called NPOs or not-for-profits, are organizations that work primarily in activities for private or public interest with no monetary or commercial gain.

The nonprofit organization classification allows an individual or a group of people (the minimum number of which is dictated by each state) to operate a business venture that will support a particular concern that benefits the public and that is charitably accessible to everyone in the community. Because NPOs have as their goal the benefit of the public, most nonprofits work to some extent in the educational sector. Some not-for-profit organizations, however, are focused solely on educational or research services.

The tax code for educational nonprofits is written to allow people to teach others personally, or through volunteers or organization employees, to explore ideas in a specific field of expertise, to foster innovation and to promote cultural and artistic opportunities without having to pay business, income or property tax. Operating a legal nonprofit means taking advantage of a program that ultimately serves the community. Tax code exists for nonprofits to maximize their positive potential, and as such, officially authorized nonprofits cannot be used to evade tax laws. NPOs cannot shelter money, peddle votes, pursue a political agenda, or enter into land speculation, among other prohibited activities. However, they can actively contribute to society.