For The Public Good

Links to IRS Forms and Information

2008-07-01T10:41:00.000-07:00

Regulations and interpretations regarding Nonprofit Organizations: http://www.irs.gov/irm/part7/index.html The IRS homepage for all NPO: www.irs.gov/eo Form SS-4 – Application for Employer Identification Number: http://www.irs.gov/pub/irs-pdf/fss4.pdf Form 1023 – Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code: ftp://ftp.fedworld.gov/

Conclusions

2008-06-30T10:40:00.000-07:00

Non-profit organizations are unique business opportunities that allow the members to do exceptionally meaningful work. Operating a legal nonprofit means taking advantage of a program that ultimately serves the community, and being involved in one of the most rewarding business opportunities that exists today. The present-day tax code allows nonprofits to maximize their positive potential, and

Regulations Governing Dissolution

2008-06-29T10:39:00.000-07:00

Generally, once the board moves to dissolve the NPO, it is no longer considered active by the IRS. One of the final moves an organization may make might be to finish reporting any outstanding income or expenses and file all final paperwork with the state, informing them of the organization’s non-active status. Board members of a nonprofit are not permitted to divide up remaining assets of the

Ensuring a Smooth Transfer of Responsibilities

2008-06-28T10:38:00.000-07:00

Transferring responsibility from one board member to the next must be accomplished in a timely manner. All vacant positions must be filled in a reasonable amount of time, so for the board member who is ready to leave, ha having an exit strategy can be helpful.[i] This strategy may include grooming someone to take over the post or simply keeping records

Stepping Down and Dissolution

2008-06-27T10:37:00.000-07:00

For board members who are ready to step down, there are a few rules that need to be followed. Additionally, if the organization is ready for dissolution, then there are regulations in place that govern the distribution of the NPO’s assets. Determining When to Step Down For members who have expressed a desire to leave the board, there are a few pertinent questions to ask to determine if it is

Audits

2008-06-26T10:37:00.000-07:00

Nearly all NPOs request an external audit at some point in their operations. Healthy nonprofits will seek out an audit in order to ensure that the operations of the business are both legal and contributing to the primary mission of the organization. Some states require external audits for larger NPOs to maintain nonprofit status. Almost all audits find that some number of changes should be

Financial Duties

2008-06-25T10:35:00.000-07:00

Financial Statements and Balance Sheets Financial statements are usually given quarterly to the members of the board. These reports are typically prepared by the CFO. Generally, the statements track an opening balance that is then added to and subtracted from throughout the course of a year. Such statements also include expenditures broken down into different categories for analysis. The

Statements

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Statement of Activities A statement of activities is simply a report that summarizes what plans the organization has undertaken, what plans the organization has continued with, and how both serve to meet the primary goals of the NPO as outlined in the mission statement. This statement is the same as that which is prepared for the annual report and for inclusion with IRS Form 990. Statement

Accounting for an Incorporated Nonprofit

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Nonprofit organizations need to ensure that they have an accountant or bookkeeper who is in charge of the financial aspects of the organization’s operations. This work varies from tallying incoming donations to compiling the more complicated annual financial reports. The Chief Financial Officer (CFO), treasurer or even a third party might be required to perform this task. Annual Reports A

Determining the Emerging Needs of a Nonprofit’s Constituency

2008-06-22T10:32:00.000-07:00

A nonprofit organization’s constituency can change over time, especially as the focus of the group shifts and is refined through trial and error. Every few years, an NPO should take some time to determine how it can better serve the members of its community. Some organizations meet with focus groups of students or researchers and ask them how they feel about the services offered by the

Estimating Financial Success

2008-06-21T10:31:00.000-07:00

There are a number of accepted methods for analyzing the financial success of a particular nonprofit. Generally, some major questions to consider when deciding how well or how poorly a nonprofit is doing include: What is the NPO’s yearly income?What is the NPO’s yearly spending?How do these two numbers compare?Where is most of the NPO’s money spent?Where does most of

Dedication to the Nonprofit Mission

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During the course of operations, all nonprofits diverge from their original stated purpose. All nonprofits require direction from the board to ensure that they are devoted to their original or refined mission statements. Ensuring that the NPO Remains On-mission There are ways to evaluate whether the nonprofit remains committed to its primary purpose. Relative funding levels will give one

Gathering Information for Declaration

2008-06-19T10:29:00.000-07:00

Gathering Accounting Information for DeclarationA nonprofit must gather a considerable amount of information to include with IRS Form 990, including annual financial statements. The annual financial statement of an NPO must contain clearly delineated categories of revenues and expenditures, with two-column accounting for all incoming and outgoing money for the NPO. Any expenses that were

Maintaining Nonprofit Status with the IRS

2008-06-18T10:28:00.000-07:00

Once tax-exempt status is approved by the Internal Revenue Service, a nonprofit must continue annual reporting along with the yearly filing of Form 990. Filing Form 990 For nonprofit organizations with an operational budget of less than 25,000 dollars per year, Form 990 does not have to be filed. Though an NPO’s operations may function for a long time without ever reaching this level of

Marketing Tools

2008-06-17T10:27:00.000-07:00

Print and Radio Advertisements Print and radio advertisements are effective methods of advertising, but are typically restricted to very large or national nonprofits. Unless the marketing team of a nonprofit can procure donated ad time, this may be far out of the reach of a smaller nonprofit organization. Print advertising is a more widely accessible method of advertisement, and can be

Marketing a Nonprofit Business

2008-06-16T10:26:00.000-07:00

Marketing may be the most important determining factor in whether or not a start-up succeeds or fails. No NPO organization should spend more than thirty percent of its budget on marketing or soliciting for funds. The percentage of the budget spent on marketing will become very apparent as part of the Form 990 filings. As a result of this informal restriction, small NPOs typically do not have very

Scheduling Regular Meetings, Business Ethics and Accountability

2008-06-15T10:25:00.000-07:00

Reasonable care should be taken to find a time and place that is convenient for the board to meet, but meetings will have to take place at least as often as is required by the bylaws. If the board cannot physically meet, then telephone or internet conferencing is an acceptable method of resolving the problem. If a nonprofit organization has a dedicated secretary, he or she will be responsible

Managing Board Operations

2008-06-14T10:24:00.000-07:00

Managing operations of the board means allowing it to run as smoothly as possible. This can be done, in part, through careful planning at the earliest stages of nonprofit planning. Though a strong foundation and continued effort, a nonprofit’s board operations can be successful. Elections of the Board of Directors Provisions for board elections should be laid out in the bylaws. Generally,

Duties of a Nonprofit Treasurer and Chief Financial Officer

2008-06-13T10:23:00.000-07:00

Nonprofit organizations commonly charge the Chief Financial Officer of the board with many of these duties, however, the specific rules are different from NPO to NPO. The expectations and rules should be spelled out in the company’s bylaws. Even if the organization employs the services of an accountant, the CFO will typically summarize and present financial information to the board at regular

Managing Financial Ledgers

2008-06-12T10:22:00.000-07:00

All nonprofits should keep financial records. These books should be reconciled at least once a month by the person who is charged with the responsibility of recording these financial aspects of the nonprofit. It’s a good idea to produce a monthly statement report that includes a column with assets, income, and net assets that is balanced against a column including liabilities and expenses. Petty

Basic Business Operations

2008-06-11T10:21:00.000-07:00

All small businesses must make sure that business can run smoothly. There are a number of issues to consider in ensuring seamless business operations, but some of the more major ones are listed below. There should be a system by which post, voice, and electronic mail is both received and answered. The way that information is shared should be clear and consistent. The

Organizational Maintenance in the Nonprofit Sector

2008-06-10T10:04:00.000-07:00

Managing Cash Flow As a nonprofit enters into the phase of everyday operations, it needs to secure continued funding, especially if it is operated as a public charity. Foundations that do not rely upon a single large grant to fund their operations should have a network of contacts with which to work. When looking for new sources of funding, it is important to remember that the primary focus of

Reporting Membership Information

2008-06-09T10:03:00.000-07:00

If a nonprofit organization has committed to a plan that involves utilizing membership as part of a larger funding scheme, the IRS will need some evidence of this on subsequent filings of the organization. The money collected from membership fees may be in exchange for a tangible object, such as a magazine subscription or some other type of physical “gift,” and is reported on IRS Form 990 as

Membership Benefits and Membership Media

2008-06-08T10:01:00.000-07:00

Nonprofit membership should have benefits that accompany it. Sometimes the financial commitment that purchases an initial membership will grant the member access to additional materials or media related to the nonprofit’s mission. Though the benefit cannot be of any significant monetary value, it certainly can and should be interesting. If it is, it can be a strong pull for new members to join.

Members of Nonprofit Organizations

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A nonprofit can organize membership drives in order to raise funds. Instead of having shareholders, each member becomes a limited stakeholder in the organization. Decisions about how members will be treated are usually first addressed in the bylaws and articles of incorporation and then modified over time as the character and desires of the membership becomes apparent. Membership Criteria

International Volunteers

2008-06-06T09:59:00.000-07:00

Many educational facilities, especially those involved in the sciences, can use international volunteers as a valuable resource. These individuals are often interested in financing their travel from one location to another and typically accept housing and a relocation stipend as compensation for a great deal of work. Property owned by the NPO may be used to house these international volunteers

Volunteer Workers

2008-06-05T09:58:00.000-07:00

Compensation and Benefits for Volunteer Workers Volunteers may legally be allowed access to available membership or the advantages that come with it, but this cannot translate to a type of payment. Most volunteers are concerned with education, social, and experiential aspects of a job, and the benefits that come from these aspects can be stressed to potential volunteers. However, any special

Financing a Nonprofit

2008-06-04T08:28:00.000-07:00

Money is a major concern in the establishment of a business that, by definition, will not generate a profit for the founder. Careful planning is essential for a successful business model. Most NPOs go into business with an initial budget planned for the first five years of operation. Some issues to consider at this stage include how big the organization will eventually become, what the mission of

Labor Laws and Employment Taxes

2008-06-03T09:55:00.000-07:00

Labor Laws and Nonprofits For-profit businesses are subject to laws regarding working conditions, minimum wages and fair hiring practices. These same regulations apply to NPOs. Before an organization starts hiring employees, it is essential that it spends time studying the laws that govern employer and employee relations. Hiring a lawyer at this stage can help to clarify employer-employee

Internal Employment and Family Members

2008-06-02T09:54:00.000-07:00

Internal Employment Nonprofit members may not actually be employed by the NPO and receive a salary during their tenure as board members. They may not charge for time or services that are donated while volunteering, because as long as a person is in a position to make decisions about an organization, he or she will not legally be able to draw a salary. However, once a person steps down from the

Employees

2008-06-01T09:53:00.000-07:00

Hiring employees is a major step for a young nonprofit. The organization takes on the responsibility of filing tax information on behalf of the employee as well as the responsibilities of human resources and payroll. All employee-related expenses must be met every pay period, whether the organization has the ready funds or not, and every small company will need some type of liability insurance,

Restrictions and Donations

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The NPO should not accept financial or other gifts that they cannot utilize. Any donation far in excess of a nonprofit’s ability to utilize should be refused. Donations over $250 from entities that refuse to be named can invite scrutiny from the Internal Revenue Service, and the special provision that allows cars to be donated for free to 501(c)(3) organizations is also under scrutiny by

Reporting and Allocating Donation Funding

2008-05-30T09:51:00.000-07:00

Anyone donating 250 dollars or more in cash or goods must be listed with name and address on the annual filing of Schedule B of IRS Form 990. The Quid Pro Quo donation is one in which a donation is made in the expectation of receiving a gift in return. If a donor receives such a gift, the amount reported to the IRS is the full amount of the donation(IRS-557, 2005). A nonprofit organization

Accepting Donations

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Upon accepting a donation, a nonprofit organization must give the donor a receipt. Until late 2006, only large-ticket donations necessitated a receipt for a taxpayer to claim it as a deduction, but it is presently the case that each and every donation, even small ones, must be proven by receipts. An acceptable receipt clearly lists the amount given or what was given, the full name and address of

Soliciting Donations

2008-05-28T09:49:00.000-07:00

Nonprofit organizations may solicit for donations in the same way any for-profit business would advertise, but the NPO has the advantage of being able to use volunteer labor and contributions to accomplish its goals. Advertising campaigns like these are typically similar to any marketing campaign, but the nonprofit in question may need to file a petition with the city or state to solicit for

Working in Tandem

2008-05-27T09:48:00.000-07:00

It is very common for educational nonprofits, as well, to work in tandem to create a more diversified or complete curriculum. This type of partnership can result in operational cost savings that could be significant for both involved NPOs. For nonprofits that hope to share resources, it is essential that some sort of agreement outlining the rights and responsibilities of each NPO is drafted.

Collaboration of Educational Nonprofit

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Support from Other Nonprofits

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Sometimes, an NPO may wish to donate funds or services to other nonprofits. Organizations that have a desire to donate may share a constituency or aspect of the mission of another organization, and will often donate funds as well as intangibles. Foundations that administer grants are a valuable source of monetary nonprofit funding. These grants can be national or local in scope, but very

Unrelated Business Income Tax

2008-05-24T09:44:00.000-07:00

If the business arm of a nonprofit organization only serves as a source of revenue and does not further the NPO’s mission, it will be subject to something called the Unrelated Business Income tax. The Unrelated Business Income Tax applies to or feeder businesses that have become successful but are not related to the mission of the original NPO. Because all proceeds from a feeder business must

Feeder Organizations and Media Offerings

2008-05-23T09:43:00.000-07:00

Published materials are very common offerings from NPOs. Published media includes media in the form of movies, books, compact discs or even downloadable content. Media does not have to be published by the NPO. It does not even have to be published for the NPO, because though IRS regulations stipulate that a nonprofit must share research and information freely, this does not mean that an

Feeder Organizations and Sevices

2008-05-22T09:42:00.000-07:00

Feeder organizations are also legally allowed to provide a service for a fee or donation that is then invested back into the original NPO. Car washes and festivals are common examples of services that can be arranged or performed by the members or volunteers of a nonprofit. Even the Boy Scouts of America, for example, once supplied the service of newspaper disposal. The newspapers that they

Feeder Organizations and Material Goods

2008-05-21T09:41:00.000-07:00

An NPO is legally allowed to sell goods that are related in some way to its mission or curriculum. A nonprofit can sell raw materials or finished products and target people inside or outside of its constituency. Even the development products that are a result of research conducted by an NPO are lawful options. Souvenir items, small-ticket impulse items, and gift shop items are commonly found

Feeder Organizations

2008-05-20T09:40:00.000-07:00

Nonprofit organizations get funding from a variety of sources. One of the most common of these is called a “feeder organization.” A feeder organization is a business that is run for the benefit of the members or the constituency of a particular NPO. In this way, it “feeds” into the activity of the main NPO. Feeder organizations are also limited in the way that they can give money back to

Hiring Employees to Write Grants

2008-05-19T09:38:00.000-07:00

Like any other business, nonprofits may hire regular employees for necessary work, including grant writing. Having workers in full-time positions entirely dedicated to grant writing is generally only a possibility for large NPOs, as small start-ups generally do not have access to the resources necessary to hire full-time grant writers. The wage scale for nonprofit grant writing tends to be lower

Contracting for Grant Writing

2008-05-18T09:37:00.000-07:00

NPOs often hire outside of their organization for grant writing work. Writers who are contracted to do grant work (or any other work to generate publishable materials) are generally paid in a lump sum with no explicit right to monies collected as a result of their work. Grant writers are available for hire in many fields. Students or recent graduates are often willing to take on a stipend wage

Grant Writing Basics

2008-05-17T09:36:00.000-07:00

Grant applications are specific to the organization that offers the grant, but most require a cover letter and an attached section that is similar to a resume. The essential points to cover often include: The mission statement of the NPOAn essay outlining the mission of the NPOAn essay outlining the need of the NPODescription of activities of the NPOHow much financial

Grants

2008-05-16T09:35:00.000-07:00

Among the most important sources of funding for nonprofits are grants. The federal and local government, separate individuals, and even other nonprofits and foundations might be sources of funding. Some NPOs exist with the sole purpose of finding funds for other worthy nonprofits. All nonprofits must find and apply for any and all available grants. Grant writing is one of the most important

Planning for a Steady Operational Income

2008-05-15T09:34:00.000-07:00

Once the NPO is established and ready for everyday operation, the board of the organization must ensure that there is enough capital to run the business. A successful nonprofit relies upon a steady flow of funding for its operational expenses. Operational budget Making sure that the budget is actually functioning as planned is the first duty of the board and Chief Financial Officer. Paying

Hiring a Tax Return

2008-05-14T09:33:00.000-07:00

All new nonprofit organizations should visit a tax attorney and an accountant at least once. The most important function these professionals serve is the inspection of application paperwork before it is sent in to the IRS. They can also advise on an institution’s Charter Documents and Articles of Incorporation. Consultation can be as cursory as ensuring all sections of the paperwork are filled in

Meeting with a Financial Institution

2008-05-13T09:32:00.000-07:00

While it is always more favorable to start a business from available funds, a new NPO may want to consider arranging low-interest loans through an institution that specializes in funding nonprofit start-ups. This is a particularly good option for a founder who has previously started a nonprofit and has a proven track record of fundraising and operating ability, but can be helpful for those new to

Minimizing Start-up Costs

2008-05-12T09:31:00.000-07:00

The money required by an NPO for ordinary operating expenses will be much reduced if the start-up costs of the organization are low, as well. Successful start-ups often stretch the “start-up phase” of the organization over a five-year period. In doing so, the organization is allowed a slow and steady progression that is more likely to follow the progression of the NPO’s specific fund-raising

Endowments

2008-05-11T09:30:00.000-07:00

An endowment is money that is left in a bulk sum, often as the result of a willed bequest that is turned into an endowment fund. The proceeds generated from this wealth usually come in the form of interest, and are used to fund a private foundation. Some organizations solicit endowment funds (also known as “planned giving”) from the living to be received upon their death. Funds from a donor

Grants and Donations

2008-05-10T09:28:00.000-07:00

Grants are a major source of funding for nonprofit industries. Thousands of available grants go unclaimed every year, so applying for funding through a variety of grants can be one of the most beneficial fundraising activities for a small nonprofit. Local sources of funding available in the form of city or county grants, and federal grants exist on the national level, as well. Grant writing is an

The Implementation of an Effective Business Plan

2008-05-09T09:27:00.000-07:00

With the requisite paperwork for establishing a nonprofit organization out of the way, the organization can start work toward the fulfillment of its mission. With an involved board and conservative financial and operational choices, the nonprofit has a good chance at success. Start-up Capital Some organizations are lucky enough to fall into a very lucrative source of funding, and, as in the

Filing with the Post Office

2008-05-08T09:26:00.000-07:00

Once an NPO has been established within its state and has sent its IRS filings, it can petition the US Postal Service (USPS) for the right to use nonprofit-rate mailing. Very often, the Postal Service will allow an organization to begin using the lower rate postage for its materials even before the tax-exempt status paperwork has been given approval by the IRS. For nonprofits that have a business

County and City Level Concerns

2008-05-07T09:25:00.000-07:00

County-level Considerations Incorporated nonprofits are not usually required to pay county taxes, though this of course depends upon the local area. Some counties require individuals and businesses to pay a temporary county tax used to provisionally fund school bonds or county roads. Incorporation at the state level is usually all a nonprofit needs to verify that it is exempt from county taxes

Form 1023 Package and Additional Materials

2008-05-06T09:23:00.000-07:00

A package that outlines the process and gives a step-by-step explanation of how to file as a nonprofit is available for download from the Internal Revenue Service. This bundle is called the Form 1023 package, and makes the process reasonably straightforward. Additionally, there is a practical list of specific forms and documents included at the end of this book for reference. Additional

Professional Filing and Retroactive Tax Exemption

2008-05-05T09:22:00.000-07:00

Private foundations and public charities involve separate forms and filing methods. Many organizations find themselves using an outside accountant or someone within the organization who is an accountant to help them determine what type of organization to file as. Tax professionals can give informed advice and opinion on what to file as, and how to file properly. Filings should be reported as

Federal Level Paperwork and the IRS

2008-05-04T09:21:00.000-07:00

Filing with the federal government is one of the most challenging steps in the process of establishing a nonprofit. As soon as an organization has incorporated within its state and received its EIN, or tax ID number, it may begin the application process. Almost all educational nonprofits are considered private foundations unless they meet the requirements that might make them a public charity

Professional Assistance and Community Ownership

2008-05-03T09:20:00.000-07:00

New nonprofits should seek the advice of tax professionals who are likely to know what forms are necessary and what further actions may need to be taken. Tax attorneys can give helpful suggestions for successful filing. Filing fees typically run around a few hundred dollars. While this may seem to be exorbitant for an initial processing fee, the future savings in state taxes alone might equal

Certification and State Filing

2008-05-02T09:19:00.000-07:00

Filing articles of incorporation is done at the state level according to state laws. It is now possible (as of 2005) to incorporate as a Limited Liability Corporation (LLC) and still be eligible for 501(c)(3) status (IRS-557, 2005). Each state has different laws on what constitutes an LLC, so new NPO founders should investigate this possibility. If the separate members of the board live in

State-level Paperwork

2008-05-01T09:17:00.000-07:00

A nonprofit organization must be registered at the state, as well as the federal, level. This most often requires separate paperwork to be filed, but is an overall relatively straightforward process. According to the previously established 5-year plan of the nonprofit organization, any NPO that will make more than 5,000 dollars per year should incorporate. Businesses that make less than this

Completing the Necessary Paperwork to File for Tax Exemption

2008-04-30T09:16:00.000-07:00

Filing paperwork can be a difficult task, and most people do not look forward to this stage of the process. However, this can be an opportunity to ensure ahead of time that an organization’s numbers are making sense and if the financials are in order. This is the most complicated yet important part of filing for tax-exempt status. The first step in filing is to apply for an Employer

Main Components of the NPO Business Plan

2008-04-29T09:15:00.000-07:00

A not-for-profit business plan is generally the same as that for a for-profit enterprise. The main components include: Title page – This page lists the official name of the NPO as well as the board members (or directors in some states) with titles and a date.Executive Summary – an outline of what the subsequent pages will contain. The key points are arranged with appropriate

The Nonprofit Business Plan- A Framework for Success

2008-04-28T09:01:00.000-07:00

All nonprofits, whether submitting their plans to a bank (or other organization) or not, should draw up and maintain a professional, accurate business plan. Like any other business model, nonprofits can fail without proper planning and preparation. However, with the correct tools, resources, and materials, the likelihood that a nonprofit will be successful increases exponentially. The Basic

Attendance at Regular Meetings

2008-04-27T08:59:00.000-07:00

Most states require that board meetings are held at least once a year. All members will have to attend meetings. Again, the meetings can be as strict or as loose as you like, but everyone is required to deal with the issues at hand and give their opinion or vote. In some states, members can sign off on the minutes of a meeting by email, in lieu of actually being there. Electronically,

Representing the Public Interest

2008-04-26T08:58:00.000-07:00

Many nonprofits choose board members from the community it serves. Having members who are in touch with the mission of the organization can be a valuable tool for effective business operations; they will likely have a clear idea of the needs of the end-users of the specific educational or research effort. Board members who are well-acquainted with the community may also have clear leads on

Potential Conflicts of Interest

2008-04-25T08:57:00.000-07:00

Founders and board members alike cannot legally profit from their NPO. They may be reimbursed for expenses, but they cannot receive any special favors, they cannot directly profit from the sale or endorsement of any instruction or advertisement, and though the members’ companies can do business with the NPO, the members in question are not allowed to vote on any decisions involving their company.

Finding the Board

2008-04-24T08:56:00.000-07:00

Locating board members who are well-suited to a particular NPO can be a significant hurdle in the process of establishing the company. Networking is the best way to undertake the challenge of finding the best people for the job. Professional associations are a great place for a founder to meet with people and tell them about the specific organization. Community and city council meetings are

Enthusiastic Potential Members

2008-04-23T08:55:00.000-07:00

Though almost everyone would like to donate time to volunteerism, other commitments often prevent them from doing so. The likelihood of someone wanting to assist a nonprofit depends greatly upon what is required of him or her in comparison to what sort of personal benefit he or she may derive by association. Finding willing individuals can be a considerable challenge, but a clear and inspiring

Qualified Individuals

2008-04-22T08:54:00.000-07:00

In searching for qualified people to become members of the board, it is a good idea for the founder of an NPO to search for those who are professionals in their areas of study, research, or work. Those who are already invested in a particular area of interest are the most likely to benefit by association, and may have the most reason to join the organizational structure. Even the newest and

Finding an Effective and Commited Board of Directors

2008-04-21T08:53:00.000-07:00

Corporation or foundations must have a board of directors or advisory council. As a legal entity, the corporate body must have at least two (3 or more in most states) board members who share responsibility for making decisions about how the business will be run. Sometimes this decision-making is accomplished by voting, and sometimes by consensus. Generally, people who share a passion for the

Drafting Appopriate and Binding Bylaws

2008-04-20T08:51:00.000-07:00

Bylaws are yet another tricky aspect of establishing a legal nonprofit business. There are guides both online[i] and in books that outline good templates and that can serve as useful guidelines. Bylaws include corporate objectives as well as more general things that a corporation will and will not do. Though these bylaws may be supplemented over time, a

Calculating the Level of Involvement

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This is a good point for the founder of a nonprofit organization to make some decisions about how involved he or she will be. Some areas of concern are: The amount of money the founder would like to invest in a start-upHow much time the founder is willing to put into a companyHow often the founder is willing to meet with the boardWho is expected to ultimately make

Drafting and Filing Articles of Incorporation

2008-04-18T08:48:00.000-07:00

Incorporating a nonprofit can be a tricky process without sufficient preparation and research. Learning what is necessary to becoming a nonprofit before the process begins saves considerable time in the long-run. Typically charter articles, mission statements, and financial summaries are necessary for filing articles of incorporation. Charter articles on the state level are filed with the

Setting Specific Limits for the NPO

2008-04-17T08:47:00.000-07:00

As part of the incorporation process, it is important to clearly lay out what the NPO hopes to accomplish and the means by which it will attain these goals. In the initial stages, keeping these goals relatively simple will lay the foundation for success, as having too many projects and aims will not only add to the paperwork and hassle, but may also dilute effectiveness. Many nonprofits with a

Gauge the Beneficiary Audience

2008-04-16T08:46:00.000-07:00

Knowing who will benefit from the existence of a nonprofit is essential in setting up an appropriate organization for community needs. One of the most important steps in looking at the beneficiary group is determining exactly how many people are likely to be served by the future organization. Part of a nonprofit organization’s five-year plan is an accurate estimate of how many people are

The Mission Statement

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The NPO structure requires a mission statement. This statement functions as the organization’s reason for existence, and should state the charitable mission at the center of the enterprise. The mission statement immediately conveys to others what an organization does. The mission statement also serves as a sort of boundary which sets parameters for the organization. It controls the scope of

Implementing an Initial Nonprofit Business Plan

2008-04-14T08:44:00.000-07:00

After the initial decision to establish an educational NPO has been made, many more steps lie ahead. The work of start-up not only involves preparatory planning and paperwork, but also involves finding others who will join the organizational structure to help with operations. Some NPOs are begun as partnerships, but most start out with a founder and a few board members. In order to fully

Funding Options

2008-04-13T08:44:00.000-07:00

Many cities have programs and grants of their own that are designed to help worthy organizations within the city limits. Registering a nonprofit at the local level may prove eligibility for such perks. A city clerk or professional advisor may be helpful in pointing an NPO toward appropriate opportunities. The local Municipal Office of Business and Development is another likely place to get

Childcare and Vocational Education

2008-04-12T08:43:00.000-07:00

Childcare can also be a qualified NPO sector, and may be considered exempt if it fulfils an educational mission created and maintained by qualified teachers. In specific cases, the enrolment must also be limited to low-income children or some other socially disadvantaged segment of the community, which allows the parents of the children to seek employment that would normally be out of reach.

Curriculum and Education Promotion

2008-04-11T08:42:00.000-07:00

For nonprofit organizations that have more research-based missions, the results of research can be presented as curriculum, the most typical example of this being the work NASA does at schools nationwide. As long as the research is made publicly available, however, it need not be disseminated so widely.[i] The arts, too is a significant area of

Charitable Education

2008-04-10T08:41:00.000-07:00

There are many ways that an NPO can go about fulfilling an educational mission. Instruction through conventional classes is the most common method, but requires a location at which the classes can take place. There are many ways that people gather information, however, and the IRS recognizes that as long as an NPO fulfills its educational mission by teaching a useful skill, a nonprofit

Untangling the Public Good from the Good of Nonprofit

2008-04-09T08:40:00.000-07:00

A nonprofit organization must exist for the public good, without restriction of access of any sort. A new nonprofit organization and its work must be freely available to all who wish to seek it. The IRS regulations list that the “operational test” for the public nature of a nonprofit: “Reg. 1.501(c)(3)–1(d)(l)(ii) provide that to meet the operational test, an organization must be engaged in

The Public Good

2008-04-08T08:39:00.000-07:00

The 501(c)(3) designation is that of a charitable organization which serves the public good through education or scientific research. The IRS includes in its definition of educational nonprofits (IRS-4220 2003): · Schools such as a primary or secondary school, a college, or a professional or trade school Organizations that conduct public

Political Considerations

2008-04-07T08:36:00.000-07:00

An NPO business model may not be for someone who is motivated by a political agenda. IRS codes do not allow nonprofits to contribute to or support any particular legislation. Educational nonprofits are not allowed to back a specific political ideology in their curriculum, though they are allowed to direct general areas of investigation and education. As an organization, no nonprofit is allowed to

Don't Cheat the System

2008-04-06T08:35:00.000-07:00

The IRS is aware that a number of nonprofits try to skirt the laws that govern 501(c )(3) exempt organizations and the compensation of founders. By their own analysis, "…those in control may not, by reason of their position, acquire any of the charitable organization’s funds. If funds are diverted from exempt purposes to private purposes, exemption is in jeopardy." This means that founders

Extreme Dedication

2008-04-05T08:34:00.000-07:00

The effort that is required when starting an NPO is significant. From networking to paperwork, ceaseless personal energy defines a successful NPO founder. Just some of the necessary measures that an NPO founder must take include putting together an advisory council or governing board, recruiting workers, organizing volunteers and employees, and even undertaking human resource and outreach

Considerable Time Commitments

2008-04-04T08:33:00.000-07:00

Establishing and running a nonprofit requires a serious time commitment. Paperwork, planning, and implementation take considerable energy and working within the confines of a small business NPO model can make this requirement all the more conspicuous. For a potential NPO founder, an earnest examination of how much time he or she is willing to commit is one of the most fundamental steps in

Keeping Your NPO Tax Information Above Board

2008-04-03T08:32:00.000-07:00

Another potential form of taxation might include income generated by investment incomes and property held by the NPO. Like any business tax, this tax must be paid quarterly on investment income of more than $500 per year. A professional accountant will be able to give advice on the quarterly filing on any such income. In addition to the IRS forms required for an NPO, every year or fiscal

Filing Forms and Keeping Your Tax Exempt Status

2008-04-02T08:31:00.000-07:00

Ensuring that a nonprofit is established legally requires significant time and effort spent filling out legal filings and forms, organizing statements and budgets, and pouring through charts and graphs. Generally, the necessary paperwork falls into two or more of the following categories: IRS forms and filings – depending upon the organization federal tax forms are filed as often as

Disadvantages of a Nonprofit Business Model

2008-04-01T08:30:00.000-07:00

Nonprofits have a comprehensive set of benefits that accompany them, and as such, can be an attractive option for a would-be founder. However, the nonprofit business sector has a number of negatives, as well, and it is essential that they be considered along with any possible advantages. Tax-Exempt Status The tax-exempt status of an NPO can be one of the best aspects of this business sector,

Property Owning andTax Breaks

2008-03-31T08:30:00.000-07:00

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

Liability Protection

2008-03-30T08:28:00.000-07:00

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

Community Support

2008-03-29T08:00:00.000-07:00

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

Write offs and Fund Raising

2008-03-28T07:59:00.000-07:00

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

Benefits and Perks of Being a Nonprofit

2008-03-27T07:58:00.000-07:00

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

Alternative Saving and Revenue Sources

2008-03-26T07:56:00.000-07:00

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

Independent Research- Flexibility and Freedom

2008-03-25T07:55:00.000-07:00

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

Research and Scientific Inquiry

2008-03-24T07:54:00.000-07:00

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