Correct Method To Set up a Non Profit

​It is important to understand all steps before starting a Nonprofit organization because it can be an inspirational way to give something back to the community and help those in need. However, building and maintaining a non-profit organization can take years of effort and determination. All the information provided in this article is intended to provide general guidance on setting up a Nonprofit organization. Note that the specific steps may vary for each state. For detailed assistance, I recommend that you should contact your legal or tax advisor.

Do Your Homework

• Is Non-Profit Suits You?

Public charities must be organized and operated solely for tax-exempt purposes under Section 501 (c) (3) of the Internal Revenue Code. If you want to set up a nonprofit to receive a wage subsidy, stop now and look for another option. In fact, many new nonprofit are not even ready or eligible to receive grants.

• Learning About Alternatives

Starting a new nonprofit could be the most complicated way to live up to your passion for the community. The biggest challenge facing most new nonprofit is finding and maintaining reliable revenue streams.

• Carry Out Analysis

Find out if (government, nonprofit, or profit) organizations are already doing exactly the same work in your community. It will be more difficult to get help if you simply duplicate existing services instead of improving or adding them.

Build Solid Foundation

• Write a Business Plan

As with a for-profit business, a business plan can help a nonprofit to describe how it wants to fulfill its mission in more detail. It can also be used to demarcate a new project or business.

• Make Your Mission Statement

The development of your mission statement is a decisive first step. Communicate the purpose of your nonprofit, which groups it serves and how it serves them. Every decision and action in your organization should support and encourage your mission.

• Develop Your Board

As the governing body of your nonprofit, your board of directors performs a variety of legal functions and responsibilities. To effectively fulfill these functions, the board will change as your organization grows and matures. Although hiring is an important step in this process, a systematic approach to board development, including:

• The orientation
• Training
• Evaluation
• Training of potential board members

All these are critical to ensuring that long-term success.

Incorporate Your Nonprofit

• The IRS requires the documents of organization and government policies and procedures that are typically associated with businesses.
• A formal structure gives credibility to your programs and services.
• The corporate structure restricts the liability of directors and officers of the organization.

File For 501(C)(3) Tax-Exempt Status
Apply for exemption status with the Internal Revenue Service (IRS). Note that the fee is $400 or $850, depending on whether you expect the average gross annual income to exceed $10,000 per year over a four-year period. It can also take 3 to 12 months for the IRS to return its decision, depending on the number of questions the IRS has on your request.

Ongoing Compliance
Register with your state agency, which handles charities and charity applications (usually the Attorney General). If you want to request contributions from other states, you also need to register. Again, the registration requirements vary with each state.
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Prepare For Annual Reporting
All exempt organizations must submit a version of Form 990 to the IRS. Form 990 represents your finances, activities, governance processes, directors, and key people who are open to public inspection. The version you submit depends on your total gross income for the year. States also have their own reporting and renewal requirements that can vary from state to state. Therefore, consider tracking the finances and activities of your organization to facilitate the development of these annual reporting requirements.