Fall 09 Honors Project

Now that I’m done with this term, I have all the work done for my non-profit IRS status. I will be posting some of the info here, but more can be found at PlanetCornucopia.com

Starting a Nonprofit Organization

Perhaps the best way to really clarify to yourself what you intend to accomplish by starting a new nonprofit is to write a basic mission statement for your organization. You’ll soon need this mission statement anyway if you plan to incorporate your nonprofit (more about incorporation a little later on). The following guidelines may be helpful to you when writing your first, basic mission statement.
At is most basic, the mission statement describes the overall purpose of the organization. It addresses the question “Why does the organization exist?”
Try include a description of what you think will be the new nonprofit’s
a) primary benefits and services to clients
b) groups of clients who will benefit from those services
c) values that will guide how your nonprofit will operate
d) how you’d like others to view your nonprofit

The phrase “starting a nonprofit” can mean several things:
* You can be a nonprofit organization just by getting together with some friends, eg, to form a self-help group. In this case, you’re an informal nonprofit organization.

* You can incorporate your nonprofit so it exists as a separate legal organization in order to a) own its own property and its own bank account; b) ensure that the nonprofit can continue on its own (even after you’re gone); and c) protect yourself personally from liability from operations of the nonprofit. You incorporate your nonprofit by filing articles of incorporation (or other charter documents) with the appropriate local state office. (An incorporated nonprofit requires a board of directors.)

* If you want your nonprofit (and if you think your nonprofit deserves) to be exempt from federal taxes (and maybe some other taxes, too), you should file with the IRS to be a “tax-exempt” organization. (The IRS states that you must be a corporation, community chest, fund, or foundation to receive tax-exempt status. Articles of association may also be used in place of incorporation.) (Probably the most well known type of nonprofit is a the IRS classification of 501(c)(3), a “charitable nonprofit’.) Depending on the nature of your organization, you may also granted tax-deductible status from the IRS. So, for example, you could start a nonprofit that is incorporated, tax-exempt and eligible to receive tax deductible donations.

If unable to file for corporation or for federal tax-exempt status, there are other ways to act as a non-profit. Consider Fiscal Sponsorship to jump start your organization. In some cases, you might find and work with another nonprofit organization that will act as your fiscal sponsor. A fiscal sponsor might be useful to you if your nonprofit:
1) Does not have sufficient resources to handle startup costs and fees
2) Does not have sufficient skills initially to manage your finances
3) Will address a community need and then no longer need to exist.

You can do much of the work yourself to get incorporated and/or tax-exemption and/or tax-deductibility, but you should have some basic guidance and advice from a lawyer who understands nonprofit matters.

According to a very informative paper by Eve Rose Borenstein, Copyright, 1998

http://www.managementhelp.org/legal/lgl_need.htm

When an entity operates, regardless of its public benefit or social welfare purpose, it will find itself subject to two legal realities: first, that the entity itself (separate from the individuals operating same can be sued for actions taken in its name or under its sponsorship; and second, that when an entity conducts financial activities, it will be considered a “taxpayer” under federal and State statutes.

Many types of tax-exempt status are possible but by far the largest category available is the “charity” category defined by Internal Revenue Code section 501(c)(3). Groups recognized as operated for charitable purposes, via a 501(c)(3) exemption letter, are the only type of tax-exempt entity which is across the board able to receive donations which are tax-deductible to the donor.