Starting a Nonprofit Organization
Below is a list of the questions that we are most commonly asked by individuals who are starting a nonprofit organization. The answers should help you to get a handle on all of the various steps that need to be taken.
What is a Nonprofit Organization?
between nonprofit and for-profit organizations is that nonprofits use their
profits to advance their programs, while for-profits distribute their profits
to their owners or stockholders. Nonprofit organizations fall into five main
associations, organized to advance a group of people who have a
profession in common (for example, Association of Research Librarians,
International Association of Meeting Planners). This group also
includes chambers of commerce and unions.
organizations, which must generally demonstrate a benevolent
component. This is a diverse category, including religious groups,
museums, environmental and educational organizations, libraries, and
the many helping groups referred to as "charities." They are
also referred to as 501 (c)(3) organizations, because that is the
number of the IRS Code under which they are described.
clubs, such as country clubs and fraternal organizations.
groups, including city, county, state, and federal agencies.
groups, generally organized to promote certain policies, issues, or
candidates for political office.
here to view an IRS chart detailing characteristics of types of
nonprofits. Again, you will note that each type is designated by the
IRS Code under which it appears.
Should I Start a Nonprofit Organization?
question to ask yourself is, "Who will benefit from the
activity?" If the answer is that you or your family will benefit,
then it's a good idea to start a for-profit company rather than a nonprofit
organization. If your answer is that the community or the public at large will
benefit, then a nonprofit structure may be the best route.
The second question
to ask yourself is, "Will I allow the board of directors to set policy,
including my salary, benefits, and even my employment by the
organization?" If your answer is "No, I want to keep control of the
organization," then you want to make your corporation for-profit. If,
however, you want the board to be autonomous, then a nonprofit organization
can be a good fit.
Remember, you can sit on the board and you can have a vote
when it comes to determining policy. However, on issues that affect your
employment, salary, and benefits, you must excuse yourself from voting.
Do I Need a Lawyer? How Do I Choose One?
do most of the work of starting your organization on your own, but you should
have your paperwork checked by an attorney. It's important to get an expert's
help in setting things up as the law requires. To choose a lawyer, find
someone with a good local reputation and experience in the nonprofit sector.
Get referrals from nonprofit leaders you respect. You can also check with the
American Bar Association (800-285-2221), your state or local bar associations,
the Christian Legal Society (703-642-1070), lawyer referral services, or the Foundation Center.