Starting a 501(c)(3)

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 14, 2022


Starting your own nonprofit organization can be an incredibly rewarding experience and can make a real difference in your community. Most nonprofits are created to provide several benefits to the public, including relief of poverty, advancement of education, promotion of religion, and other charitable purposes. These charitable organizations are also referred to as 501(c)(3) organizations by the Internal Revenue Code, which exempts them from taxation.

However, before you can get started helping others, you need to first navigate the process of starting a 501(c)(3) organization. It requires careful planning, a dedication to your cause, and a willingness to comply with all the rules and regulations that govern 501(c)(3)s. Not to mention, you will need to raise money to support your organization's activities.

This complete guide will walk you through everything you need to do in order to start a 501(c)(3) nonprofit organization, from developing your mission and structure to filing for tax-exempt status with the IRS. We'll also provide some helpful tips along the way on how to run your organization efficiently and effectively so that you can make the most positive impact in your community.

Understanding 501(c)(3) Organization

Nonprofits are tax-exempt organizations that operate to achieve outcomes that benefit a community. That can include combating animal cruelty, promoting sports and education among youngsters, or providing low-cost dental health, among other things. These are specific instances, but they provide a good overview of the various tasks a nonprofit might undertake.

Nonprofits are formed as a result of individuals' desire to see a difference and are dissatisfied with giving or providing volunteer services to existing organizations. They want to be leaders rather than followers, and they wish to promote the causes that are important to them.

Many organizations are started by individuals who grew up in impoverished communities but were able to obtain education and employment experience. As a result, they establish their own groups to assist people in similar circumstances a chance to succeed just as they did.

Many of us have a desire to make the world a better place. However, very few people take action in order to achieve this. If you are frustrated by the condition of things and wish to do more than just gripe, you should be proud of yourself, but be prepared for many challenges along the road. There's a reason that individuals complain: it is simple. Running an organization dedicated on improving people's lives around you is much more difficult than it appears.

Creating and operating a nonprofit is an amazing experience that includes a lot of gratifying labor as well as the fulfillment of assisting others. You must, however, treat it with respect and seriousness. Otherwise, your organization could fail before it begins.

If you want to help others, keep in mind that running a nonprofit requires a significant amount of time and effort. You will have to dedicate time to filling out the necessary paperwork so that your organization remains tax-exempt. Additionally, you will be responsible for hiring and managing various people who contribute to your organization, such as board members, staff, and volunteers.

Consider it as establishing a bookstore. You might be a skilled reader who knows all of the classics by heart and is able to recite Shakespeare and Dostoyevsky from memory. You then decide it's time to take your love a step further and begin sharing it with others.

You open the bookstore after raising funds then various prolems present themselves. First, you must hire individuals which is something new to you. So, you decide to hire your nephew, who you can count on.

Furthermore, you are responsible for handling shipments. JLike any other type of merchandise, it's important to find reliable book distributors that offer reasonable shipping rates. However, rip-offs are common in this industry so it's important to be mindful of that when negotiating prices. Additionally, delays frequently happen with shipments which can result in your clients not receiving the newest editions of their desired books.

Speaking of customers, there aren't many of them, and some of them don't share the same enthusiasm you have. Nevertheless, you invest every dollar you earn in enhancing your booksyore. You may not have made as much money from your business if you did things differently, but you're doing something you love. Moreover, you also do it for those who share your thoughts and feelings.

Nonprofits function in a similar and unique manner. Aside from the salary paid to the employees, any money generated through the business's operations is put to good use. The aim of these initiatives is to continuously enhance the organization's projects in order to make them more accessible to the public, obtain better technology, and hire more personnel who can assist them.

What could motivate anyone, let alone you, to start such a company? Maybe you have been dissatisfied with the present conditions in the world or your neighborhood for some time. Perhaps you grew up in a low-income neighborhood and decided to start a charity to benefit future generations of kids who would otherwise grow up on the same streets. Maybe you lost someone close to death caused by an illness, and now you are passionate about establishing a foundation that will aid people like him. Or perhaps you wish to utilize it as a means of marketing yourself while also assisting people in improving their lives.

If you want to open a nonprofit for causes you are passionate about, it is essential that you stay objective. Consider this a business but also keep the passion burning inside of you. Majority of nonprofits rely on volunteers who give their time freely because they support the cause and have no ulterior motives. For them to continue standing up for what they believe in, you must serve as an example.

While it is tempting to maintain a fully romantic vision of your organization, this is a field that requires idealism. People who wish to pursue a career in nonprofit need bravery, perseverance, and tenacity. You are not simply working for the sake of financial compensation at the conclusion of the month but your organization and project will hopefully be responsible for many people's lives changing.

Jim Ziolkowski is the founder of buildOn, a nonprofit dedicated to after-school programs for impoverished children in the U.S., and constructing schools in developing countries. To achieve that on a global scale, they rely on volunteers who want to make a difference. The bureaucracy of running the organization is not what attracts these volunteers but knowing that their efforts are going towards feeding healthy meals to starving children.

A nonprofit's goal must be clear and concise in order to guide all of its activities. An organization cannot address all of the community's issues. Instead of juggling a lot of issues at the same time and failing to achieve any of them, you should prioritize certain issues and demographic groups.

A 501(C)(3) tax exemption is required to operate a nonprofit correctly. Obtaining that exemption is difficult enough, and keeping it may be a challenge. Your organization's finances will be open to public viewing, and you will have to submit numerous forms on an annual basis to keep your status. Furthermore, the actions of your staff or board members may inadvertently cause your organization's demise.

In order to keep your nonprofit functioning in the long term, you will need to maintain financial accountability and control over your funds. The IRS is vigilant when it comes to monitoring charities' finances, so you must treat this seriously. Even if you have a fantastic aim, a sound working concept, and a committed team, your financial management should be at the top of your list.

If the process of starting a nonprofit sounds complicated, this article will act as a comprehensive guide. We will walk you through every step of creating and running a successful nonprofit, from figuring out your goals to staying compliant with the IRS. Plus, we will help you keep your nonprofit's mission at the forefront while protecting and growing it.

You can not operate a nonprofit on your own, so you should be able to choose who will contribute and support you. These folks will be the ones to assist raise money for your organization, put in place programs, instruct volunteers, represent your organization to the public, identify community needs, and do routine work such as answering the phone. Even if you do not have any HR experience, we will teach you how to pick and hire individuals.

Budgeting is a difficult task. Nonetheless, we'll help you utilize tools like core numbers, cash flow projection, statement of operations, and functional expenses to complete Form 990—the most essential form for a charity. We will also go over the many computer systems available to help you manage your organization effectively.

At the conclusion of this article, we will provide you with a list of links to the most essential documents you will need to set up and run your nonprofit. Throughout the article, we will include instructions on how and when to complete these forms. Of course, it is always a good idea to have a lawyer or accountant review these papers before filing them.

Small Footprint Press

We were formed from a desire to change the world and the environment, which is why we believe in returning power back to the individual while also protecting our planet. The only way to survive in the long run is for individuals to take care of themselves and their surroundings. As a result, we strive toward encouraging and promoting sustainable living as an individual.

We have been able to transform people's lives step by step by providing assistance for those looking to improve their circumstances, become self-reliant, live off the grid, or be prepared for the worst. We wrote this book with the goal of assisting you in launching a successful charitable organization. The following topics are some of the most common challenges that many other individuals have encountered when running a charity. Some of these issues can only be predicted after having worked within a nonprofit environment oneself.

Creating and running a nonprofit organization is an act of love, and it brings out the best in people. We want to share the knowledge of creating organizations like this from beginning to end and how to keep it from closing its doors before it can fulfill its mission.

Nonprofits are here to help. According to the National Council of Profits, every person in the country has been benefited in some way by a charity's work, whether they are aware of it or not. However, this happens only in extreme circumstances like receiving aid during a catastrophe or even learning how to tie a knot as a boy scout.

We'll be examining the many definitions of nonprofits, the significance of 501(c)(3) status, and what distinguishes these organizations from not-for-profits and for-profits in this article. There are several benefits to working for a charity, but there are also some drawbacks that we will look into.

We will then be ready to get down to business. This involves raising money and putting together your team. We will look at what makes a decent board, as well as how to recruit the greatest paid employees and volunteers.

We will walk you through the entire process of creating your own name for your nonprofit, including how to choose a memorable moniker. We will also look at how to obtain tax-exempt status and how to maintain it.

It is not useful to have a fully working nonprofit that no one is aware of. So, in addition to establishing a functioning website and utilizing social media to collect donations and grants, you should also ensure that it has a functional software system. We will go through the ins and outs of building such a system later on. It is critical to have a solid piece of software in place. Communication between internal staff as well as with external parties should be feasible using this system.

We will also show you the most crucial document you will need to submit in order to maintain your tax exemption: Form 990. This is a yearly form that you must file with the IRS proving that you are following good financial practices. Conflicts of interest may also hinder your most important activities.

Creating and monitoring the programs you put in place is essential to ensuring that your charity achieves its objectives. We will also look at strategic planning, program identity, the way you deliver your services, and how to assess a program's effectiveness.

The purpose of a portion of this guide is to discuss risk management, which entails anticipating everything that might go wrong.We will  examine how insurance protection is essential, including the many types of coverage you can get. This guide will also be used to talk about the need for staff appreciation while expanding your nonprofit.

We also included several form templates that you may apply to your daily operations, as well as a few lists of instructions that might assist you in creating your own documents from the ground up. These do not pretend to be a substitute for the assistance of an accountant or attorney, but they should be beneficial when you are just getting started.

Creating genuine change is impossible without first understanding how to start a 501(c)(3) nonprofirt, with all of its challenges and rewards. You have made the decision to overcome these obstacles, and this article will be your weapon in combatting them. This information is now yours to use wisely.

Reasons to Start a Nonprofit

There are various motivations why someone may want to start a nonprofit organization. 

Some may want to fill a need in the community that is not being met by for-profit businesses or government agencies. Others may have a passion for a particular cause and want to use their skills and resources to make a difference. 

Still, others may simply want to create an organization that will serve as a legacy for future generations.

No matter what the reason, starting a nonprofit can be a rewarding experience. But it is important to understand the difference between nonprofits, not-for-profit, and for-profits before getting started. Here's a quick overview:


A nonprofit is an organization dedicated to a particular cause. It has a mission and purpose to serve the community and benefit the public. 

It collects donations or payments for providing its services, but it also uses profits to further advance the organization in contrast to investing in business growth or the individual wealth of the owner.

Nonprofits are serious businesses, and that is how they should be treated. Entrepreneurship is critical in this regard. 

It is critical to have staff that likes what they are doing, but it is also important to have individuals who know what they are doing. You must also have a well-executed plan, including obtaining the right licenses and permits and learning how to manage your finances.

A nonprofit is more effective when everyone has the same goal and works diligently to achieve it. Nonprofits can have a variety of missions, such as providing education or medical care or working to protect the environment.

Nonprofits do not have a single owner. Instead, they are overlooked by a board of directors with at least three people to manage finances responsibly.

Nonprofit aims to ensure that the company can provide the services to those needing them. A nonprofit, for example, may spend revenues on wages and improve its services. 

The success of its purpose determines the success of the profit. The more people are helped through its activities, the more successful it is.

There are various reasons for creating a nonprofit organization. These include:

  • Fulfilling a Need in the Community: Nonprofits are often created to fill a need in the community that for-profit businesses or government agencies are not meeting. 

This could be something as simple as providing affordable housing or childcare or as complex as offering healthcare services or job training.

  • Passion for a Cause: Many people start nonprofits because they are passionate about a particular cause. 

They want to use their skills and resources to make a difference in the world. This could be anything from working to end poverty or hunger to protecting the environment or animal rights.

  • Creating a Legacy: Some people start nonprofits as a way to leave a legacy for future generations. This could be something like establishing a scholarship fund or creating a museum. 

Some nonprofit organizations in the U.S. include American Red Cross, Feeding America, United Way, Habitat for Humanity, Direct Relief, American Heart Association, and Samaritan's Purse. 


Not-for-profits don't always have the best interest of the community at heart and can serve private purposes for their members. 

This kind of organization does not have to serve the public and can serve the objectives and needs of its members, though some of them serve beneficial public purposes.

For example, private clubs and membership organizations are usually set up as not-for-profits. 

All revenue earned—whether through contributions or activities—is put to manage the organization in this situation better. However, if this occurs, any money donated to them cannot be written off by donors come tax season.

Not-for-profit organizations must apply for tax-exempt status from the IRS, including sales tax and property tax exemption. This also means that money donated by individuals to not-for-profit organizations cannot be deducted from the tax return of that individual.

Types of not-for-profit organizations are social advocacy organizations, trade organizations, and foundations.

For-Profit Organization

A for-profit organization exists to generate revenue for its owners. The owners can be individuals, a group of investors, or shareholders. Any profit that is left after expenses are paid is distributed among the owners.

This type of organization can be either a sole proprietorship, partnership, or corporation. A sole proprietorship is a structure of a business that is owned and run by a single person, a partnership is owned by two or more people, and shareholders own a corporation.

The main purpose of a for-profit organization is to make money for its owners. But that doesn't mean they can't also provide valuable goods and services to the public. In fact, many for-profit businesses do just that.

Some examples of for-profit businesses are manufacturers, restaurants, airlines, retailers, and banks.

Nonprofit vs Not-For-Profit vs For-Profits

The main difference between nonprofits, not-for-profit, and for-profits is that nonprofits are required by law to serve a public purpose, not-for-profits can serve private purposes, and for-profits exist to make money for their owners.

Nonprofits are organized around a mission to benefit the public good rather than generate profit. They must operate in a way that furthers their mission, and any surplus revenue must be reinvested back into the organization.

Not-for-profits don't have to serve the public and can serve the objectives and needs of their members, though some of them do serve beneficial public purposes.

For-profits exist to generate revenue for their owners and can be either a sole proprietorship, partnership, or corporation.

When it comes to taxes, nonprofits qualify for tax-exempt status under the 501(c)(3) status, while not-for-profits may be eligible for tax exemptions when they earn a 501(c) status like 501(c)(7). 

For instance, some not-for-profits don't need to pay sales taxes or property taxes. For-profits do not qualify for 501(c) tax exemption but may have tax deductions from business expenses, charity donations, employee salaries, and benefits.

In a nutshell, 501(c)(3) organizations serve the general public good and are therefore entitled to that exemption so they may continue to carry out their mission. 

To do so, they must make their operations and financial information accessible to the donors in order to maintain their end of the bargain. As a result, these donations are also deductible from your taxes.

Nonprofits are also distinct from not-for-profits in that they have their own legal status. 

Another distinction is that whereas running a nonprofit entails more of a business with compensated workers, the members of not-for-profits perceive it as a recreational organization. Nonprofits do, however, have a portion of volunteers working for them, whereas not-for-profit members work entirely on a volunteer basis.

It is feasible for a nonprofit to modify its mission statements at any time if the new mission still qualifies for tax-exempt status under section 501(c)(3). You should notify the IRS before making changes, or your organization's exemption will be jeopardized.

The Differences Between a 501(c)(3) and Other Nonprofit Organizations

Nonprofit organizations are still required to comply with state laws, even though this will affect their federal tax bills. This is because nonprofits are corporations and need to be registered in the state where they plan on operating. The IRS will review your documentation to determine if your company qualifies as a 501(c)(3).

Although securing tax exemption can be daunting, the process becomes less complicated when you understand which type of nonprofit organization you're creating. The IRS provides clear definitions for these organizations. For example, 501(c)(3), which falls under the category of charity, has different requirements than other 501(c) categories.

Charities are non-profit organizations that focus on improving the lives of people in a community. A charity's efforts might include, for example, a restaurant that provides excellent meals at low prices to residents of a poor area or a charity clinic that offers HIV treatment. They can also work on promoting amateur sports and other initiatives.

Charities of all types may apply for the 501(c)(3) status, which shields them from taxes. They obtain money from soliciting donations to their community and internet crowdfunding, but they may also receive larger amounts of funding from a generous benefactor, a family fortune, or a personal foundation.

Some nonprofits are charities, but not all of them are. For example, a veteran association cannot be considered a charity according to the law. However, it can still help with improving the reintegration of veterans suffering from PTSD back into society. Another example would be a parent's association at a public school; this is not technically classified as  a charity either, but it is still helping to improve education in its given community. There are other types of organizations that also don't qualify as charities even though they may serve their communities in different ways; such examples include chambers of commerce or retirement fund associations for teachers, labor unions, agricultural cooperatives, and horticultural societies..

The Different Types of 501(c)(3) Organizations

There are three main types of 501(c)(3) organizations:

  • public charities
  • private foundations
  • private operating foundations

The most well-known are charity organizations that operate to the benefit of the general public. They work in a wide range of areas, using a variety of approaches. Public charities receive a significant proportion of their funding from donations from the general public and government funding programs. It is necessary that at least one-third of the earnings of a public charity come from contributions made by members of the general public. Individual donors may get tax deductions up to 60% while ooperative donor can get up to 10%.

Private organizations, also knnown as non-operating foundations, do not run operations or provide services. They work to promote the initiatives of other charities rather than operating on their own. Small groups of individuals may be the source of these foundations' income.

Small groups of individuals or even families may operate private foundations. For example, if a family loses a young daughter who aspired to be a medical doctor, they might establish a private foundation in her name to provide scholarships to other young women with the same ambition.

A tax deduction of up to 30% of income may be obtained by donating to a private foundation. Furthermore, since the board of a private foundation is fewer in number than that of other nonprofits, it can be better governed.

The number of private operating foundations is limited. They may be thought of as a hybrid of the first and second types, performing endeavors like charity while attaining governance that brings them closer to a private foundation. At least 85% of the income must go toward exempt activities, and they are entitled to the same level of tax exemption as charities.

Is Nonprofit Right for You and Your Goals?

Nonprofits are distinct organizations that operate in a particular manner and under a set of regulations. Opening an organization to feed the homeless, for example, requires a different set of abilities than starting a restaurant. We've seen some advantages and drawbacks to operating such an organization, so now it's time to decide if this business model is appropriate for you.

If you are accessing this article, it is likely that you are considering starting a nonprofit organization. However, before taking such a big step, it is important to do your research in order to understand the challenges and commitment required for success. Ask yourself tough questions about your goals and objectives and considered all potential obstacles that may appear during your journey.

It is critical to collect this information not only so that you may run a nonprofit, but also in order to determine whether or not you should establish one. There are numerous methods for serving the community, and establishing a charity is just one of them. Some people have produced significant amounts of good through small initiatives or even through for-profits.

Ask yourself if you could obtain what you want while running a for-profit business. To go back to the previous example, could you start a restaurant and make money off of it while also giving food to the homeless? You may not be able to feed as many people, but you will still do good while making money.

Running a nonprofit may be costly. Every dollar you raise must go toward the organization, which means paying rent, electricity and water bills, as well as employee salaries and legal costs. Because there are so many charity foundations to choose from across the country, fundraising has become a difficult job. The 501(c)(3) status does not imply that their finances are a breeze; especially because they need these donations in order to earn an income while being subjected to constant monitoring.

It is preferable to ask people to contribute a portion of their money to your cause if you are fighting for something they care about. The majority of contributors are not concerned with the tax exemption: they want to assist a cause that is near and dear to them. Maintain friendly ties with these individuals since they will be the ones who pay your bills, and you can not sue them if they decide on a different course of action.

Even if you decide not to start a nonprofit, there are several methods to do good and help a cause. The most apparent options include donating money to an existing organization and offering voluntary services. Volunteering can be done online or in person, with cash or other items accepted as donations. Nonprofits rely on your support to survive, and they would appreciate any donation you could give.

While establishing a new organization might be difficult, you may create a chapter of an existing one that reflects your values. You can establish an affiliate under the parent company's supervision and permission. The parent organization will allow you to use their registered trademark and work to promote their concepts. Your chapter will have restricted access to the funds of the parent organization, but it will also be eligible for 501(c)(3) status.

Setting up a for-profit business that helps support nonprofits can be as rewarding as running a nonprofit. We've already mentioned the restaurant example, but this can also be a bookshop that donates part of its revenue to an educational fund or a secondhand clothes shop that donates coats to the homeless. Even if you don't own a business, you can set up a donation cycle among your friends and family to help one or several charities with money.

Advantages of a Nonprofit Organization

A good idea is only the beginning of the process of establishing a nonprofit. To succeed, it requires more than simply having an excellent concept. It's possible to convert that idea into something greater with dedication and perseverance. The advantages of forming and running a 501(c)(3) stretch well beyond the tax exemption status. Here are some examples:

Limited Liability

The dangers of starting a nonprofit are far less than those of creating a small for-profit company. While the owners of a for-profit business are frequently linked to the firm, a nonprofit is considered an independent entity from its directors. As a result, many of the legal issues that would harm the proprietor or partner of a for-profit firm have no impact on board members of a nonprofit.

Nonprofits are not accountable to creditors or courts. In no way are people who finance, lend money to, or run a nonprofit personally responsible for the organization's debts. That is not to suggest that a person can hide behind their work as a charity in order to engage in unlawful behavior. Directors may be held liable if they cause any damage through their actions or inaction to the organization.

Separation of the Nonprofit and Individuals

Legal difficulties of individuals can have an impact on the functioning of a business. Nonprofits, on the other hand, are in a public domain and are not affected by their runners' legal problems. They have their own legal existence and may deal with legal issues such as signing a contract or participating in a lawsuit without infringing on its owners' rights.

Eligibility for Funding

Nonprofits that work on social programs might obtain assistance from both the public and private sectors. There are several charitable grants available only to public institutions, which can not be utilized by for-profits. Federal funds are provided out of taxpayer money and are intended for organizations with tax-exempt purposes.

Individuals and firms that contribute to nonprofit organizations may get tax deductions.


Creating and running a nonprofit not only increases the credibility of its owners in the community, but also lends credence to the company or person behind it. For example, people are more likely to make donations to a nonprofit that is run by a long-established organization rather than one they have never heard of.

Postage Discounts

Nonprofits also have cheaper rates on postal services. Their printed material, for example, can be sent out as USPS Marketing Mail at a significant discount. Other papers like bills and accounts, as well as handwritten or typewritten documents, are not accepted for this service.

Disadvantages of a Nonprofit

Running a nonprofit is difficult and it may have an impact on your career. However, recognizing these disadvantages might assist you in deciding whether or not to go forward with this path.

Numerous Paperwork

The paperwork for any business is important, but with tax-exempt organizations, it is more so. It is a good idea to maintain records of all charity activities conducted every day. The IRS is always on the lookout for nonprofits to verify that they continue to meet their exempt purposes. To keep their exemption, all 501(c)(3) groups are required to submit their records to the IRS on specific dates.

Scrutiny by the Public

Nonprofits are required to disclose their financial information to the public because they are exempt from taxes. Since charities exist for the public good, this data is considered public interest. So, anyone who requests it should be able to get copies of documents that detail the organization's state and operations, including salaries.

High Fees

Any business, regardless of type, must pay for essentials like accounting, renting office or warehouse space, furniture, legal counseling , and more. They also need to pay for the application for tax exemption and incorporation with other organizations . With a charity organization, however, it is important to remember that the money donated will not be brought in as profit later down the line. To avoid being surprised by expenses you did not anticipate, it is always best to create a budget before getting started.

Shared Control

A for-profit business has a lot more personal control than does a 501(c)(3). The number of rules and regulations to be followed may be daunting, with some states requiring that nonprofits have more than one director. The board of directors will make the most significant decisions, and the majority must be respected.

Limited Profit

If you can not accept the idea that running a charity will not result in a profit, it's an indication you should reconsider your priorities. The sole money you may get from your employment with a 501(c)(3) is the fixed salary; all revenue generated by the company's operations must be reabsorbed and put to better use.Unrelated revenue, on the other hand, will attract the IRS's attention, and you might lose your exempt status and have to pay a fine. In addition, you can not use a nonprofit's assets to produce other income-generating activities.

When a charity must shut its doors, any remaining assets must be paid to creditors. Whatever money is left from the organization must be given to other foundations. By law, the proprietors and board of directors are not permitted to keep it.

A 501(c)(3) founder is entitled to fair remuneration for their efforts in the profit. However, do not pay yourself more than what the IRS deems reasonable. This number is determined by comparing the organization's budget to the amount of worked hours, typical compensation in the sector, and your level of education. Paying more than that might jeopardize your exempt status.

Here are a few examples of alternative sources of revenue:

Renting out space to professionals who have a similar cause, such as renting an auditorium for a public speaker.

Make money for your nonprofit by conducting a consulting or facilitating training using the knowledge that you and your staff have gathered.

Your nonprofit can license its intellectual property to generate additional income. For example, the knowledge you use to provide consultancy services could also be used to write a book on how to run a similar organization.

An excellent way to raise money and market your organization is by selling products related to your cause, such as items with your logo.

Developing a social enterprise, such as an LLC, that has the same structure as a for-profit but with a goal like that of a nonprofit.

The IRS has rules to prevent nonprofits from earning too much money. All related income should be consistent with the organization's primary goal. Any profit that does not fit this description is considered unrelated income. To avoid jeopardizing your 501(c)(3) status, the unrelated income should not exceed $1,000.

Creating a Vision

Another distinction between nonprofit and for-profit is the sense of purpose. Why are you operating this business if you're not trying to fill your pockets? If you have to go through all that bureaucracy and spend all that money, there has to be some sort of compensation at the end, right?

The main objective of a nonprofit is to bring people and resources together to fight for a shared cause. To do this, the organization should have a clear idea of what they are fighting for before fundraising begins.

When people donate money to a nonprofit, they want to ensure that their donation is being used for the cause they initially donated for. If an organization changes the focus of their work, donors are likely to stop giving. To prevent this from happening, nonprofits need to be open about how donations are spent.

Donations don't always take the form of cash. Many people decide to volunteer their time for nonprofit organizations. That work may be specialized, like accounting, or it may come from untrained individuals who want to lend a hand by carrying out more routine duties. Knowing how to recruit volunteers is essential to the success of nonprofit organizations because they are a valuable resource.

A specific objective will also provide a strong foundation for the staff and volunteers to work on and keep them motivated. It is essential that they identify with that cause. A good way to keep them motivated is to hire people who belong to the demographic that the nonprofit's mission benefits.

A mission statement is an essential document that describes the purpose of your charity and how you intend to accomplish it. That sentence should be succinct and clear, explaining why your organization exists. A well-written statement will serve as a reminder for everyone to stay focused while also communicating that objective to possible partners.

The Ideal Nonprofit

The first step is to figure out what you want to accomplish. It's now time to convert that concept into reality. Conducting a needs assessment to obtain information about your target audience is a fantastic method of determining whether or not your idea will work.

This study will provide you with an indication of whether your resources are adequate to fulfill the community's demands. You can then begin planning how much money you will require in donations and the necessary employees and volunteers based on this information.

Then, consider what motivates that ideal person to donate for you and keep that in mind when choosing people to request donations from. Of course, you will never find someone who checks every box on the list, but this is a good place to start. Write down the qualities of the ideal donor to your cause, including their age, level of education, professional background, and income.

The assessment is also essential to find out what the other organizations are already doing in the field you want to work in. You may do that by simply talking to individuals who work at other nonprofits and enterprises with similar goals. This might lead you to reconsider your first ideas, which is better sooner rather than later.

Knocking on people's doors and asking questions can be equally effective. It is excellent for learning about nonprofit services from the other side of the fence. You can also go to other places and learn about how nonprofits are involved in their community, so you can apply what you learn to your work.

It is crucial to research about logistics and practicalities, such as federal, state, and local rules, that will affect your job. For instance, the U.S. Census Bureau may provide basic population data for your region of the country, and knowing how to interpret these rules will enable you to organize.

If you want people to believe in your company and give their time, money, and energy without expecting anything in return, it is critical that they trust your integrity. Do not jeopardize that faith for it is the foundation of any nonprofit. Always project someone who is dedicated to doing good, and you will inspire these individuals to do so too.

When you must accomplish all that requires your attention, it might be difficult to concentrate on the big picture. Still, you should never forget your primary objective. As a result, many organizations create a slogan from their mission statement. Repeat it frequently, write it down, and hang it on the wall so that you may always remember why you're doing this. A nonprofit's loss of early popularity might be deadly.

Getting Real

You have decided to start a nonprofit. The objective has been determined; the mission statement is completed; you are already searching for a location and learning how to hire people. However, creating an organization from the ground up may already be difficult for someone who is used to it and much stressful for someone who has never done anything like it before.

The first step is to write a business plan. Begin with a summary of the entire operation, which should be on the first page of your document. This should be brief and powerful, functioning as an elevator pitch for your whole business plan. Many investors do not read further into the proposal because it is not good enough so make it better to encourage them to turn the page.

It is also necessary to conduct a market study in order to obtain an idea of your competitors, their strengths, weaknesses, opportunities, and threats (also known as the SWOT analysis). This will assist you in gaining a better picture of your company's chances of success.

The next step is to organize your products and services, outlining what you intend to do and why you should be the one to do it. Include the production of tangible items that will generate revenue for the organization, such as personalized mugs, t-shirts, jewelry, and headwear.

You should then develop an operation plan that includes the plans to set up a physical location for the group, as well as supplies such as stationary and furniture. Then, how will you provide your services and describe an excellent team, including volunteers? You must also detail each employee's responsibilities and roles in order to make the most of their time and efforts.

Finally, we have the financial plan, which is what most investors care about. If you do not know anything about accounting, it is time to seek expert help. This section of your report will describe how the money will flow within your organization and how it will benefit the public and pay the staff. It will also explain how much money you will need to raise to meet those goals.

Always know what type of budget you will need to accomplish the organization's goal. Employees must be paid, supplies must be acquired, expenses must be covered, and your 501(c)(3) status will require that everything is kept track of. Hiring an accounting firm to handle the paperwork may well imply spending money on it.

Starting from the bottom up entails starting with no previous financial records. Many individuals begin this process believing they will receive a specific sum of money, only to be disappointed later on. Keep in mind that you may get significantly less than you desire while developing a fundraising strategy. It is also preferable to be prepared since your company's entire income is driven by contributions.

The first year may be the most difficult since you will be learning how the company works and the difficulties that the goal presents. It's always frustrating when you do not achieve all of your charity's objectives, but don't lose hope. You can utilize this information to create a more realistic financial plan.

Creating a thorough marketing strategy is critical for a charity that gets its money from contributions. People will not give to your organization if they are unaware of its existence. Even if people do know about you, they must be convinced that your organization is worthwhile supporting. It is more than just getting individuals to work with you; it is also about creating loyalty among them. If a donor receives a letter showing how their donation is making a difference in people's lives, they will be far more likely to continue giving.

Funding the Operations

Nonprofits rely on regular individual contributors, fundraising, corporate sponsorships, government grants, and fees for services and goods to generate the bulk of their income. Individual contributors can either collaborate or become recurring donors. This implies that they will make periodic donations that will be charged from their bank accounts or websites such as Donorbox automatically. These contributions are dependable and easy for both the donor and the receiver to manage, and they may be taken into account when preparing your yearly budget.

Fundraising can be done in a variety of ways, including phone calls, social media posts, email, and post-mailing. It might also be conducted at certain events or through newspaper advertising. Many for-profit businesses include charitable contributions in their budgets and are delighted to have their name and logo associated with a charity that serves the needs of its community. You could also appeal to them to allow you to speak with their employees so you may get personal donations.

If you are feeling overwhelmed by this procedure, you may always engage a grant seeker. This is a skilled professional with expertise in obtaining the best grants and preparing you a complete proposal. You can locate grant seekers on websites like LinkedIn, but be cautious about who you hire. There are volunteer search engines where you may get a free grant searcher—just be sure they know what they are doing.

Grants are not presents! You'll have to show the grantor that you're using their money for the purpose of the award. That is especially true with public grants because you will be receiving tax dollars. It's critical to maintain track of all expenditures and transactions so that you can show that you're using the grant for its intended purpose.

Building Your Team

A company's success is ultimately determined by the quality of its employees. As a result, be cautious about who you hire for your team. They must be committed to the organization's goals while also being competent, diligent, and trustworthy.

Board of Directors

According to IRS guidelines, the board of directors must include three members. Of course, you may have more; however, it is always a good idea to have them in an odd number to avoid tied votes. While this is not a rule, it is preferable if members do not come from the same family for unbiased reasons.

If you are hiring a board, look for people with prior experience in the field who can help your organization succeed. The board members will be in charge of raising funds, recruiting personnel, and ensuring that the nonprofit follows its bylaws. It is a good idea to split the board into three groups: one-third each for financial, management, and community expertise.

Board members may be required to work as volunteers and perform other tasks until everything is in place. Make sure they understand what they are expected to accomplish, so they won't be disappointed later. Their talents should be used to further the cause of the organization, not for money.

Executive Director

Find an executive director to handle the day-to-day operations of your organization in order to achieve its mission. You should hire an executive director based on their management experience, communication and planning abilities, and leadership skills.

Keep in mind the strengths and limitations of your organization when selecting an executive director. A charity must work for a cause outside itself, and many external variables can influence it. So, it is not only about what you do at your desk; it is also about what happens beyond your office.

An executive director with an advanced degree is advantageous, but knowing the demographic you are working with can be just as significant. For example, if your organization wishes to improve education in a poor area, hiring an executive director with a bachelor's degree who grew up there may be preferable than recruiting someone from outside the community. This will aid the organization in becoming more connected to and trusting of its members.

The executive director is a paid employee so their compensation should be included in the yearly budgeting. Starting small may prevent you from obtaining the ideal executive director right away. Nonetheless, it may be worthwhile to cut costs elsewhere in order to hire a great executive director who will take your nonprofit to the next level.

Officers and Staff

Officers are the people in charge of your nonprofit's staff. It is their responsibility to put the board of directors' decisions into action. The staff will be the people who make the nonprofit run on a daily basis. Small nonprofits typically begin with a small volunteer staff. They grow in size over time and can hire and pay more people. Some organizations have dozens of volunteers but only one or two paid employees to help them coordinate.

The treasurer is in charge of keeping track of expenses, paying bills, managing fees, and taking carae of the organization's funds. The job of the treasurer is to maintain records that are submitted to the IRS on an annual basis so that the company can retain its 501(c)(3) status.

The committee chairperson serves as a liaison between the members and the organization's staff, administering projects, leading meetings, drafting minutes, and following through with organizational bylaws. In addition, this position includes facilitating board member interaction by keeping them up to date on the organization's activities.

Communication managers are needed for online nonprofits to manage their social media, organize campaigns, create and send emails, administer websites, distribute greeting cards, and conduct public relations. Hiring someone with a degree in communications and who is active on social media is a smart idea. This is an occupation that may typically be completed online most of the time.

An events manager is in charge of conferences, workshops, receptions, public fundraisers, and other monthly and annual gatherings. They must also contact public speakers, provide food and beverages to the participants, prepare materials such as brochures and offer welcome gifts.

A fundraising manager is a specialist that focuses on soliciting sponsorship, fundraising, and government grants. A fundraising manager will go above and beyond what the grant applicant can accomplish when it comes to individual grants. They will be searching for opportunities for your organization to collaborate with potential contributors, businesses, and regulatory bodies in order to identify the greatest deals for it.

The staff at a company include those who work for these supervisors in specific professions. It also includes secretaries, cleaners, administrative assistants, drivers, and other personnel who are needed in any business and may work full-time or part-time and be paid or volunteer.

Hiring Staff

It is time to get started on the recruiting process once you have figured out what positions need to be filled in your nonprofit. For each position, you should have a clear vision of who the ideal candidate should be.

Nonprofit organizations are required to deduct federal income taxes from their employees' pay. This qualifies them for the Federal Unemployment Tax Act (FUTA), a program that encourages states to compensate those who are out of work. The nonprofit must pay this tax, not the employee. Nonprofits are also required to pay Federal Income Tax Withholding (FITW), as well as Social Security and Medicare taxes (FICA). If you pay an outside consultant more than $600, you must report those payments with Form 1099 before the end of the calendar year. State law may impose similar requirements.

The first thing you will need is an Employer Identification Number (EIN), which we have previously discussed. The EIN acts like a social security number for your nonprofit. You can open a bank account in the name of your organization and hire people to work in it using the EIN number. The IRS website has instructions on how to apply for an EIN number, or you can download the forms and fill them out manually. You may also submit the papers by mail to the IRS office.

Before applying for an EIN, it is necessary to establish your organization legally because the tax exemption is removed if you fail to file an annual information return for three years in a row. Whether or not your company is not established by the time you apply for an EIN, that three-year period will begin being measured as soon as you get your registration number.

The Hiring Process

Hiring for a nonprofit is no different from hiring for a for-pofit. However, if you are employing a paid staff, you will need to figure out how much money you will have available for salaries, whether it is contract or salaried, and any benefits that may be offered.

Make sure your organization is registered in all necessary state programs, including worker's compensation and unemployment insurance. Also, be sure that the individuals you are hiring are qualified to work in the United States. These issues should be addressed before you start composing a recruiting ad.

In an employment ad, the duties of the position, as well as any relevant benefits and time commitment, should be stated. The type of recruiting (e.g., open house vs. networking event) is also mentioned; this depends on the employer's preference and strategies for attracting talented people to their organization.

When it comes to selecting individuals for an interview, many nonprofit rely on recommendations from their personal and professional connections. It's more convenient to ask for a recommendation from a friend or a past colleague than to put up an ad and wait for applications. Hiring someone who isn't good enough as a favor for someone you know is considered unethical, and it might harm your business.

Hiring Board Members

Your board members are the first people you should consider recruiting. They are typically unpaid, so be sure to note that in your ad. Websites like Board Net USA, Board Match,, and The Bridgespan Group specialize in nonprofit board member recruitment.

A nonprofit's founding and history should be covered in an ad for a board member position, as well as how you plan to put your ideas into action. Following that, provide the organizational chart and board meeting schedule—keep in mind that board members aren't always accessible.

After you have identified the finest prospects, it is time for the job interview. Starting with a potential board member, begin by inquiring about the organization and what makes them want to volunteer their time and services. Then inquire about any qualities that make a great board member and if they possess them.

Use the interview to find out what they know about fundraising, since this is one of a board member's major responsibilities. Do they have any prior experience with it? Would they be willing to serve as the voice of your organization and spend time on fundraising calls and events? What would they say about going to a lunch where the objective is for them to ask the host for a donation to their cause?

Ask the prospect board members about their experiences and contacts. Would they be willing to utilize the network that they built throughout the years for fundraising purposes? Or would they consider it too invasive? Try not to push them or suggest that declining to provide their contacts would be a deal-breaker in the interview.

Board members should have some degree of control over their schedules. Inquire about whether they would be free for the essential meetings and social gatherings and fundraisers. If the applicant can not do that, it will be impossible for them to represent your organization

During the interview, you may ask a wide range of questions, so do not be afraid to ask them. It is better not to conduct the interview alone; instead, make yourself part of a larger group. You can talk about your impressions of the applicant after the interview is finished. This will lead to a more balanced selection at the time of hire.

The selected board members should sign an agreement that confirms their commitment to the organization's bylaws. The contract should also disclose any money they might receive, as well as its terms—keep in mind that an IRS Form 1099 Misc is required if you pay a board member more than $600 each year.

After you have hired your board members, make sure they know about the organization's objective, chart, schedule, and contact information for everyone who works there. Orienting them one-on-one through everything they need to know is the greatest approach to do it. If you have any orientation materials such as books or brochures, ensure that they have a copy they may take with them.Some organizations organize a reception to welcome their new board members, going above and beyond the call of duty. These events can be open to the public, with information posted on the organization's website, social media, and local press. They are ideal for introducing board members to their employees and those benefitting from the charity.

Hiring a Staff

The most significant distinction between employing board members and employees is that staff are generally employed full-time positions paid from the organization's income. Hiring a new employee is not always the best answer. Gaps in the workforce can be filled by elevating current employees. Providing such chances will raise morale among the team and may be less expensive than recruiting new people.

In case you need to employ someone, keep in mind that advertising a job posting will bring in a large volume of applicants. It is critical that your potential employees are well-versed on the responsibilities of the position they will be filling. A nonprofit might not pay its staff enough, but you may make it more appealing by noting the flexibility and a sense of purpose behind the organization.

Asking several questions and receiving detailed answers is much easier if you hold a number of interviews. These meetings do not have to be all in person, and they can take place over the phone or using internet applications. You will develop a bond with the prospects, which will help you choose the finest one later and save a lot of time.

Do not be tempted to take a chance because you have to fill a position on short notice. A fantastic resume does not guarantee that the applicant will live up to expectations. Getting to know your prospects over several interviews will also help prevent you from hiring someone who doesn't fit in with the organization's values. Especially for nonprofits, getting to know your candidates through many interviews is critical since it's about their commitment to the cause.

If the recruiter hasn't done interviews before, it's easy to be partial towards a candidate who made an excellent first impression. It is vital to seek for important information. That is why, as in the case of board member selection, having more than one interviewer so you can compare your notes and impressions is critical.

If you want to improve the objectivity of your hiring process, try looking for both the good and bad qualities in each candidate. You might be surprised by what you find.

Take some time to network with other nonprofit leaders to see if they can help you find prospects. If someone suggests an unqualified individual as a friend or family member, be wary. Pay attention to the ones that are recommended due to their great service because they may have more experience doing so.

Take the time to double-check the information listed in a candidate's CV. If a person claims to have a diploma, it's worth making that call to verify it. Also, contact their past employers and check the dates mentioned in their CV. Sometimes, rather than telling you outright that they have worked or studied at a certain location, applicants will bend reality to win your approval. It can shed a lot of light on an applicant's work ethic if you find out about this.

Creating a 501c3 Nonprofit

In this section, we will show you how to establish a brand in the early phases of starting a nonprofit organization's existence. We will also look at the legal requirements for forming a 501(c)(3) nonprofit. There are several state and federal rules to adhere to before establishing an organization.

Running a nonprofit organization can be costly. The fees for incorporating and obtaining tax exemption vary widely by state, ranging from $25 to $150. Applying for tax exemption alone can cost between $275 and $600. In addition, you'll need to rent office space and pay all the associated expenses, hire and train staff members (who will need to be paid), pay for a website domain, building, and marketing costs.

Getting public grants may seem impossible if you are just starting out. It is common to get donations from your local community, but they likely won't be sufficient to launch a company.

One approach is to do an online fundraising. These have become increasingly popular in recent years, as they allow individuals to offer their ideas to contributors in exchange for a prize. If you are developing, for example, an organization that teaches youngsters how to play sports, you could give them a jersey with the signature of all the kids' signatures as a reward to someone who contributes significantly. Smaller contributions might be reimbursed by having the donor's name displayed on a plaque at the headquarters of the organization, along with all those who made similar donations.

Crowdfunding is an excellent way to get an idea off the ground. But it isn't enough to keep it going. Once everything is in place, you'll need to rely on traditional grants and donations to make it happen. You must have a name for your nonprofit in order to accomplish that.

Developing a Catchy Name

One of the most difficult and essential aspects of organizing a nonprofit is to name it. The name is the first thing individuals learn about your organization, their initial encounter with your mission and values. As a result, it must be clever and appealing, piquing people's interest in learning more about your efforts. On the other hand, you don't want it to be too long, nor should you make sure that it's easy to say.The name of the organization should appeal to the general public and not just to you. Rather than spending hours trying to come up with a good name using pen and paper, work together with your team. This is an instance where the assistance of a third party, such as a family member or friend, is often beneficial.

The name will appeal to workers and volunteers, making you feel more at ease about launching it. However, in order to submit the necessary forms for incorporating and tax exemption, you will need to have the name figured out. As a result, some people try to come up with a name they may use right now but believe they can alter later.

Changing the name of an organization, on the other hand, isn't as simple. It involves a lot of paperwork, but it can also be detrimental from a marketing standpoint. In the world of nonprofits, recognition does not come quickly, and sticking to a name will assist you in developing trust in your brand. Unfortunately, changing names might undo all that hard work, putting you back at square one.

If you feel that the current name of your nonprofit no longer accurately reflects its mission, then it might be time for a change. This can happen when the organization relocates, changes personnel, or if the original name is now outdated. You may also need to rename in order to avoid any confusion with other similar groups.

Celebrities frequently lend their names to a foundation they established, giving credibility to the organization. Forest Whitaker set up the Whitaker Peace & Development Initiative, which assists impoverished communities all over the world. Lionel Messi built the Leo Messi Foundation to promote health, education, and inclusion through sport.

Consider a descriptive name that provides some information about your goal right away if you do not have a prominent figure to support you. When you hear names like as Save the Whales, Feed the Children, and Teach for America, it's clear what they are fighting for and who they are fighting for. However, be cautious not to be overly explanatory; otherwise, the organization's potential of growing in the future might be harmed. Naming your earnings after your neighborhood, for example, might cause problems if you expand big and start working in other areas of the world.

Keep a Child Alive is an excellent example of a company name. It is a nonprofit dedicated to assisting people in impoverished regions of Africa. It also tells you the organization's urgency. Who would refuse to keep a kid alive?

When done effectively, combining words to create a name can be an effective strategy. Americorps is a good example for this because you can figure out the wordplay after only a little effort. Another excellent example of this is Warwanda (Water Access Rwanda), whose name alludes to Africa's scarcity of water. Just be careful not to come up with a new term that might cause confusion. It's inconvenient and unpleasant for everyone to have to explain your organization's name to them.

Abbreviations are more successful when they can generate a new phrase, such as CUSO International, which means "Canadian University Service Overseas." The acronym is more likely to be said and remembered than the full name of the organization. BeyGOOD is the charitable foundation established by Beyoncé Knowles dedicated to mental health. The addition of a minimal Y connects the charity's work with that of the person in charge of it.

Abbreviations aren't always appealing, so use them cautiously. For example, the Will and Jada Smith Family Foundation (WJSFF) does great work but is difficult to recall and pronounce.

After brainstorming, choose the names that sound most appealing. Next, read them out loud to get a sense of how they sound. It might also be helpful to ask other people to read them for you. When deciding on a name, consider whether or not it accurately represents your organization's work. Will you have to spell it often so that people can understand it? Additionally, make sure that the name is not already in use by another organization and that the corresponding website domain is available. Another thing to be mindful of is choosing a name that sounds good in English but might unintentionally mean something inappropriate in another language— especially if it closely resembles an existing word.

Make a shortlist of names and inquire about them from various sources. Listen to how that name sounds to both internal and external individuals. Pay attention to their input, even if they suggest you abandon a name you like. It's preferable to make concessions now than it is to do so later when the brand has been established and the paperwork is completed.

When you've decided on a name for your organization, it is time to develop your brand. To start with, engage a professional designer to design the logo for the group. Do not try to create your own, regardless of how cheap it may seem. The symbol should be basic and powerful enough that people would recognize it, revealing something about the organization's goals and activities.

Becoming Exempt

Once you have decided on a business name and a board of directors, decide whether your legal structure will be a trust, a corporation, or an association. Trusts and associations provide little liability protection to their members and are not the most common choice for nonprofits. Corporations are more secure and eligible for government grants, making them the best legal structure for a nonprofit.

To establish a nonprofit, you must first file a business entity with your operating state. All of these entities can operate in the three categories: nonprofit, for-profit, or not-for-profit and are classed as LLCs, proprietorships, partnerships, or corporations. The process of establishing a corporation is simple and the forms are straightforward to comprehend.

Following the formation of the entity, you must apply for tax-exempt status by submitting a Form 1024 along with your request for an EIN. Then, although the process is complicated, you can start your entity in one of those categories and convert it to another.

Keep in mind that the paperwork you will need to complete may differ by state. Some jurisdictions will require you to publish a public notice in a local newspaper announcing your organization's creation. You may learn more about applicable legislation in your region by contacting your local National Association of State Charity Officials (NASCO). The registration procedure needs you to notify the following:

  • The name of your organization
  • Name and Address of the Registering Agent (Founder)
  • Nonprofit Address
  • Names and Addresses of the Board Members
  • Statement of Purpose to Which Your Nonprofit Will Operate

Make sure that you have the required license and permits that will comply with federal, state, and local laws—for example, the right to operate a business at your office's address. The next step will be to apply for exemption of federal income tax with the IRS.

The IRS does not exempt a nonprofit organization from paying income tax. The IRS requires a number of documents before granting you tax exemption, and they will keep an eye on your business after that.

The IRS requires an organization to fill out the online Form 1023 (or 1023-EZ if for a small organization) in order to apply for a 501(c)3 exempt charitable group's tax-exempt status, according to IRS Publication 557, Tax-Exempt Status for Your Organization. This form, also known as Application for Recognition of Tax Exemption, is designed to provide the IRS information about your company's structure, purpose, and planned programs. They also demand the following documents:

  • The organization's EIN
  • Articles of incorporation
  • Organizing documents
  • The organization's bylaws
  • A description of your activities
  • Financial information

You will need to submit several documents in addition to the 28-page long-form, which may total up to of 100 pages. The IRS will evaluate your company's structure, dedication to performing activities according to the mission, and interest in conducting 501(c)(3) activities with this document.

Before you can accept donations, most states will demand that you get a Charitable Solicitations Registration. In most cases, a corporate tax exemption is also necessary. California and tax are two exceptions where you must follow specific regulations in order to receive charity purposes.

If you have not previously done research, the application procedure might take anywhere from three to twelve months. If you can't come up with adequate answers to your planning for this organization, the IRS might reject your request. It is insufficient to want to do good and harbor an idea if you are unable to put together and administer your budget.

Associating with a 501(c)(3) certified organization is another option for accelerating the adoption cycle. The most effective method of accomplishing this is to identify a sponsor with a comparable aim as yours.

You must submit an annual 990 form to the IRS after obtaining the 501(c)(3) status. To demonstrate that they have been complying with IRS requirements since receiving their 501(c)(3) status, nonprofit organizations must file this form on a yearly basis. It must be submitted by the fifteenth day of the fifth month in any year. If you don't submit it, your tax exemption may be revoked.

The IRS Form 990 is a tax document that businesses must fill out annually. It contains many questions regarding your company, including the following:

  • EIN, also referred to as a Taxpayer Identification Number (TIN)
  • Tax year
  • Legal name and mailing address
  • Any other names used by the organization
  • Name and address of at least one principal officer
  • Website address
  • Confirmation that the organization's annual gross receipts must be $50,000 or less

The easiest method to preserve your 501(c)(3) status is to run a tight ship and make sure you know everything that is going on all the time. Keeping financial records is critical, but you should also maintain minutes for every meeting and request monthly reports from the board members and employees regarding what is been happening. Keep track of every grant you applied for, whether you were accepted, and copies of receipts for donations. Finally, stay up to date on nonprofit rules since they change frequently and might catch you off guard.

If your organization's gross receipts are less than or equal to $50,000, you can file Form 990-N electronically. This is known as the 990 Postcard, and it only consists of eight questions. It's much easier and quicker to fill out than a paper form.

If your gross receipts are less than $200,000 and your assets total less than $500,000, you may use Form 990 EZ. This is a brief version of Form 990 that is four pages long but is more detailed than 990-N.

Keep in mind that your organization's finances are public and will be examined closely. That implies you can not be caught unprepared. For example, a License to Fundraise may appear to be a simple formality however, this is a document that permits you to raise money within a certain jurisdiction. It is possible to fundraise without having one, but it is not recommended due to the potential for serious IRS complications.

The Role of Lobbying in Politics

The IRS's 557 form discourages 501(c)(3) organizations from lobbying the government, but it does not forbid them. Nonprofits may continue to be tax-exempt if they devote only a tiny amount of their budget to lobbying. Nonprofits are also banned from engaging in political campaigns, whether they back or oppose a candidate.

The IRS decides if an activity can be called substantial lobbying by evaluating features such as how much of the nonprofit's time and money is going towards lobbying in comparison to what was spent on the company'smission. They might also necessitate the nonprofit to fill out Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization to Make Expenditures to Influence Legislation. This form helps calculate how much money the company spends on its mission versus how much is being put into lobbying efforts.

The 501(c)(3) restriction only applies to a certain set of organizations, whereas other types of 501(c) do not have that limitation. For example, a teachers' retirement fund association that is incorporated under 501(c)(11) may engage in an electoral campaign if the candidate is promoting teacher rights, or a veteran's organization that opposes a congressional representative who wants to propose legislation that benefits this group.


Pay close attention to fundraising since it is the organization's lifeblood. That is the process of requesting money from contributors, whether they are private, corporate, or charity groups.

There are several different fundraising techniques to choose from. Using more than one will result in better outcomes. The most basic approach is to phone individuals or walk up to them on the street and inform them about your cause. While this frequently works, most people would find it intrusive, which may damage your reputation.

You may also collect funds through mail, social media, and email. Crowdfunding sites are also useful for raising money for a specific cause. If your firm's goal is to restore a home that was destroyed by a natural calamity, you could create a campaign to get donations for that.

When emailing for a donation, aim to be succinct and direct. To make it more readable, split the text into subject lines. Try to pique the reader's interest before requesting the donation by beginning your message with a phrase like "As you're probably aware" or "Please find enclosed." Every day, people get hundreds of emails, so an email that asks for money right away will most likely be reported as spam. The best way to succeed is to produce compelling content that catches their attention while also noting at the bottom that they may make a difference.

Storytelling is an important aspect of fundraising. Asking for assistance to aid children in need may seem abstract, but selecting a specific kid with a name and telling their story is far more effective. Be careful not to take advantage of the circumstances of people, even if your goal is to help them, but make sure that the potential contributor feels for that real person in need and who they may assist with their donation.

The donors should feel like you're talking about them. Make good use of the second person: you, your, yours. They will feel like an essential element of the narrative. From the outset, inform them of the impact they may make. Don't force them to give more than they can afford. Even if their initial gift is modest, it's only the beginning of a long series of donations.

Look at your contributors not only as contributors, but also as partners. People contribute money to charity because they want to see things improve, and you are the vehicle through which that happens. You may build a relationship with your donors by considering this idea.

Keep an eye on the donor's retention rate. If they are giving less or nothing at all, a pleasurable phone contact from the organization's owner is essential. Inquire about their involvement with your cause, as well as anything you can do for them. Make the conversation personal and let them know how much their contribution matters to you.

You may also improve the visibility of your campaign using social media. A peer-to-peer campaign is a strategy in which numerous people will establish their own fundraising sites for your cause. They then inform their connections about the initiative, spreading the news without requiring you to pay extra.

Social media allows you to reach out to a large audience of individuals who might be interested in assisting your cause. In addition, investing money into a Facebook ad will result in more views for a post if you have a Donate Now button on your Facebook page.

Non-profits are eligible for government grants that aren't open to commercial enterprises. These awards might be administered by the local, state, or federal government. is a website that provides information on all of the possibilities, allowing you to choose the one that best meets your requirements.

Before starting the fundraising:

  1. Define your financial limit by how far you want to go.
  2. Make sure you do your homework and find out the precise quantity you'll need and how it will be used.
  3. When you're tempted to create a round number on top of your head, resist it.

If you're lazy now, donors who gave money to your cause may not be happy with how you spent their money, which could lead to legal issues.

A core number is the precise sum of money required to provide a unit of service, which is an indication of service volume over time. For example, a school kit might be a set of material that a student needs to complete a school term.

Create a spreadsheet with the total costs you incurred in a year, divided by the unit of service you provided or intend to provide. Having that number set will make life simpler; knowing that $10 is enough to buy a school kit for a child tells you that a $50 gift contributes to the education of five children.

It's not only for projects: you should be aware of how each cent you receive will be utilized to help your company grow. This includes your facilities, marketing materials, human resources, and equipment. If your donors know where their money will go, they'll be more inclined to assist you.

With the core number in mind, you may generate a gift range chart to assist you visualize your campaign objectives. Knowing how much to ask from each donor, where to concentrate your efforts, and whether or on track

With those figures in mind, it's time to figure out who your contributors should be. People who are sympathetic and willing to assist you based on your objective. Most of your contributors will most likely be women if you're promoting gender equality, but this doesn't imply that men won't help.

Try to work with local firms that operate in your community, such as small enterprises, restaurants, and healthcare clinics. Having your nonprofit's name connected to a company that strangers know and trust might be a golden opportunity for you.

Whatever method you choose, make a point of sending a thank-you note to your contributors once they give. Maintain their contact information on your database and send them a birthday card or a holiday greeting card every year. That will keep you in their thoughts, ensuring that the next time they consider donating money to charity, your organization will be the first one that comes to mind.

Standard Operating Procedures

Nonprofits may utilize the standard operating procedure (SOP) to describe what is expected. You may use SOPs to follow all required regulations, such as your bylaws, when using them. If two chapters of the same non-profit in different continents use the same SOP, they will provide comparable services.

Nonprofits need to stick to SOPs for two reasons: first, to ensure that employees follow them; and second, because it is by following them that members of the staff ensure that they are adhering to the budget. For example, if an organization's SOP specifies that its members must do a task in a particular way and at a specific speed, it makes it simpler to discover the fundamental number of that task. It also improves the efficiency of employees by raising their quality of effort.

The first objective of your organization's SOP may be the overall mission, but it might also be about minor activities that one or two workers must complete. Then come the phases to reach that aim and any roadblocks you anticipate encountering on the way. After identifying these problems, determine how each participant will accomplish things such as mechanisms and processes.

Following an SOP is assurance that you won't have to improvise in the case of an emergency. Assume one of your employees calls in sick the day before a major presentation. In that scenario, you will not have to worry about trying to find a solution since you already have a code that instructs how to redistribute staff or call a volunteer who can help on that day. You also have everything written down when you call donors if they stop giving.

This process is beneficial not only for boosting productivity and optimizing time, but it also aids in the preservation of accountability throughout your company. When we look at filing audit reports, this will be critical.

Optimizing Your Google My Business Profile

Raise Awareness and Support

There's no sense in establishing a strong organization with a good mission and an outstanding team if nobody knows about you. Working together with a community to achieve outcomes is part of the concept of nonprofit. As a result, you must raise awareness among that community as well as people outside of it because most of your income will come from donations.

Make your organization a brand. You'll need a catchy name, a logo, and a purpose statement to succeed. People should be able to relate your brand to the work you do and trust you.

You'll need a website that will function as your company's headquarters, with a web address that people will see first when they search for your organization's name on Google.

As your online presence, the page should be kept simple and professional.

A website is a journey. People will want to return again if the experience was pleasant. A negative encounter will have the opposite result. Unless you are an experienced web designer, do not attempt to construct the page from scratch yourself. Having assistance from an expert may make a big difference. You might also try out a membership website builder that provides straightforward tools for users to drag and drop their content.

A website's primary aim is to answer any queries a user might have about your charity. As a result, it must be both attractive and simple to navigate and load quickly. This will entice the person to learn more about your cause and decide whether or not they want to participate.

The most important thing to remember for your homepage is that it should be a pitch. Include an impactful picture, your logo, and a phrase that accurately reflects how important your work is. Some websites include donation buttons at their homepage but never put them before the mission statement - this will make you look like you're begging for money.

You should have an About Us section on your website where you can describe how the company was formed and show photographs and brief bios of its members. These short biographies should be interesting and quick to read and include information such as the member's hobbies and pets.

Visitors will want to know about your organization's past accomplishments. If you can demonstrate your previous success, they will want to engage with you. If you're just getting started, include a statement of your future objectives on the site and provide practical information on how you intend to achieve them. Include photos of the organizations' buildings and individuals for whom you want to help, but don't be melodramatic by, for example, including images of malnourished children in order to get more hits.

When you tell the tale of your nonprofit, make the person reading it feel like they're a part of the plot. Create a narrative in which donors play an important role and make them feel how crucial their contribution is to the organization's success. Knowing that they may help individuals' lives improve will pique their interest and persuade them to get involved and give.

If you have a blog with regular posts about relevant issues, you can bring in people from many different backgrounds. These individuals can then be converted into donors and volunteers for your nonprofit organization. For example, if you have a nonprofit that helps amputees, you could create a blog where you postregular news stories about this issue. You could also include detailed information about prosthetics and inspirational stories about the people your organization assists.

Donating should be simple and quick, with no paperwork required. The ideal method of accomplishing it is to include a donation button on each page of your website that solicits donations from visitors by simply filling out a form with their bank information. Every page of your website should have the donate button, so that people may click on it while they're reading your material.

The visitor should be offered the option of making single contributions that will be automatically charged to their credit card every month. Set up a mechanism so that the donor is reminded at least a few days before his or her account is debited automatically.

The goal of a fundraising campaign is to raise money for a good cause. The unique form should allow people to know what they are supporting when they contribute. The form must be simple to complete, with only the most essential information requested. It should also provide details about each donation level, as well as the various perks available at each amount.

Donors will want to know how their contributions are going to be spent. When requesting donations, make sure you're clear about how they'll be utilized. Some organizations have milestones they must meet in order for an activity to take place. If your nonprofit provides clean water to a village, for example, you might list how much money is required to drill a well. You may also inform the public about how those donations are benefitting the community using your blog. Keep in mind that before asking people for money, it's vital to assure them on the importance of what you're doing.

If you want to provide your visitors with a different choice than giving money, include a page with the name More Ways to Give on your website. You can get donations of clothing, books, toys, and food together with volunteers who will work online or in-person and offer all sorts of assistance that does not require them to disclose their credit card information.

Last but not least, the visitors must complete a simple Join Us form to connect with the organization. This should be online—no print materials are required—and those who fill it out should be given extra perks, such as newsletters and access to the Members Only part of the website. They should have access to a calendar showing all upcoming events, as well as how to join them.

Volunteering is becoming more popular. You have a global pool of volunteers if you have a task that a volunteer can do from his or her home computer. To acquire work experience and to assist people in areas they've never visited, people apply for volunteering opportunities. Hiring individuals with diverse backgrounds and cultural experiences can help you use this diversity to your advantage.

People will visit your website from a variety of devices. As a result, your web designer should be able to develop versions that are compatible with mobile devices, such as smartphones and tablets. According to studies, 60% of visitors come from mobile devices, which is a demographic that can make a significant impact on donations.

It's never a bad idea to make your material accessible to those with disabilities. A keyboard-friendly website should also be mouse-free, and it should work without the aid of a mouse. Other features include:

  • Closed captioning in videos for people with hearing impairments.
  • Links with detailed descriptions.
  • Alternative text for those who are blind and cannot see images.
  • Choosing appropriate colors for your text and background can help it be more readable—no blue fonts on purple backgrounds, for example—and the text should be easily resizable without distorting it.

Other Ways of Gathering Donors

Creating local awareness can be as simple as sending out a press release to a local newspaper, holding office parties, and giving out brochures and other promotional items. Brochures may seem outdated in the age of digital media, but distributing printed material will increase public knowledge of your business.

A press release is a document that is submitted to the media in order to have them write about a certain issue. Every day, newsrooms receive hundreds of press releases, both printed and digital, and must choose which ones appear appealing.

There's no guarantee that a news outlet will cover your story just because you've sent them a press release. However, you should send one to all relevant outlets anyways. Just be careful not to mix up the name of the reporter you're contacting. You can find a template for a press release at the end of this book.

If you're having a social gathering, give the announcement about a week before. You may hold events like as a luncheon, picnic, or even an afternoon of games to break the ice. If your organization specializes on youth issues, request that they perform presentations for visitors. A charity that works with children's education may ask them to read a poem they composed for the guests.

These kinds of parties are essential to enhancing the connections with contributors. They also assist in recruiting new supporters that have not previously been aware of your cause. This works particularly well if you're giving a lecture or a workshop because people will come to hear what you have to say and will go home discussing your mission.

There are professional public speakers for hire, but you may always take the stage and express your cause. You can also locate individuals who will perform that task eventually so they may promote their own goods to the audience.

Rather than repeating the same information that can be found in a brochure, discuss a historical or scientific topic that relates to your organization, even if slightly. That's the same idea as content marketing, which entails producing non-promotional material to enhance your reputation as an expert in a discipline. You may offer knowledge for donations by doing this. Also, don't forget to provide a certificate of attendance at the conclusion of the speech.

You may discover that your staff has personal interests that might be turned into fascinating lectures if you talk to them. Perhaps your secretary has a collection of vintage postcards, or the finance director is an expert on James Bond films. Even something that isn't directly related to what you're doing may be a means of attracting new individuals. This is a powerful instrument whether you're converting it into lectures or blog entries.

It's critical to have someone photograph and record the material for future social media postings at any parties you're hosting. Before posting these on social media, ask individuals if you can use their pictures. Make these posts more amusing and instructive with creative descriptions so that people who weren't able to attend may feel invited to the next one.

If you don't have the money to throw a reception, you can get people involved in community service. It's excellent for promoting the cause, doing good, and getting folks invested in a fun atmosphere. A charity working on behalf of elderly people's well-being may enlist young people to go to retirement homes and give presentations to the residents there. Always make sure that someone is recording these events so they may be used as marketing material.

The Importance of Social Media

Social media is an excellent way to interact with others. A well-executed social media campaign may help you connect with the appropriate individuals at a low cost. It's also a fantastic method to get people to talk about your nonprofit's cause to their own followers on a regular basis.

People's attention span has decreased in recent years, owing to the availability of information via any device. Because of that, it's tough to communicate a message before something else captures your audience's attention. As a result, having an internet presence on many platforms is the best solution.

To begin, determine what platform is most suitable for your needs. For their ease of use and number of members, Facebook, LinkedIn, and Twitter are the three primary ones. They're also easy to recognize even if you don't have an account with them.

Through your personal account, you may set up a Facebook page for your organization. The name of your page and the type of nonprofit are both selected. As the profile picture for your Facebook page, use the logo of your organization. A picture depicting people whose lives you will impact is an excellent choice as the cover photo; it should be something attractive that reflects on your efforts, such as a photo of those you hope to help.

The first step is to get followers. The first stage is to ask your Facebook friends to like your page, which has a specific button for that. Keeping posting on a regular basis is critical or else people will forget you. Buffer and Hootsuite allow you to schedule your postings so they'll be sent automatically without you having to be online.

While your Facebook profile may be used to discuss almost anything, LinkedIn is a social networking site exclusively for businesses. As a result, your postings should reflect that. Creating a LinkedIn page is simple. They'll want information about the business type and size as well as contact information. A tagline and a link to your website should be included in your header area.

You may add your phone number and complete address, as well as relevant hashtags and languages used in the company, to your page. Some of these fields are optional, and you can publish your page without filling them in. Having a completely filled page will assist you get more views, so take the time to fill it out completely.

The appeal of Twitter is that it provides a voice to individuals and organizations. Breaking news appears there first, most important concerns of the day are highlighted, and powerful people such as celebrities, influencers, and politicians have a direct connection with their followers.

Having your nonprofit on Twitter will provide you a direct link to your supporters, employees, and beneficiaries, as well as with other organizations. Many people use Twitter, and you may develop long-term relationships that will have an impact on your work. However, be cautious about what you tweet: careless tweets have ruined people's entire careers. It's safer not to tweet if you're unsure whether your post would upset the proper individuals.

Software Systems

The rhythm of your job is determined by the software that you utilize, so do your homework first. It takes a lot of work to transition from one program to another, not just because of the data but also because it's necessary to educate your staff about the new system.

Software can automate tasks that don't require human interaction. For example, you may use them to manage your membership database, accept new members, receive payments, and collect donations.

Having many softwares installed on your computer will give you more freedom to switch to a different one at a later date. Have separate training sessions for each software, but keep them separated. It becomes more difficult to exchange data across systems if they aren't linked.

Software packages on the market for organizations with restricted resources are often free and provide limited usage. This can be a good place to start, though if your organization expands, you'll most likely have to upgrade your plans. Furthermore, utilizing numerous alternatives implies that you must keep track of the price of each one.

The most used software are:

  • Email providers
  • Gmail, Outlook, ProtonMail, etc.
  • Donation Providers
  • DonorPerfect, Qgiv, etc.
  • Microsoft Word Online
  • Microsoft Excel Online
  • Eventbrite (event organizer)
  • QuickBooks (basic accounting)
  • PayPal (payment collector)
  • WordPress (website management)

This list covers the essentials of a non-profit organization. If you want to go beyond the basics, investigate membership management software. It may include a number of features that bring all of your demands together in the same system.

The long-term cost of using a membership management system is lower. You may construct a solution that is geared to the demands of a charity and something the list above does not provide.

The software's user-friendliness and speed of transition are advantages that can't be overlooked. However, you may have difficulties integrating your membership management system with new applications. For example, if you discover a new program that aids in the handling of a certain aspect of your money, it might be difficult to combine it with the membership management software.

Your nonprofit's expenses may rise or fall as a result of your membership. Familiarize yourself with the software's pricing structure so you don't have any surprises. Some companies charge fees for setting up the system and providing assistance for training, for example. Include them in your monthly and annual budgets.

An effective online system should be simple to access and navigate. A complicated procedure may destroy your company. On the other hand, a decent system will help your employees operate more smoothly and connect you with the greatest contributors and volunteers. Both software and membership management systems have advantages and disadvantages; therefore, double-check them before making a decision.

Managing Your Finances

The 501(c)(3) status is a delicate thing, and you must exercise caution when using it. The IRS maintains a close watch on the restricted gifts and whether you have misused the money provided by your benefactor.

Every program has unique requirements. You should be concerned with how much they cost, the outcomes they achieved, the difficulty of generating and implementing the plan, and what can be learned and improved in future versions. Consider how likely it is that contributors will continue to work together and what measures you could take to make it more likely. When you close a month, sometimes the most cherished program must be eliminated because

When it comes to presenting your board of members' monthly results, make a presentation with dashboards that include visuals and pictures. Bar and pizza graphs, images, and organization charts will show the key information and make it easier for the board to comprehend. You may have board members who are unskilled in finance, so providing them with easy-to-understand materials like this can assist them understand.

Make use of the human element. Make a basic tale to explain the data. Let them know how many people were assisted, how many new contributors you acquired, and the services that were established. You should strive for growth while also bettering yourself. It's important to improve both the quantity and quality of service provided.

It's a good idea to start a reserve fund while you should spend the majority of your money on programs. Establish a reserve fund with a set percentage of contributions that may be put there. Don't touch it unless your organization is in financial distress, as estimated percentages

A reserve might be helpful in future endeavors by providing a source of funding for current efforts. For example, if you need $1,000 for a project but receive double that amount, you may set aside a portion of the money and spend it on the next project. Whether or not the additional cash makes the current project even better, why not use it to help fund your organization's next initiative—always being honest with your collaborators?

The cash flow forecast is a tool that allows you to project your financial condition in the future. This is a spreadsheet where you can see your anticipated payments, debits, and future costs. As a result, you will be able to understand your financial position at any moment and how much should be kept in the reserve funds at all times.

The Essence of Financial Services

It's critical to maintain a good accounting system and keep your fundamental records up to date on a regular basis. You should also do monthly reconciliation at least once a month, comparing the balance in your accounts records with a bank statement showing the amount of cash in your account.

The financial statements for a non-profit should include a statement of cash flow, which is exactly what a non-profit should have. This document contains the amount of cash and equivalents that enter and depart the business each month, as well as any investments made with money used to acquire long-term assets.

If it all seems too difficult, start by creating a file or a note system that is always updated. When you need to locate an essential document, this will come in handy. In this system, you should track every aspect of your nonprofit's finances, from the use of funds to the authorization of purchases and the act of paying your staff. If someone has to go across the street and buy a pencil for you, that should be recorded.

The foundation of any organization is its financial management. Programs can't take place, staff may not be paid, and the aim couldn't be accomplished without it. It's tempting to believe that in a small business, one person should handle the books and records single-handedly. But you should make it a practice all workers, including volunteers, to participate in this process.

Your organization will be required to submit an annual statutory statement, which must encompass your financial activity throughout the year. The finance team should begin preparing these months ahead by creating and submitting the paperwork in the proper system. It's also a good idea to include a narrative while describing your annual operations to an IRS representative. It will provide them an impression of your nonprofit's objective and how those funds are being utilized to achieve it.

It's also important to preserve both hard and digital copies in case there is a problem. When you make a donation, have the person fill out a form with their contact information, home address, and social security number.

Form 990

People trust foundations. They perceive them as groups that are committed to doing good and helping individuals save money by not paying taxes. Finding out that a charity has misused its public trust could have a detrimental impact on not only the individuals involved, but also on the nonprofit sector as a whole.

The people and corporations who donate to your cause only expect--apart from the tax exemption--that you fulfill that cause. Otherwise, they will stop donating. As an example, you can't use money raised for clothes to fix your computer unless that computer plays a role in fulfilling the mission. Software replaces human work by managing a membership database, registering new members, receiving payments and collecting donations quickly and dependably; things we cannot do as well ourselves.

The IRS is relentless in its pursuit of tax cheats. If you don't disclose your financial information, the IRS may notice you and begin an audit. Your tax exemption status is based on your level of transparency and responsibility. You are responsible for providing a high degree of financial management, and because these funds are open to public view, watchdog organizations will be interested in investigating them to uncover any irregularities.

Tax-exempt organizations are required to file Form 990, which provides an overview of their operations and governance as well as other financial data. This form must be submitted by May 15 of the tax year calendar or on the fifteenth day of the fifth month after the fiscal year's end. There is a $20 penalty for each late filing.

If you fail to submit your 990 forms for three years in a row, you risk losing your tax-exempt status. If your form does not meet IRS standards, it may be resubmitted. It's more convenient to get things right the first time. There is filing software that can keep track of your 990 information and assist you with preparing your taxes.

Internal and audited financial statements must first be filled out in order to complete Form 990. The internal statement is produced by the organization itself, with the aid of a bookkeeper, and is meant to give an insight into the industry. It also helps the audited financial statement prepare.

The financial audit statement is audited by a certified public accountant (CPA), who will verify the data supplied by visiting the nonprofit's website, speaking with members of the staff and the community, meeting with contributors, and performing other analytical procedures. Then, whether the information in the report is real will be determined by the CPA.

The board members handle both reports and the data included on File 990. If you're unsure about how to proceed with these documents, don't take action on your own. A mistake might be costly for your business. Hiring an accountant or an auditor is the greatest investment you can make in this case.

The IRS has a filing system designed particularly for Form 990. This e-filer increases the likelihood of submitting your form correctly. In addition, you will be notified when it's time to submit your form using this program. For organizations with receipts under $100,000, it is free to use and includes state forms for Hawaii, Michigan, and New York.

The e-filer first connects to the IRS database using your organization's EIN. This information is kept secure with a bank-level security system. The next step is for the e-filer to ask you a series of questions that they will use to complete your tax form. By chapter, you will see the specifics of your nonprofit's tax filings, as well as separate visual representations of each chapter.

Failing to file the 990 Form on time results in a $20-per-day penalty. In addition, if you do not submit this form for three years in a row, your tax-exempt status will be revoked at the end of the third year. If states don't receive the form on time, they can prevent nonprofits from receiving funding and major donations.

The maximum penalty for an IRS noncompliance violation can be up to $10,000 or 5% of the company's total gross sales, whichever is lower. For instance, if your organization has receipts in excess of $1 million, you may be fined $100 each day and face a fine up to $50,000.

If you do not file your tax return on time, you may extend the deadline by submitting Form 8868. An exempt organization can apply for an automatic three-month extension to submit its tax return. If they believe there isn't enough time, they can also ask for a three-month extension on that extension.

Nonprofits are subjected to tight monitoring by the IRS. It's critical that all of a nonprofit's funds be traceable, for example. As a result, the IRS prevents the tax-exemption process from being misused.

Because all of the corporation's profits are intended to be returned and used to achieve its goal, accounting should be thorough and reveal where each penny is going. A mistake—whether a genuine slip or an intentional fraud—will be quickly identified, and you'll have to justify yourself to the IRS. It aids if you have a qualified accountant at your side in this case.

Keeping your bookkeeping and accounting in good order is critical while running a nonprofit. Some organizations have a bookkeeper or accountant on staff, but outsourcing this work may be more cost-effective. Accounting firms will hire specialists with the needed training and experience to complete this task. Hire one that specializes in working with nonprofits if possible; they may provide specialised services.

Basic accounting may be done with a spreadsheet. Begin by comparing your budget to your monthly income and costs. Budgets, unlike financial statements, are documents that plan your financial requirements for the future. After that, compute the difference it will make at the end of the year. Those figures will aid you in finding out what sort of accountant you require.

The tax code for non-profits is extremely complicated, making tax reporting much more difficult than it is for other organizations. If a volunteer offers to do your accounting, be careful. Inquire about their educational and professional backgrounds. While their goals might be good, if they aren't prepared to do the work, you may find yourself in a lot of trouble. Would you rather wait for a mechanic or ask the first person who drives by to fix your engine if your car broke down on the road?

When briefing your board members about the numerous ways your tax return might go wrong, be sure to remind them of it. They should be aware of how important financial transparency is. Otherwise, they risk putting the organization in jeopardy by accepting a lavish gift or using its resources to generate unaccountable revenue.

You should be aware of the various programs established by organizations and the government as a nonprofit that survives on money. Many websites on the internet provide an up-to-date list of new grants, with their qualifications and advantages.

To discover about new possibilities, you should be up to date on local and national news. Of course, politics is important, but you may also discover useful information from unexpected places. A well-known actor who was in a vehicle accident establishes a fund to raise awareness of the dangers of drinking and driving is an example.

Important Metrics

It's also beneficial to keep track of other factors, such as restricted versus unrestricted net assets. Restricted net assets are those donations intended for a certain cause. For instance, if you receive grant money to buy medicine, you can't spend it on your business office rent. Unrestricted assets have no strings attached; you get that cash and do with it as you wish for your nonprofit.

The worst mistake a nonprofit can make is to misuse money from a donation, which is something only restricted gifts allow. It's not easy if the donor isn't aware of the differentiating characteristics between these two sorts of donations. A simple remedy would be to include a clarification while requesting a gift request that their money may be utilized for many things. If you need to spend restricted funds on other purposes, contact the donor and get permission to reappropriate their gift.

Understand the requirements of the type of grant you're applying for. Then, your application should be designed to meet those needs. Don't submit for a grant you don't need because you believe you have a high probability of receiving it. This may result in hefty fines down the road.

All belongings in your organization, whether it's an office, a program, or a stapler, must be assigned a lifespan to allow you to compute depreciation. This is the process of determining how long an object will function until it becomes obsolete. Some things depreciate rapidly; others do not. You should make a timetable so you know when you can utilize that item and when you'll need to replace it with something new.

You're always at risk of running out of cash if your organization doesn't have a consistent source of income. A financial position statement will provide a sense of the organization's finances. Make a list of your assets in terms of their liquidity and how quickly you can convert them into money, from shortest to longest duration. In addition, make a list of your liabilities in chronological order based on their length of obligation.

Statement of Activities

A list of accomplishments is the equivalent of an income statement for a nonprofit. A nonprofit will use the statement of activities to quantify its revenue and expenditures in a specific period, as opposed to the income statement being used by businesses. You might make a basic spreadsheet with two rows or a more comprehensive one. The following are examples of items that should be included in this spreadsheet:

  • Member dues
  • Contributions
  • Fundraising events
  • Program fees
  • Gain on sale of investments
  • Investment income
  • Grants

The activities section of your resume should include all program expenditures, including job expenses. This will enable you to see how much each program cost, whether the money was well spent, and if you can continue it. For instance, a support services expense would show how effectively the organization is functioning and any changes that may be necessary.

Donations of equipment, food, clothing, and everything else that isn't cash must be recorded in the revenue section of your statement of activity. If you paid to install a donated printer as a result of these donations, for example, include it in your cost column.

Some donations may follow generally accepted accounting standards (GAAP). For example, if a client who is an artist donates a painting for you to hang in your office, this is considered a gift and isn't converted into cash.

Statement of Functional Expenses

This is a list where you may categorize your nonprofit's expenditures, such as administrative activities, fundraising, or executing programs. Rent, transportation, and compensation are examples of types of expenses.

The folks who evaluate your paperwork should understand how your organization balances its cash flow and expenditures, as well as whether it can continue operating. This equilibrium implies being able to operate a successful business while also maintaining the quality of your initiatives. If your finances are out of line, the IRS may take notice.

Statement of Cash Flow

This document is to inform you of the change in your organization's thought process. This shift will take place over a specific duration, be it one year, a month or any other set time frame. The three sections outlined are:

Operating activities: funds raised from grants and donations or by offering a service.

Investing activities: expenses from purchasing a vehicle or piece of equipment or from long-term investing.

Financing activities: money earned from issuing or redeeming bonds.

Annual Statutory Report

The importance of Form 990, as well as the way it should be utilized to produce an annual report for the IRS, has already been discussed. We will, however, go through the writing procedure a little more in depth.

Annual reports must be completed on a regular basis because leaving it until the last minute may be catastrophic. Even if you have all of your files ready to be pulled and evaluated, going through them all and recording the information you need will take a tremendous amount of effort.

Adding data to your report as you acquire it is a much more practical technique. This must be done on a daily basis, and it resembles constructing a house brick by brick. When it is time to submit your report, you will be amazed by how big the house has gotten.

The following data about your organization is needed:

  • Employer Identification Number (EIN)
  • Legal Name
  • Tax Year
  • Website
  • Gross Receipts

Keep things simple and creative while reporting. Rather than inundating the reader with statistics, offer an engaging narrative. This story should demonstrate to the auditor how your organization's actions are benefiting your community. This will assist them in determining whether you fulfill their criteria, as well as show you how to keep your 501(c)(3) status.

When you submit a Form 990, it becomes public information. That means you don't have to save records from previous years' forms: they can be accessed. The IRS still advises that you maintain documentation for at least three to seven years after the filing date of your return, even if it's public information. You may keep track of your records using a filing program. Simply input your EIN number and the software will pull data from the IRS database for you.

You should always be able to provide copies of your three most recently filed annual inform returns, as well as a copy of your application for tax exemption. This includes schedules, attachments, and any relevant supporting documentation. Some nonprofits prefer to save time by having these documents available via a link on their website.


Nonprofits are subject to more stringent audit standards as a result of their tax-exempt status. Furthermore, because their finances are public and they must account for the purpose of their organization, they must maintain a higher degree of transparency.

The IRS may demand that your organization hire an external firm to perform a thorough examination of your books. When an independent audit business examines your documentation to verify your financial statements, transactions, accounting procedures, and internal controls, this is known as an independent audit.

Every procedure must be set up and accounted for. Having a good filing system will save you time and stress. Every purchase authorization and specific papers should be kept after every company purchase of goods or services. This should be a company policy, with everyone on the board and staff assisting in its implementation.

Managing Your Money

While all of the above topics deserve careful consideration, the amount it takes to advertise each program is perhaps one of the most important factors for determining how much money you need. You should also have an awareness of how much it costs to raise funds that flow into your organizations. Not just in terms of donations and programs, but also in terms of rent, employee pay, and recurring expenses. Having these figures at heart will help prevent you from being caught off guard by a lack of finances.

While presenting your budget, use financial dashboards. Some of them may not have the appropriate business expertise, yet it's critical that they have a clear understanding of the company's situation. These dashboards should not be confined to money-related concerns. Include information about those whom your organization assisted, such as their names and how their lives were affected; the level of volunteer interest; and how these figures compared to previous years.

It's not always about finding the cheapest alternatives when it comes to money management. You may need to spend a little more in order to get something or receive a service that will last longer. For example, if you choose low-cost shelving for your office, you'll have to replace them on a regular basis. That implies taking everything out, replacing the new shelves, and putting everything back again if the shelves don't break and send your items into the ground before you do so. Of course, this is only if the shelves do not break and toss your things onto the ground before you change them

This is true for your website, as well. Everyone seems to know someone who can build your site for less than a professional designer. However, this might quickly become a nightmare, requiring you to spend more money to hire the competent individual who should have completed the job in the first place.

The quality of the services you offer your community shouldn't be compromised because of budget restrictions. Your main priority should be to provide good services, not to have the lowest denominator possible. You might have to decide whether it's more important for you help more people with less quality or focus your attention on a smaller group so that you can give them better treatment.

Maintaining a balance between these two options is challenging but essential. Your resources are minimal, so it's more prudent to address the dilemma head-on than to ignore it. However, the reality that your organization relies on donations also curtails your choices, and occasionally you'll need to make difficult decisions to achieve favorable outcomes while still remaining a tax-exempt entity.

Local Laws

Depending on the state your company is incorporated in, you may be required to submit one or more reports each year. Financial statements, corporate registrations, tax-exemption applications, and fundraising registrations are all examples of filing paperwork that they must complete. They may also want a new registration and corporate officials' signatures to renew it.

There are numerous requirements to follow, and it's a good idea to familiarize yourself with the regulations of your state's government agency. Updates on recent modifications and sample forms should be available on their official website, which should include all of this information. Most states now complete the procedure entirely online.

You'll have to fill out a form to terminate your nonprofit's registration in a state where it no longer exists. This implies you'll need to submit more paperwork as well as the required fees. If you leave your old home without following this procedure, it could jeopardize your tax-free status.

Conflicts of Interest

When one or more board members is unable to be impartial, the board's integrity may be jeopardized. Furthermore, the board should not have any personal or financial benefits from its role. If a charity creates a program to encourage sports and one of the board members owns a sports equipment business, they should be kept away from decisions regarding purchases.

The IRS has a specific requirement that nonprofit organizations have a written conflict of interest policy in their Form 990. This document must set forth the board's regulations for detecting and managing such situations. The organization's main objective is to prevent members with conflicts of interest from participating in its activities.

If someone thinks they have a conflict of interest, it's in the organization's best interests if they report themselves to the board. If done in good faith, this will benefit the company. However, if a board member decides not to disclose his or her conflict of interest to their coworkers, there is a risk of an excess benefit transaction occurring.

The excess benefit transaction occurs when a person who is disqualified obtains an economic advantage from a charity. A disqualified person is anyone who has significant influence over a tax-exempt organization, whether they use it or not. The president and board members of almost any company are considered disqualified persons, as are any individuals who were involved in the organization's inception, control its budget and revenue, or manage a major portion of the operation.

If the sports equipment store we mentioned gets a contract with the nonprofit, not because of their quality of merchandise, but due to it being owned by a board member, that particular board member can get punished for an excess benefit transaction.

According to the law, a disqualified person participating in a nonprofit entity they control cannot personally benefit from said organization. If they do, they will be subject to an excise tax of 25% of the excess benefits received. To make it right, the disqualified person must fix their wrongdoings by returning any money or property gained through their actions plus interest while also replacing anything of value that was given up because of the transaction- all under conditions where no one is left worse off than if obeying the law from start.

If the property to be restored isn't in good enough condition, the disqualified person will have to pay an extra sum equal to the difference. In addition, if the value of the thing exceeds the correction amount, the company must reimburse the person.

There are also penalties if it's shown that other management personnel were involved in the excess benefit transaction and knew about it. This includes a 10% premium above the excess benefit, up to a maximum of $20,000. If the parties can show that they were unaware they were breaking the law, this penalty is not applicable.

Excess benefit trades are not always done in bad faith. Many times, the individuals involved are unaware that they are violating the law. Perhaps the owner of the sports equipment shop didn't have profit in mind and simply suggested his business because it was trustworthy. That does not imply that what he did was correct. When he learned that the board would vote on where to buy sports items, his obligation was to withdraw from the meeting, thus preventing conflicts of interest. His absence from the meeting would make the arrangement more reputable if the board voted and picked his store.

Is Your Nonprofit Achieving Its Goals?

Every time you offer a service, be sure that it meets the needs of individuals who were previously unmet. That is what designing, putting into action, and analyzing programs is all about. A program is a collection of coordinated activities aimed at delivering a service. They must be integrated with maximum efficiency to avoid wasted time and resources if they are to be effective in achieving the company's goal.

When viewed from afar, programs may appear chaotic. You might realize additional objectives while arranging the program. If feasible, they should be added to your schedule. If your objective has been accomplished but you believe the program may continue to help people, talk about it.

Don't mix up activities with programs. They are much more tightly structured and targeted. Getting a box of books and donating them to a library is an example of an activity. Putting together a system to collect donated books, which would be sorted by themes and reading ages, then delivering them to the libraries where they best fit is an example of a program.

The Parts of a Program

The four components of a nonprofit program are inputs, processes, outputs, and outcomes. They are linked to each other and can't operate separately. We'll utilize the previous example of book donations to libraries:

The program inputs are the resources required to run the program. For example, in the case of a library, you would need paid employees to contact book contributors, space to store those books, transportation to transport them to each library, and so on.

The approach you use to provide the service is the procedure. Books being collected and separated, as well as public libraries increasing their offerings are all examples of how processes develop.

The output is the unit of service. The books are being donated here, for example.

Outcomes describe the impact of your work on those who receive it. The following are some examples of outcomes:

Short-term outcomes: allowing people to read more by giving them free books

Intermediate outcomes include: assisting students in obtaining better grades, allowing readers to discover new interests as they read more, developing readers' grammar and vocabularies, stimulating free thinking, and so on.

Long-term goals: readers can pursue new vocations as a result of what they've read, encouraging their own children to read.

All of these parts are critical, but they should all be focused on achieving the ultimate goal, which is their significance. As a result, whenever you're attempting to sell a program, emphasize the outcome rather than the process. It not only depicts a more cohesive picture of your strategy, but it also has an idealistic tone that will appeal to individuals who want to support you.

Each program should be designed to achieve a long-term goal and contribute to your company's mission. Because it isn't a good fit for you, you may have to eliminate an entire program. On the other hand, the aim itself might be transformed into a major initiative that generates other smaller ones all focused on the same concept.

A simple logic model, in which the top items are included, is a good place to start when planning your nonprofit initiative. While listing your goals, be realistic since you'll have to fulfill them. In that part of the report, for example, state how many books will be given away to how many libraries.

Strategic Planning

Nonprofits need a strategic plan as a guide to help them reach their goals. Every component of your strategy should be linked to the others. It might seem chaotic at first, but having a sense of where you're heading can be beneficial.

The description of the program should include a thorough explanation of the sort of company you're running, the sort of service you're providing, your target market, and an overview of your advertising methods. Include financial details such as how much money you expect to charge and how much money you will spend. Even though your aim isn't to make money from the program, you shouldn't have any financial setbacks either.

If you're the solitude-loving type who wants to tackle things on your own, get ready to make some major changes. You can't create a strategy or execute a strategic plan without the help of others.

You should involve the staff in the program design since they will be the ones executing it. Those who work on the street level of a nonprofit organization are more likely to understand the people being helped, since they interact with them directly. If a member of your team presents you with an idea for a new initiative, you should listen to what they have to say.

The board should also be involved in program planning since it is a duty that pertains to the company's mission. The programs can't happen without their authorization, and they can't be maintained without their assistance. When voting on whether or not to implement a program, having an uneven number of board members avoids a tied vote.

Your initiative plans should also consider the people you want to help. They should be allowed to present their own information, express their requirements, and provide suggestions on how to put that program into action. If our example libraries are unwilling to accept romantic novels, we shouldn't give them romance books. Alternatively, we'd wind up with a box of useless books.

A program is a dynamic entity that integrates everyone in the organization. They should go beyond simply the sum of their parts. You may collect book donations, but you won't have a location where people can read them. The library has actual room, but it lacks sufficient books. You can accomplish more than you could on your own when you work together.

You may work on the same program at the same time as another you're working on. The initial one might be a trial run, allowing you to put money into more ambitious concepts. Why not establish a literary award for kids to write in conjunction with our plan to encourage young people to read? Why not collaborate with a local school to make it happen?

Listen to everyone you're collaborating with. Ideas that seem fresh and original might come from unexpected places. After you've completed a draft of your program, meet with all of your workers to talk about it. You may invite representatives from your client's organizations to evaluate your ideas and provide comments.

Don't be a perfectionist. As you put the program into action, unforeseen difficulties will surface. Don't get discouraged: there is no such thing as a flawless strategy. The ideal plan is one in which everyone can contribute to the best of their ability and achieve a good result. It must be aligned with your mission and strategies and provide answers to your client's issues. If things don't go according to plan, be ready to improvise; everything should fall into place eventually.

Incorporate new and innovative concepts into your program regularly, just as for-profits do with their projects. After all, you're not in this to make a quick buck--you want to improve people's lives, so always be on the lookout for ways that you can better serve them.

Social media is a powerful marketing tool that can help you reach new audiences and build relationships with potential clients. By engaging on social media, you can learn about the needs of your target market and position yourself as a solutions provider. Additionally, many nonprofits get their start from connections made on social media – when like-minded individuals come together to support a cause.

Before you start a program, it's critical to understand who you'll be assisting in each target market. This will assist you in assessing your services and deciding where to direct your efforts, whether it be through advertising, PR, or the sale of a service.

You may also utilize social media to learn more about your rivals, discover how their programs compete with yours, their strengths and limitations, as well as their pricing. This is another situation where you can take advantage of the transparency required for nonprofits. Charity organizations are not competitive by nature; unlike other professions, they do not compete against each other.

Your Program's Identity

It might be as difficult to choose the name of your service as it was to choose the name for your organization. If you want people to remember your service over time, you should come up with something unique and memorable.

The name should not be associated with any other product or service, from other businesses, or from your own. It needs to serve the service you intend to provide presently, but if your company expands and services new regions, you should still be able to use it. Naming it after a city is a good idea since it avoid names related to natural landmarks such as mountain peaks.

Brainstorming the program's name with individuals who are working on it might generate some intriguing possibilities. Some businesses, for example, conduct online polls in order to select names for their programs. You may also utilize focus groups to hear people's thoughts regarding names on a list and ask them to express them.

A trademark is a word, phrase, symbol, design, or combination of them that identifies your product and distinguishes it from others. When you register your project's name as a trademark, you prevent other organizations from using the same name. At least in the area where you utilize them, common law trademarks already cover names and logos that are used frequently.

By registering your nonprofit trademark, you may obtain further coverage. This will provide comprehensive protection in all fifty states, which is beneficial if you intend to branch out across the country. You'll have indisputable proof of ownership, rights, and access to federal courts. Furthermore, if someone misuses your trademark without your consent, you are entitled to compensation for legal fees, as profits acquired by using your property will be returned.

It's not a simple task to keep track of trademarks, and you should do some study before jumping in. Always get expert advise. Consider continuing with the usual-law trademark identified previously, depending on your budget.

Delivering Services

Your services should flourish with your aim specified and promotional efforts in place. That implies you'll have to increase production and check on the resources you'll need to continue providing that service. Then, make a forecast of how much more business you can expect to get in the following weeks, months, and years, as well as how long you can maintain that level of productivity.

Although you should predict this growth in your marketing analysis, it can be difficult to foresee. The demand for a product or service is volatile; influenced by external factors that fades away quickly.

Your nonprofit's distribution services should always be at their peak. This is crucial in any scenario, and it can mean life or death when you're providing a vital service, such as food or medical care.

If you need to provide a service remotely or aid an area that is difficult to reach, some businesses can be done through phone calls or online. If your organization requires a lot of movement and travel over long distances, it might be worth considering purchasing a vehicle.

Some charitable automobile dealers may give a vehicle as a donation. Others won't provide you with a car for free, but will offer your nonprofit a significant price reduction. Donations can also come in the form of vehicles acquired by members of the community. They aren't always in the best condition, but they can usually be restored.

Some businesses decide to conduct a test run before proceeding with an actual program. The purpose of the pilot would be to experiment and see how your ideas function in practice for a six-month to one-year program. Every aspect of the trial should be tracked so that useful information and data may be collected for later programs.

Evaluating the Success of a Program

Defining what indicators of success will be used in your program is an important step. It isn't necessary for your strategy to remain identical to the plan you had before. It doesn't imply that your program was a failure if it strayed from its original purpose. It could mean that it grew and evolved into something more suitable for the community's needs.

Once a year, programs should be reviewed. This not only determines how successful they are in achieving their aims and objectives, but it also helps plan future development. Evaluations also assure the charity's public trust by assuring donors that their donations are being utilized effectively.

These ratings affect a lot of your judgments. Make sure to keep track of each program separately, as well as the revenue and expenditure figures for each one. Individual data from these projects may provide you a different perspective on your finances than the overall numbers of the firm might suggest.

Having your key indicators in place will allow you to keep an eye on their progress. Have they cost more or less than you predicted? Is it possible to improve this program by hiring or firing someone? Are there any signs that this project will cause long-term financial difficulties for your company? How is this initiative affecting the public's perception of your organization? If a program isn't performing as planned, the board must decide whether to correct it or eliminate it. If things are going well, consider increasing funding for it.

While it would be ideal if every nonprofit conducted a thorough examination of its activities once a year, some are too small or lack the resources and qualified personnel to do so. Even if you can't pay an accountant to accomplish it, you must somehow complete this work. There are methods for preparing an evaluation that may help.

To ensure that your plan is successful, imagine the best-case scenario in which the program would be fully functional and achieve all of its objectives. Then make a list of the characteristics of that ideal situation: how many workers does it have, how much money does it generate, how big is its social media following, and so on. Then work your way back by attempting to figure out what modifications are necessary to attain those qualities.

When doing an evaluation, always pay attention to your staff. They are the most reliable indicators of a program's problems and how they may be addressed. Figures and spreadsheets might be deceptive; instead, you can get important and genuine information from those who are out in front actually performing the labor.

You should present all available information to a program review team, which should include the program's chief executive and key officials. You might also want to include at least one of the people who helped create the original program plan so they can evaluate how it has evolved throughout the course of its implementation.

Protecting and Growing Your Nonprofit

Protecting your organization is a concept that may take on many forms. It ranges from putting up a caution sign on a damp floor to assuring the long-term viability of your organization. Managing risk for your nonprofit implies detecting and preventing future incidents that might endanger it. You can develop plans to avoid these future events and help keep your nonprofit on track if you manage risks well.

The Alliance for Nonprofit Management defines risk management as "…a discipline for dealing with the possibility that some future event will cause harm" (Layne, 2021). Risk management outlines strategies and techniques to help organizations in identifying potential risks. This allows them to take steps to avoid or mitigate any possible damage.

Here are some examples of risk management:

  • Fixing a water or gas leak before it causes an accident.
  • Checking a job applicant's background thoroughly to be sure they are as qualified as they claim to be.
  • Backing up essential data that may be accessed in the event of a computer breakdown.
  • Establishing a financial reserve that may be utilized if a company's revenue stream is cut off.
  • Preventing vehicle accidents by maintaining the business's transportation system on a regular basis.

To perform a risk evaluation, you must create a comprehensive list of all the information collected by your organization. By analyzing that data, you may identify potential future issues. Some risks will be more difficult to prevent than others, but their influence on your organization would be much greater if it happened.

Some dangers must be faced, and the best you can do is minimize them. You should calculate how nervous you would be about each risk you're willing to take. Then, create a framework for monitoring and defining the procedures that need to be taken in the time frame available to you. It might imply increasing your spending in one area, providing training to your employees, or purchasing insurance.

Emergencies can happen at any time, so you must be ready for them. The idea of an emergency is a sudden event with potentially deadly results that demand immediate action. There are three key components of nonprofit emergency management:

  • Reduce the risks of accidents by eliminating hazards. Prevent emergencies from happening by eliminating threats.
  • Devising procedures to be employed in case of an emergency.
  • Organize training drills for your staff so that they are prepared in case of an emergency.

Drills are frequently regarded as a waste of time, especially on a hectic day. They may still be the finest approach to evaluate how individuals would react in an emergency without putting them under undue pressure. Not only are security procedures put to the test, but also the building's structure and how to maneuver through it in a crisis scenario.

Many organizations have an emergency plan team made up of personnel who serve as de facto leaders to the rest of the team. From drafting evacuation routes to filling out federal security paperwork, their responsibilities range.

This shouldn't affect their normal job, but it aids in the enforcement of safety measures.

Getting Insurance Coverage

It might be difficult to locate an insurance agent or broker that you can trust. Look for an insurance firm that understands the distinctions between nonprofits and other types of enterprises. It's also preferable to find a company that specializes in your industry rather than selecting the most well-known ones.

While every organization's insurance needs vary, general liability insurance is always a good place to start. Your company will likely require specialized types of coverage depending on specific needs, such as if you own the property your business operates out of. If you're ever hosting an event at another organization's building, be sure to confirm that their policy covers you and anyone else involved with your company.

There are two types of insurance you can purchase: liability and property. Liability insurance will protect your organization from claims related to negligent conduct. This type of insurance is further divided into:

Commercial general liability insurance is one of the most important types of insurance for businesses. It can help protect your business from a variety of risks, including personal injury, bodily injury, property damage, and advertising injury.

Business auto insurance can protect your company in the event that one of your vehicles causes an accident that injures someone. This type of insurance can help cover the costs of medical bills, property damage, and legal fees. It can also provide protection for the driver and owner of the vehicle.

Directors' and officers' liability: protects the organization's embers from unlawful actions committed by their work.

Workers' compensation insurance: protects you in the event of an injury to or death of a worker.

An umbrella or excess liability policy provides additional limits on liability beyond the standard coverage limit in a homeowner, auto, or business policy. This type of policy is designed to protect policyholders from excessive loss in the event of a claim.

Property insurance includes:

  • Criminal or employee dishonesty can include theft made by employees and could also be extended to volunteer workers. It can also include fidelity bonds that will protect you from embezzlement. In order to qualify for this type of coverage, your business must have implemented measures to mitigate the risk of employee theft, such as background checks and regular audits.
  • Business owner's package policy: a single policy that covers you for general liability, property, and criminal prosecution.

What Could Go Wrong?

You'll have to keep track of every penny you spend as a nonprofit runner. You must utilize the contributors' donations for the purposes they intended. It's a never-ending burden, and there are numerous opportunities for things to go wrong.

Theft is a constant risk for any company that deals in money or products. You may be cheated at any time by your workers, board members, or even your clients. Someone could steal a book from the shelf or commit the majority of your month's budget fraudulently. That's one reason you need to keep track of everything that goes on within your firm. Take precautions even if you have complete faith in the individuals you trust most.

If you have to pay a fine to the IRS, this could be an issue. They're constantly monitoring non-profit activity, and any error might result in your tax-exempt status being revoked. As a result, maintaining up-to-date filings is also a method of risk management and following good practices like the ones we've seen throughout the book.

Fraudulent fundraising is another thing to keep an eye on: individuals who misuse your company's name to obtain money for a bogus cause. Unfortunately, the majority of people do not bother to check the information they receive in their emails and social media, and they will give their money to these scammers who will keep it. This is bad news for contributors, but also for your firm, as its reputation may be dragged through the mud.

Your organization's system must keep your data secure. Your contributors and collaborators entrust their information to you confident that you have a secure method in place. Personal records, payment methods, e-commerce details, and other such information are examples of this.

Confidentiality may be jeopardized if someone invades your computers. It won't just affect the people who own that information, but also your company, which may be held liable. Many charities use a guide to avoid cybersecurity problems, while others don't even understand what that means. Until they are the victims of a crime, most businesses take cybersecurity lightly.

When starting a new company, it's typical to buy secondhand equipment like computers since they are cheaper. Make sure you format those PCs properly, particularly if you're not sure who the previous owner was, so you don't risk having compromising material in your workplace.

The only thing worse than losing sensitive information is to inadvertently lose a database full of it. Not just because someone hacked into your computer and destroyed the data, but also because your electrical system didn't get proper maintenance and caused your computer to explode or because you accidentally dropped water on the keyboard. So, what do you plan to do now that all of your hard-earned knowledge has been lost?

The only way to maintain a secure backup of all the data you store with your charity is to do so constantly. Most businesses back up their files in the cloud so they may be accessed from anywhere in the world. It's also a good idea to save a physical copy in a USB or external driver, along with cloud storage. Keep in mind that technology changes at an exponential rate. People used to keep information on huge floppy disks, which are no longer available. A new device might emerge that would render current techniques unusable tomorrow.

Risk management may assist you in comprehending future dangers as well as future possibilities. It will allow you to make plans and anticipate issues before they occur. It's a strong tool that can assist your business in progressing forward, and it may provide an indication of your future performance.

To obtain a sense of the future, you must first comprehend where your firm is now. This includes not just current and past work but also your talents and limitations. You may then create a timeline for where you want to go based on this information.

It's also critical not to overlook just how much work you'll need to do once you've got a plan in place. It requires time and effort, so don't think you can have it all figured out right away. Every decision you make should be based on facts and evidence, and you should never try to predict the future, no matter how close it is or how promising or terrible it appears.

Doing Right by Others

Reputation is a company's public image, which is formed through consumer perceptions. You may spend years establishing a nonprofit from the ground up, be up to date with the IRS, and provide a necessary service for your neighborhood—but all of it can be undone if your reputation is sullied.

Scandals can take a variety of forms, ranging from sexual harassment to embezzlement. You may not even be aware of them, but if they occur on your staff or in your company, it could have a huge impact. Donors, both new and old, will no longer support a nonprofit with a poor reputation. Employees as well as board members will abandon the ship. So what can you do if you find yourself in this scenario?

The first thing you should do is demonstrate your dedication to the cause and show honesty and accountability. People will begin to associate your organization's name only with the scandal if you interrupt your job. Instead, try to obtain positive press by launching new and improved initiatives, noting how many individuals are being assisted as a result.

Learn what people are saying about you on the street and on the internet. Social media is frequently employed to establish or destroy a reputation. Some individuals will believe anything that appears on their smartphone's screen, believing themselves to be more powerful than leaders who deny such claims.

It isn't necessarily a lie, but it's not always the case. Whether you're having a PR blunder or complaining about poor customer service, be truthful about your actual obligations. In that scenario, it's preferable to negotiate a solution with the individuals concerned. On the other hand, if internet feedback includes swearing and insults, ignoring it is preferable.

Negative criticism might be correct and assist you in developing as a business. If someone has something useful to say, pay attention. And if their lawyer will be there, bring yours as well. It's not necessary for everything to go to court, and it's possible to reach a settlement before things become irreversible.

It's a touchy subject for a company to address allegations levied by third parties in the press. There should not be any public discussion of an issue before an adequate internal investigation is conducted. The primary channel of communication with the media, representing not one individual but the organization, should be your well-written press release.

If the cameras are unavoidable, choose a few individuals to stand in for you. That individual should have an important role in the company, such as a board member or a high-ranking employee. It's critical to project a professional and honest image, enunciate clearly, and be ready to answer questions honestly.

You should strive to project a good image and avoid blaming others, even if they are guilty. This will be seen as an example of the organization's lack of loyalty to its staff. When put on the spot with trick questions, respond that you'll reply in your press release for publication in the media.

How to Organize and Grow Your Nonprofit

A nonprofit can begin with a small group of people with a vision and expand into something much bigger over time. Money and competent staff are essential, but they aren't enough in themselves to help your organization develop as much as it could.

Learn about a comparable organization that is ahead of yours and attempt to figure out how they grew. Don't copy their methods; they won't work the same for you. Instead, use them as an inspiration to develop your own models and methods that are tailored to your organization.

Since your resources are finite and might vary significantly from one month to the next, it's critical to be efficient while using less. Find a balance between efficiency and resourcefulness, and don't spread yourself too thin.

There are simple ideas that don't cost a thing, such as have your employees include the company's logo to their social media photos. It is free, spreads the name of the firm, and creates a positive image of people who are proud of their jobs or volunteer in their communities.

It's not enough to just serve the demands of a specific group. If you're hiding in your office reading resumes, your ideal volunteer may be right next to you, but you won't notice them. So go out and find people who can make a difference for your cause at events such as churches, carnivals, volunteer fairs, and mission fairs.

Most people would rather give to a charity they already know, such as a friend or family member, in order to avoid the hassle of doing it through multiple organizations. Make good use of your influence. Your board and staff should contact their relatives and friends frequently and instruct them to do the same whenever you hire someone new. Donations may not be large, but you will add a significant number of names to your list of contributors.

Donations from businesses may be more difficult to come by than those from individuals. As a result, they will be more inclined to provide services in exchange for monies and offer free advertising space. They can also provide free forum area on their premises so that clients can contribute money to the charity. In comparison to the nonprofit's headquarters, this might be more effective at attracting visitors all day long.

You'll hear a lot of negative feedback, but that doesn't mean you shouldn't call them again in the future. Some people believe all charity organizations are frauds and that you will use the money for your own gain. However, there may be individuals who can't give you a donation right now but would do so in a few months. Always be polite with these contributors and ask them when you can call back; keep their names and the date in your calendar.

At any time, new possibilities emerge, and you must be prepared to discuss your non-profit. When someone inquire what you do for a living in an airport queue or during a dental visit, you may be in the waiting area. This is an excellent opportunity that gives you the opportunity to talk about what you do, how it's done, how much it affects people's lives, and so on with enthusiasm.

If the stranger is interested in telling his own narrative, let him speak. Instead of interrupting him, connect his narrative to yours. Offer your business card at the conclusion of the talk. This should be a standard practice for all people employed by the company. Make it natural rather than rehearsed or else you'll lose interest.

Putting together presentations in public places is a fantastic method to raise awareness of your work. Although you won't fill an amphitheater on your own, getting authorization to speak for a few minutes before a play or a concert will introduce your organization to many different people.

People don't just give to a cause they've heard about; instead, they give to one that has been repeatedly mentioned. Patience and perseverance will encourage them to act. Your contributors aren't simply individuals who write cheques; they're an important aspect of the organization. It's the motivation behind their generosity that brought them, and you must nourish it in order for them to continue donating.

The manner in which you communicate your narrative may persuade individuals to give you monthly donations. Rather of asking for a large donation to do a big project, you may persuade them that minor regular payments would aid in the long run.

Valuing Your Employees

Volunteerism requires respect as well as professionalism. These individuals will be providing their time and labor because they believe in what you're doing. They work for free since serving the mission is all they care about. You may employ someone whose skills you've previously evaluated while a volunteer when you have an open position for a paid employment.

A handbook should be given to all volunteers at the start of their service. The first thing that should be included in this handbook is a heartfelt thank you from the organization's management. They should be informed about the volunteer philosophy, which will make them feel how important their work is and the work settings they will deal with. Make them feel welcome and they'll provide you with their best efforts as a result.

At the top of the pyramid, you'll find individuals with talent. Consider what your board members could offer to the table. Perhaps they have talents that can benefit the organization. Perhaps they have a contact who will make a significant contribution to your work. Don't think of your board members as bystanders who are only there to vote and provide their image to the organization; in a nonprofit, every aspect is an active participant!

Templates and Forms

Form 1023 – Request for Recognition of Exemption under Section 501.c3

  • Access
  • Click on Forms and Instructions.
  • Make a search for 1023.
  • Follow the instructions to fill in the form.
  • Follow the same instructions to access Form 2013-EZ, which can be filed online.

Form 990 – Return of Organization Exempt from Income Tax

  • Access
  • Click on Forms and Instructions.
  • Type 990 in the search bar.
  • Select the form that fits your needs, keeping in mind that the EZ version can be filed online.
  • You can find Form 990-T for Exempt Organization Business Income Tax Return through the same method.

Articles of Incorporation Template

Articles of incorporation are used for corporations to get legal recognition as a business entity. Below is a template for such a document, which can be found on the website (2020): 

Articles of Incorporation Template

Conflict of Interest Policy Template

You will need a written code that details what constitutes a conflict of interest inside your organization. The website BoardSource (2015) offers a full-length version of the contract, which includes the disclosure questionnaire bellow:


Conflict of Interest Policy Template

Gift Acceptance Policy Template

The Council of Nonprofits offers a variety of gift acceptance agreements, which are simple documents. Here's an example:

Acceptance of Gifts Policy

Gift Acceptance Policy Template

Instructions for a Fundraising Letter

You must be convincing about the problem and how your organization is best equipped to address it in order to obtain donations or grants. As a result, make sure you include the following elements in your letter:

  1. Define the problems and solutions you want to address. A memorable name for the initiative is helpful.
  2. Make a list of your goals and explain them to the reader in order to demonstrate that you know exactly where and how you will use their gift.
  3. Tell the reader about your organization's prior efforts in that area and how those accomplishments will benefit the project at hand.
  4. Present a description of the community's problem and discuss the individuals whose lives you'll be changing.
  5. Make a list of all the things you need money for. You should be upfront about how much you require and what you will do with it. Make the reader feel as though their contribution was worth it.

Business Plan Template

This business plan template is based on a model created by Lena Eisenstein (2020) and can be found in full detail on the Board Effect website.

Name of Nonprofit:

Primary Contact:

Physical Address:

Mailing Address:

Telephone Number:

Website URL:

Email Address:

Table of Contents (include page numbers)

Executive Summary

Include information about your organization's mission and history in a tone that engages the reader and motivates them to continue reading.

Highlight the products and services you currently provide and will in the future. Illustrate the impact of your efforts, as well as how your donations aid them.

Marketing Plan

Describe your marketing research, the target audience, competitors and collaborators, and plan. Mention your demographic research as well as your competition and collaboration information. Then explain how you use advertising, promotions, budgeting, and marketing tactics to promote your business.

Operational Plan

Give an overview of your organization's daily operations. List your permissions, licenses, insurance coverage, trademarks, patents, and copyrights. Describe the duties and responsibilities of your employees in detail. Include the number of workers you have, their qualifications, pay structure if any, and whether you utilize contractors or freelancers. Explain when you'll need to hire new staff and how many people are anticipated to start working soon after this writing project is completed

Impact Plan

Describe your nonprofit's strategy for achieving its goals and vision. Tell your contributors how to measure the effects of their gifts.

Financial Plan

Include a section that explains your present financial situation, as well as what you anticipate your future financial condition to be. Add reports such as cash flow statements, balance sheets, income statements, and budgets to the mix. Include a list of your revenue streams, including partners, sponsors, contributors, grants, subscriptions, membership fees

Nonprofit Press Release Instructions 

It's best to keep your press release short and to a single page. At the top of the page, include the date.

Choose a brief title that accurately represents what you're trying to promote. Keep it concise and powerful.

In addition, add a short compliment—which will work more efficiently if you know the name of the particular reporter you're sending it to.

In three paragraphs, attempt to describe the event, including what's going on, when it occurs, and why they should make a narrative about it.

Finish with a thank you and your name.

Volunteer Application Form Template

Although volunteers are wonderful, you want to understand everything there is to know about them before allowing them into your company. Knowing a few facts about individuals beforehand can make this choice a lot easier. This template, as well as many others, may be found at

Volunteer Application Form Template

Volunteer Handbook Instructions

According to Tobi Johnson (2013), a volunteer handbook should contain the following elements:

A letter of gratitude from the organization's leader.

Info about your organization, including your mission and past services.

Philosophy of the volunteer program, where volunteers get to know about the importance of their work.

Ethics guidelines, including inside work ethic and the basics of nonprofit laws.

Working conditions, including safety and accessibility.

Customer service standards, informing on how to serve the public.

Required paperwork and reporting, with special attention to confidentiality.

Training procedures, schedule, and expectations.

Perks offered to volunteers.

Supervision and support, requirements of attendance, reasons for dismissal.

Volunteer feedback.

Volunteer protections and insurance coverage.

Resources and materials.


Inquiry Letter Instructions

You should include the following information in your letter of inquiry:

An introduction, including the name of your organization, its budget, and a description of the project.

The description should include why you are the finest candidate for the position. Describe your past and existing initiatives.

The statement of need is when you must persuade the reader that there is a pressing need and that your project can fulfill it. To create a narrative in which technical information may be included, utilize storytelling methods.

The method should be compatible with the data you've supplied so far, describing how you'll go forward to solve it.

Please list other sources of money that you plan to approach for this project.

A conclusion in which you make yourself available to answer any questions and express your gratitude for the reader's time.

Request for a Gift in Kind from a Corporation

Corporate Letter Request for Gift in Kind

How to Prepare a Grant Proposal

The following are the requirements for a successful grant request:

Cover letter, in which you briefly present your organization's mission and history.

Evaluation, in which you inform how you are going to evaluate and make sure that the investments are going to be well spent.

Needs assessment, in which you inform how you plan to make your organization achieve its ideal state.

Executive summary, in which you go into detail about your history and mission. The information should go deeper than the cover letter.

Methods and strategies: the most essential part of the proposal, where you present an over.

Sustainability plan, in which you will show that the required grant is going to fulfill the needs of the program you desire to implement, and a view of how you plan to use the grant to fulfill each need of the organization.

Budget, in which you present a spreadsheet in accordance with the information that you provided in the sustainability plan.

Annual Report


Click Charities & Nonprofits.

Click Finding Filings Forms 

Click 990-series forms and schedules.

Select the type of form that fits your needs.


Although doing something with love isn't always a guarantee that we're performing it correctly, there are many examples in which we see firms close their doors. That's because their owners knew how to perform their tasks well—bake bread, repair computers, provide dentistry services—but didn't take the time to learn about the business side of things.

After you've fallen in love with something, you must continue to advocate for it even after the initial enthusiasm subsides. Many individuals begin their crusade to start a nonprofit with a burning desire in their souls. Unfortunately, because they weren't prepared for the challenges that this type of work entails, their bright dream soon becomes a nightmare.

Some people believe that when they think of forming a charity to improve children's education, the first thing that comes to mind are children holding books in their hands. The company's goal may appear greater than life until you're buried under mountains of paperwork, laws, bylaws, rules, audits, annual reports, and other documents that seem to entrap you in bureaucracy.

There are a variety of issues that can confront you as you try to start and run a nonprofit organization. There may be several things that go wrong, whether through carelessness or inexperience, which can have long-term consequences for you. Furthermore, not everyone is qualified for the demands of such an institution.

It's not your fault that you didn't know anything about taxes until now. You may be discouraged by all of this information, but it shouldn't deter you. Being aware of how things can go wrong is a huge step toward being able to do it correctly. If you previously had no idea what a Form 990 was, how to perform a risk assessment, or the distinction between a program and an activity, reading this book will have helped prepare you for your goal of starting a nonprofit organization.

Finding a mentor is often recommended by those in many companies as the best way to go about their professional life. Mentors are difficult to come by, though. Even if you know someone who has knowledge in the area and would be willing to share it with you, finding the time and resources to learn everything they have to offer may not always be feasible.

We hope that with this book, we can assist those who lack experience in the field and are attempting to do good. We understand that some people may be scared by the procedures and consequences of crossing them. However, it wouldn't be ethical to pretend that the world of nonprofits didn't include these things.

However, the fact is that it is feasible to start and operate a nonprofit organization, acquire and maintain your 501(c)(3) status, pick a board, hire and train personnel and volunteers, and carry out regular operations as a way of serving the greater good of your community. It is possible; if you prepare yourself for the challenges while keeping both feet on the ground, you can—and should!

A tax exemption is one of the key reasons why nonprofits can continue to operate. These organizations are regulated to prevent this system from being misused. Try to see the IRS as a partner rather than an adversary. They ask you to keep them updated on your activities in order for them to provide you with this benefit.

There's no need to feel bad if you don't want to start a company as a founder. You may still contribute, volunteer, and even work as a staff or board member in an existing charity. Perhaps you'll discover which organization is better suited to your beliefs after studying this book. Who knows whether that ambition to establish your own organization will resurface at some point?

For those who have completed this book and are determined to start a non-profit, we are proud of you. The adventure has just begun; you will discover things that aren't covered in a book. It's rocky terrain, and at times you'll feel like quitting. Come back to these pages when your journey seems difficult and remember how it began.

Always be proud of what you're doing, because it might take a long time. We are constantly informed that individuals are worthless and that no one achieves anything unless they can benefit from it.

Here you are, learning how to start a business that will put blood, sweat, and tears into it but offer you little financial compensation. You're inspired by the desire to make the world a better place, and now you have everything you need to begin your trip.

Wear that pride like a gold medal, and don't let anyone take it away from you, no matter what you're doing in the future.

So, now it's time to put your best foot forward!


What form is required to acquire 501(c)(3) status?

You must file the IRS Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the IRS Code to obtain the 501(c)(3) status.

When should I file Form 1023 for 501(c)(3) status?

Form 1023 should be filed within 15 months of the formation of the organization. Filing can be extended beyond 15 months under specific circumstances. When it exceeds 27 months following the formation of the organization, retroactivity of the status is likely limited.

What are the fees in filing Form 1023 for the 501(c)(3) application?

A filing fee of $600 must be paid when Form 1023 is submitted to the IRS. Organizations that file using Form 1023-EZ pay a reduced $275 filing fee.

Are there any activities that could cause a loss of exempt status?

Some activities could put your exempt status at risk, including political campaigning and lobbying, using the organization to generate income for private individuals or shareholders, and engaging in illegal activities. Be sure to review all the rules and regulations carefully to ensure you are in compliance.

Do I need to be a corporation to get a 501(c)(3) status?

IRS clearly stated that an organization must be formed "as a trust, a corporation, or an association" to qualify for the 501(c)(3) status.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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