The Critical Steps Before Starting a Non Profit

Knowing everything necessary for the 1023 application

You are ready to start a non profit organization, but you are not sure where to begin. The non profitprocess can be very overwhelming and confusing if you are not properly prepared and do not have quality support. Fortunately there are many places you can go for help and it is typically in your best interest to take advantage of these resources as they can make the process much smoother and less stressful.

The first step in starting a non profit organization is deciding what exactly it is that you want to do. There are many types of organizations that fall under the IRS’s criteria for a non profit. Deciding exactly what area or areas you would like your organization to focus is very important. In many cases it is better to start small and work towards a larger goal. Taking on too much at one time can spread your resources thin making your organization unproductive and ultimately leading to failure.

After you have come to a conclusion as to what type of organization you would like to start or what need/problem within the community you will be addressing you are ready to draft a mission statement. Your mission statement is basically a snapshot of what your organization is and what it is trying to accomplish stated in one or two sentences. Your mission statement should grab the attention of people and make it clear what your organization does. A mission statement is very important as it will be used on a majority of the material you distribute for your organization.

The next critical step in starting your non profit would be to create a board of directors. The IRS requires all organizations to have a minimum of 3 people on the board. You must also be conscious to make sure that if there are any outside relationships they make up less than half of the board positions. It is also important to have a diverse group of people serving on your organizations board that will be able to contribute insight from multiple perspectives. Having a strong and credible board of directors typically will translate into and strong and credible organization, which is very important to the future success of your organization.

Once you have successfully navigated these hurdles you are ready to begin filing and drafting paperwork. The first thing that needs to be done is becoming incorporated in your State. This is what gets you recognized as a legal organization. When you are incorporating your organization make sure to include the 2 clauses (purpose and dissolution) which the IRS requires to be in your organizational documents. After incorporation you can obtain an employer identification number (EIN or Federal ID), as well as begin drafting bylaws, creating a budget and putting in place record-keeping and accounting systems. While having these systems in place is not required by the IRS is does give your organization the tools necessary to build a strong base and create a stronger organization moving forward.

IRS 501c3 Application

After the State has approved your incorporation paperwork and you have created all the necessary supporting documents you are ready to file the 1023 application which is what the IRS uses for organizations applying for 501c3 status. Once you have completed this application and submitted it to the IRS the hardest part begins, waiting. The IRS can take anywhere from three to six months to approve your application, but once they have you are an official 501 c 3 nonprofit corporation or tax exempt organization. After approval you should look into getting registered as a charity and filing your state tax exemption paperwork. Both of these are done on the State level, so check with your State to see exactly what you need in you specific State.

Ready to move forward in a 501(c)(3) status?

For more information regarding the 1023 application and starting a nonprofit organization, visit our Nonprofit Start-up page or Contact Us at 407-857-9002.

Wanting more? Check our our prior blog Nonprofit Does Not Mean Tax Exempt where we discuss

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