It’s neither as simple nor as difficult as people may think. But it does take hours of work to ‘start’ a nonprofit. There is a process that founders must follow in order to start a nonprofit organization.
The first thing is to determine the purpose of the organization. The purpose is typically summed up in the mission statement. Next, develop a clear and concise description of the organization’s programs and services, target audience, and geographical service area. Be sure to be specific. Reviewers will call you and ask how frequently the services will be provided, the location where the services will be delivered, the duration of the program, and if there are any fees associated with receiving the services, so be sure to provide as much specific detail as possible. Also, provide measurable goals, objectives and outcomes for each service being provided.
Once these basic elements are finalized, a board of directors must be selected to serve as the decision-making body of the organization. Typically, newly established nonprofit organization board members are friends and family members of the founder. This is not advisable since the board of directors is also responsible for raising funds and providing support and direction for the organization. Friends and family members, while supportive, typically are not well equipped to provide the expected fiduciary responsibilities associated with the role of board of directors. Public agencies, foundations, funders and potential future board members look at current board members to determine the viability of the organization. If your board members do not bring experience, expertise, or value-add to the organization, then their value as a leader in the industry your organization has been developed for is diminished.
By Laws and Articles of Incorporation must be created that describes how the organization will be governed. It will describe how frequently the board will meet, the process for electing and replacing board members, and the length of time a board member will serve on the board. Once completed, the By Laws and Articles of Incorporation, along with the description of the organization programs, services and officers of the board, will need to be submitted to the IRS for tax exemption approval.
Review and approval for tax-exempt status is a lengthy process because expert caseworkers review submissions to determine each organization’s eligibility. Approval can take anywhere from 45 days to one year. Please be advised that the IRS can and does reject hundreds of applications a month for failing to meet the criteria of a nonprofit organization.
Adventurous individuals may try to take on the challenge of completing the paperwork on their own. Others may turn to the Internet for companies that market cheap and quick turnaround services for establishing nonprofit organizations. Consultants also offer these services, usually at higher fees than internet-based companies because they typically provide a more customized product. Internet-based companies often offer boilerplate or canned responses to questions that may send off red flags to IRS reviewers, causing delays in the approval process, or flat out rejection. It’s always a good practice to obtain referrals from organizations that have successfully secured their IRS approved tax status.