Partner Training: Starting a Nonprofit

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A short training presentation on starting a nonprofit for CharityNet & BizCentral USA partners.

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Partner Training: Starting a Nonprofit

  1. 1. Partner Service & Sales Training<br />Starting a Nonprofit<br />
  2. 2. Nonprofit Formation Overview<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  3. 3. Points to Consider<br />What is involved in legal formation?<br />What resources are available?<br />Where will the organization be located?<br />Will it qualify for tax exemption? <br />What are the reporting requirements?<br />
  4. 4. Establishing a Nonprofit: Step by Step<br />Establish a Board of Directors.<br />File Articles of Incorporation with the state.<br />Make sure the organization is registered in each state in which funds will be solicited.<br />Become recognized as a 501(c)(3) organization.<br />Obtain exemption from state income and sales taxes, if possible.<br />Maintain compliance with annual filings.<br />
  5. 5. Board Establishment<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  6. 6. Why a Board of Directors?<br />There must be some protection built into the system so the government can feel that the public purposes of a nonprofit are being carried out. <br />It requires that a group of individuals act as guardians of the public trust, whohave the public’s interest at heart.<br />An effective board can make it possible for the management, staff, and volunteers to focus upon the day-to-day tasks of making that mission a reality. <br />
  7. 7. Board Responsibilities<br />The Board is Responsible for:<br />The conduct of the nonprofit organization (Legally and financially)<br />Defining the organization’s mission, goals, and objectives<br />Public accountability and creation of public value<br />
  8. 8. Board Activities <br />The Activities of a Board Include:<br />Creates mission statement and reviews it periodically<br />Makes policies (Drafting AOI, Bylaws, Conflict of Interest Policy, Trustee Manual)<br />Selects, evaluates, and terminates the chief executive<br />Appoints committees for different purposes<br />Enhances nonprofit’s public reputation<br />Manages the organizations funds<br />Assists in developing annual budget<br />Makes personal financial contributions<br />Assesses its own performance<br />Engages in long term strategic planning<br />
  9. 9. What Board Member do NOT do: <br />Become involved in day to day operations of the organization<br />Hold owner’s equity in any organization assets<br />Receive compensation or salary for their Board duties <br />
  10. 10. IRS Board Guidelines for 501(c)(3)<br />Must have a minimum of 3 members on the Board of Directors<br />Must have a minimum of 51% that are strictly volunteer<br />Must have 51% unrelated in family or business<br />
  11. 11. Board Indemnification<br />Most organizations indemnify their Board members, meaning that in most cases they cannot be held individually responsible for legal action against the organization.<br />However, if a trustee shows negligence in financial matters they can and will be held personally liable.<br />
  12. 12. Legal Formation<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  13. 13. Where will the Organization be Located?<br />The organization should be incorporated and headquartered near your planned area of operations.<br />Keep in mind a Registered Agent must have a physical address in the state where the business is incorporated.<br />
  14. 14. Choosing an Organization Name<br />Choose a name that is marketable, unique, and describes what the organization will do, or will aspire to relate.<br />Avoid naming the organization after an individual, in most cases.<br />Develop a mission statement relating to the organization’s name and planned activities.<br />
  15. 15. Incorporation<br />To become a legally established nonprofit corporation, the organization must file Articles of Incorporation with their state.<br />This is the governing document that establishes the purpose of the organization, and puts limits on the activities the organization may undertake.<br />Specific information required by the IRS must be included if the organization wishes to apply for tax exemption.<br />The format of this document will vary by state.<br />
  16. 16. Application for Federal Tax Exemption<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  17. 17. Why 501(c)(3) ?<br />A common next step is to request determination under IRC 501(c)(3)<br />Many types of nonprofit organizations may qualify for exemption from federal income taxes, however that exemption is not automatic.<br />Applications must be filed with the Internal Revenue Service requesting the privilege of tax exemption for the organization.<br />
  18. 18. 501(c)(3) Benefits<br />501(c)(3) Organizations:<br />Do not pay federal corporate income tax. With this exemption, an organization can save 15-35% of its taxable income.<br />In most cases do not pay state corporate, franchise, excise, sales, and use taxes.<br />Can offer individual and corporate donors a tax deduction for their contribution. This is an incentive for taxpayers who itemize their deductions.<br />Are eligible to receive foundation grants.<br />Are eligible for lower postal rates with the U.S. Postal Service.<br />Are viewed as a whole as reputable organizations.<br />
  19. 19. 501(c)(3) Application Package<br />At minimum, to apply with the IRS for recognition as a 501(c)(3), and organization will need:<br />Form 1023 Application for exemption<br />Financial Plan (3-5 years)<br />Articles of Incorporation<br />Bylaws<br />Conflict of Interest Policy<br />
  20. 20. State Level Compliance<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  21. 21. State Level Compliance<br />A variety of state-level filings may have to be completed on an annual basis.<br />Failure to complete all state required filings may result in the organization owing state taxes, falling out of good standing, or even being administratively dissolved.<br />
  22. 22. Form 941 for Employees<br />This is a quarterly filing for organizations who have paid employees.<br />Like all employers, charities who pay wages must withhold, deposit, and pay employment taxes-including federal income tax, Social Security, and Medicare. <br />
  23. 23. State Corporate Tax Returns<br />Nonprofits must be sure to obtain state level sales and income tax exemptions, if available in their state.<br />If the organization is not granted state exemption, they must file and pay taxes!<br />In some cases, organizations exempt from state taxes must still file some sort of annual return (varies state to state)<br />
  24. 24. Annual Reporting<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  25. 25. Books and Records<br />Organizations must keep adequate records of their finances, thus professional bookkeeping is essential:<br />Document all sources of receipts and expenditures<br />Keep donor records<br />Retain all supporting documents-such as grant applications and awards, sales slips, paid bills, deposit slips, cancelled checks<br />Prepare annual financial statements<br />
  26. 26. Form 990<br />Form 990 (Annual Tax return for Exempt Organizations)<br />ALL organizations are now required to file, regardless of revenue<br />Penalties imposed for not filing<br />Revocation of 501 status if not filed for 2 or more years in a row<br />Professional bookkeeping year round makes filing a breeze<br />
  27. 27. Services & Processes<br />NPO Formation Overview<br />Board Establishment<br />Legal Formation<br />Application for Federal Tax Exemption<br />State-level Compliance<br />Annual Reporting<br />CharityNet USA Services & Processes<br />
  28. 28. Pricing<br />Prices charged for completion of the paperwork necessary to establish a nonprofit organization will vary, depending on how far the client is in the process and how many supplemental documents they’ve already prepared.<br />In addition, pricing may be affected by the number of state level filings required in the client’s state.<br />Price quotes include only document preparation fees, and all government filing fees will be the responsibility of the client.<br />
  29. 29. CharityNet Services:<br />501c3 tax exempt services<br />State tax exemption & Charity Registrations<br />Articles of Incorporation<br />Grant writing Services<br />Strategic Planning Services<br />Web development Services<br />Bookkeeping and Accounting Services<br />
  30. 30. Our Process<br />Once a sale has been made, clients are given access to a specific “Steps Page” related to the service purchased<br />Here, they will find a variety of information, FAQ, processes, and questionnaire to help them provide us with quality content to complete their work.<br />Additionally, we provide value added resources to build goodwill and help our clients manage or grow their business.<br />
  31. 31. Conclusion<br />As a nonprofit consultant, your goal is to be recognized as a trusted advisor, share ideas, and build relationships with local nonprofits and churches.<br />CharityNet will support you with service experts in a variety of key competencies including tax & accounting solutions, marketing, graphic design, writing services, web development, and more.<br />The key to success will be to help your clients find revenue through fundraising and then recommend fundamental services to build a strong foundation and successful future. <br />
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