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

1. Partner Service & Sales Training Starting a Nonprofit

2. Nonprofit Formation Overview NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

3. Points to Consider What is involved in legal formation? What resources are available? Where will the organization be located? Will it qualify for tax exemption? What are the reporting requirements?

4. Establishing a Nonprofit: Step by Step Establish a Board of Directors. File Articles of Incorporation with the state. Make sure the organization is registered in each state in which funds will be solicited. Become recognized as a 501(c)(3) organization. Obtain exemption from state income and sales taxes, if possible. Maintain compliance with annual filings.

5. Board Establishment NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

6. Why a Board of Directors? 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. It requires that a group of individuals act as guardians of the public trust, whohave the public’s interest at heart. 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.

7. Board Responsibilities The Board is Responsible for: The conduct of the nonprofit organization (Legally and financially) Defining the organization’s mission, goals, and objectives Public accountability and creation of public value

8. Board Activities The Activities of a Board Include: Creates mission statement and reviews it periodically Makes policies (Drafting AOI, Bylaws, Conflict of Interest Policy, Trustee Manual) Selects, evaluates, and terminates the chief executive Appoints committees for different purposes Enhances nonprofit’s public reputation Manages the organizations funds Assists in developing annual budget Makes personal financial contributions Assesses its own performance Engages in long term strategic planning

9. What Board Member do NOT do: Become involved in day to day operations of the organization Hold owner’s equity in any organization assets Receive compensation or salary for their Board duties

10. IRS Board Guidelines for 501(c)(3) Must have a minimum of 3 members on the Board of Directors Must have a minimum of 51% that are strictly volunteer Must have 51% unrelated in family or business

11. Board Indemnification Most organizations indemnify their Board members, meaning that in most cases they cannot be held individually responsible for legal action against the organization. However, if a trustee shows negligence in financial matters they can and will be held personally liable.

12. Legal Formation NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

13. Where will the Organization be Located? The organization should be incorporated and headquartered near your planned area of operations. Keep in mind a Registered Agent must have a physical address in the state where the business is incorporated.

14. Choosing an Organization Name Choose a name that is marketable, unique, and describes what the organization will do, or will aspire to relate. Avoid naming the organization after an individual, in most cases. Develop a mission statement relating to the organization’s name and planned activities.

15. Incorporation To become a legally established nonprofit corporation, the organization must file Articles of Incorporation with their state. This is the governing document that establishes the purpose of the organization, and puts limits on the activities the organization may undertake. Specific information required by the IRS must be included if the organization wishes to apply for tax exemption. The format of this document will vary by state.

16. Application for Federal Tax Exemption NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

17. Why 501(c)(3) ? A common next step is to request determination under IRC 501(c)(3) Many types of nonprofit organizations may qualify for exemption from federal income taxes, however that exemption is not automatic. Applications must be filed with the Internal Revenue Service requesting the privilege of tax exemption for the organization.

18. 501(c)(3) Benefits 501(c)(3) Organizations: Do not pay federal corporate income tax. With this exemption, an organization can save 15-35% of its taxable income. In most cases do not pay state corporate, franchise, excise, sales, and use taxes. Can offer individual and corporate donors a tax deduction for their contribution. This is an incentive for taxpayers who itemize their deductions. Are eligible to receive foundation grants. Are eligible for lower postal rates with the U.S. Postal Service. Are viewed as a whole as reputable organizations.

19. 501(c)(3) Application Package At minimum, to apply with the IRS for recognition as a 501(c)(3), and organization will need: Form 1023 Application for exemption Financial Plan (3-5 years) Articles of Incorporation Bylaws Conflict of Interest Policy

20. State Level Compliance NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

21. State Level Compliance A variety of state-level filings may have to be completed on an annual basis. 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.

22. Form 941 for Employees This is a quarterly filing for organizations who have paid employees. Like all employers, charities who pay wages must withhold, deposit, and pay employment taxes-including federal income tax, Social Security, and Medicare.

23. State Corporate Tax Returns Nonprofits must be sure to obtain state level sales and income tax exemptions, if available in their state. If the organization is not granted state exemption, they must file and pay taxes! In some cases, organizations exempt from state taxes must still file some sort of annual return (varies state to state)

24. Annual Reporting NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

25. Books and Records Organizations must keep adequate records of their finances, thus professional bookkeeping is essential: Document all sources of receipts and expenditures Keep donor records Retain all supporting documents-such as grant applications and awards, sales slips, paid bills, deposit slips, cancelled checks Prepare annual financial statements

26. Form 990 Form 990 (Annual Tax return for Exempt Organizations) ALL organizations are now required to file, regardless of revenue Penalties imposed for not filing Revocation of 501 status if not filed for 2 or more years in a row Professional bookkeeping year round makes filing a breeze

27. Services & Processes NPO Formation Overview Board Establishment Legal Formation Application for Federal Tax Exemption State-level Compliance Annual Reporting CharityNet USA Services & Processes

28. Pricing 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. In addition, pricing may be affected by the number of state level filings required in the client’s state. Price quotes include only document preparation fees, and all government filing fees will be the responsibility of the client.

29. CharityNet Services: 501c3 tax exempt services State tax exemption & Charity Registrations Articles of Incorporation Grant writing Services Strategic Planning Services Web development Services Bookkeeping and Accounting Services

30. Our Process Once a sale has been made, clients are given access to a specific “Steps Page” related to the service purchased Here, they will find a variety of information, FAQ, processes, and questionnaire to help them provide us with quality content to complete their work. Additionally, we provide value added resources to build goodwill and help our clients manage or grow their business.

31. Conclusion As a nonprofit consultant, your goal is to be recognized as a trusted advisor, share ideas, and build relationships with local nonprofits and churches. 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. 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.