Starting a nonprofit organization rev 8_31_12

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  • Starting a nonprofit organization rev 8_31_12

    1. 1. www.johnsoncenter.org
    2. 2. Welcome to the Johnson Center Established in 1992, the Dorothy A. Johnson Center for Philanthropy is an academic center focused on increasing the efficiency and effectiveness of the charitable sector. Heather Carpenter, Ph.D. Assistant Professor School of Public, Nonprofit, and Health Administration Grand Valley State University
    3. 3. Starting a Nonprofit Organization February 24, 2012 2:00-5:00 p.m.
    4. 4. Learning Objectives Learn key steps to forming and successfully running a nonprofit organization. Turn your passion for a specific issue into a nonprofit organization. Form new professional and networking contacts through interactive seminar activities.
    5. 5. Introductions • Name, Organization, Mission/Cause • Idea or established organization • Which subsector does your idea/organization fall under?
    6. 6. Nonprofit Subsectors 1. Arts, Culture, and Humanities 2. Education 3. Environment and Animals 4. Health 5. Human Services 6. International, Foreign Affairs 7. Public, Societal Benefit 8. Religion Related 9. Mutual/Membership Benefit 10.Unknown, Unclassified
    7. 7. Class Overview • What does nonprofit mean? • Overview and Importance of Nonprofit Industry • Forming a Nonprofit Organization
    8. 8. What Does Nonprofit Mean? • Tax Exempt Status – 25 tax exempt categories – Public Benefit, Mutual Benefit, Religious Benefit – 10 subsectors of 501c3 organizations
    9. 9. Types of Nonprofits • 501(c)(1) — Corporations Organized Under Act of Congress (including Federal Credit Unions) • 501(c)(2) — Title Holding Corporation for Exempt Organization • 501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations (Public Charity & Private Foundation) • 501(c)(4) — Civic Leagues, Social Welfare Organizations, and Local Associations of Employees • 501(c)(5) — Labor, Agricultural, and Horticultural Organizations • 501(c)(6) — Business Leagues, Chambers of Commerce, Real Estate Boards, etc. • 501(c)(7) — Social and Recreational Clubs • 501(c)(8) — Fraternal Beneficiary Societies and Associations • 501(c)(9) — Voluntary Employee Beneficiary Associations • 501(c)(10) — Domestic Fraternal Societies and Associations • 501(c)(11) — Teachers' Retirement Fund Associations • 501(c)(12) — Benevolent Life Insurance Associations, Mutual Ditch or Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. • 501(c)(13) — Cemetery Companies • 501(c)(14) — State-Chartered Credit Unions, Mutual Reserve Funds • 501(c)(15) — Mutual Insurance Companies or Associations • 501(c)(16) — Cooperative Organizations to Finance Crop Operations • 501(c)(17) — Supplemental Unemployment Benefit Trusts • 501(c)(18) — Employee Funded Pension Trust (created before June 25, 1959) • 501(c)(19) — Post or Organization of Past or Present Members of the Armed Forces • 501(c)(21) — Black lung Benefit Trusts • 501(c)(22) — Withdrawal Liability Payment Fund • 501(c)(23) — Veterans Organization (created before 1880) • 501(c)(25) — Title Holding Corporations or Trusts with Multiple Parents • 501(c)(26) — State-Sponsored Organization Providing Health Coverage for High-Risk Individuals • 501(c)(27) — State-Sponsored Workers' Compensation Reinsurance Organization • 501(c)(28) — National Railroad Retirement Investment Trust
    10. 10. What Does Nonprofit Mean? • Differences than For-profits – Can make a profit – Advancing the Public Good – Nonprofit specialized accounting, fundraising, board structure
    11. 11. Overview and Importance of Nonprofit Industry • Number of Nonprofits Today • Number of Nonprofit Employees • Number of Nonprofit Education Programs
    12. 12. Is there are Need? • Exercise: What makes your organization unique? – Where will you go to research your cause? – Who will you talk to? – What other organizations will you look at? – What makes your organization unique and different from those other organizations?
    13. 13. Forming a Nonprofit Organization • Two Options: – Get Fiscal Sponsorship and then apply for permanent 501c3 status – Apply for 501c3 status
    14. 14. Forming a Nonprofit: Getting Fiscal Sponsorship • Individuals or groups in a hurry. • Gives the group the ability to apply for and accept grants, accept tax- deductible donations, and carry on other activities under the tax-exempt status of their sponsor. • National Network of Fiscal Sponsors – http://www.tides.org/community/networks- partners/nnfs/
    15. 15. Forming a Nonprofit: Getting Fiscal Sponsorship • Activities of the sponsored group must be consistent with those of the sponsor. • There are many situations where using a fiscal sponsor could make sense. • Many funding sources-foundation will not fund brand new groups.
    16. 16. Forming a Nonprofit: Applying for 501c3 status 1. Create Business Plan 2. Draft Mission Statement 3. Recruit Board Members 4. Get a lawyer 5. Draft Articles of Incorporation 6. Draft Bylaws 7. Apply for Business Name 8. Apply for Federal EIN# 9. File Incorporation with State 10. Apply for Federal Tax- Exempt Status 11. Apply to Solicit and Receive Contributions
    17. 17. 1. Business Plan • Template available from http://www.sba.gov • Shows: – Clear and compelling mission – Services that have been thoroughly planned – Market exists for services – Taking advantage of market opportunities – Capable management – Realistic and achievable financial projections • Accurate Start-up costs
    18. 18. Fundraising Planning Process 1. Clarify why the nonprofit needs support 2. Composition of revenue mix 3. Turn case statement into specific goals, objectives, and action steps 4. Identify potential donors 5. Match strategies with gift markets 6. Make solicitations, track the results, recognize the donors, ensure gifts are used for intended purposes and make necessary improvements
    19. 19. 2. Mission Statement • Video – http://www.youtube.com/watch? feature=player_embedded&v=LJhG3HZ7b 4o#! – Use concrete language – Talk about the why
    20. 20. Mission Statement Examples • To connect people through lending for the sake of alleviating poverty. • Building healthier lives, free of cardiovascular diseases and stroke. • To explore, enjoy, and protect the wild places of the earth; to practice and promote the responsible use of the earth's ecosystems and resources; to educate and enlist humanity to protect and restore the quality of the natural and human environment; and to use all lawful means to carry out these objectives.
    21. 21. Mission Statement Exercise • Create a Mission Statement for your Nonprofit
    22. 22. 3. Recruit Board Members • You are required to have a minimum of 3 board members to start • Recruit people you can trust • Diversity of backgrounds and roles (governance, management, program operations, fundraising, legal, evaluation) • Constituent/target market representation
    23. 23. Board Member Activity • Who will you recruit as board members?
    24. 24. Managing Your Board: Finding the Governance Balance • Board members play an important role in the success of a nonprofit organization. • Volunteer organization or paid staff. • Board chairs should encourage dissent, debate and questions, the key is finding the right balance.
    25. 25. Managing Your Board: Board Committees • Key Standing Committees – Executive, Finance, Fundraising, Board Development, and Personnel • Ad Hoc Committees – Strategic Planning – Special Events – Evaluation • Ideal board size • Frequency of Board Meetings
    26. 26. 4. Get a Lawyer • You can incorporate without one, however it is helpful to receive legal advice from the start
    27. 27. 5. Draft Articles of Incorporation • Template available • Must be a tax-exempt purpose • No profits can inure to benefit any individual • Cannot be a political organization • On dissolution, all assets must go to another tax-exempt organization of similar service
    28. 28. Articles of Incorporation • http://www.sec.state.ma.us/cor/corpweb /cornp/npfrm.htm – Form 502 MI
    29. 29. 6. Draft Bylaws • Corporate rules, behaviors, and actions – Powers of the board – Meetings information – Directors – Officers – Committees – Operational Staff – Fiscal Year – Conflicts of Interest – Amendments
    30. 30. 7. Business Name Process • Name must not already be used in the state • Name availability search with LARA- Department of Licensing and Regulatory Affairs
    31. 31. 8. Apply for Federal EIN# • National application SS-4 with IRS • Permanent identity for all government reports and documents
    32. 32. 9. File Incorporation with State • Form 502, Articles of Incorporation (Nonprofit) with the State of Michigan’s Bureau of Commercial Services, Corporation Division – Fee $20
    33. 33. 10. Apply for Federal Tax Exempt Status • Form 1023 – You will also need Minutes of First Board Meeting – It normally takes four to six months from the time an application for tax exemption is filed with the IRS to receive notice that tax- exempt status has been granted.
    34. 34. Apply for Federal Tax Exempt Status • Include as supplementary material with Form 1023 – Articles of Incorporation – Bylaws – Statement of Current Income/Expenses – Preliminary 3 Year Budget • Waiting Period/Advanced Ruling
    35. 35. 11. Apply to Solicit Donations • Michigan Department of the Attorney General, Charitable Trust Section • Annually file
    36. 36. Heather Carpenter, Ph.D. carpenth@gvsu.edu Resources and Nonprofit Blog: http://www.nonprofitalternatives.org Twitter: @heathercarpente Delicious: http://delicious.com/heathercarpenter Resources Page

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