The document summarizes the key steps for starting a nonprofit organization. It discusses establishing the Johnson Center in 1992 to increase nonprofit effectiveness. The class overview covers what nonprofits mean, their importance, and how to form one. Key steps include creating a business plan, mission statement, recruiting a board, obtaining legal assistance, filing articles of incorporation and bylaws, applying for necessary registrations and tax-exempt status. Interactive activities help attendees explore their nonprofit ideas.

1. www.johnsoncenter.org

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. Starting a Nonprofit Organization
February 24, 2012
2:00-5:00 p.m.

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. Introductions
• Name, Organization, Mission/Cause
• Idea or established organization
• Which subsector does your
idea/organization fall under?

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. Class Overview
• What does nonprofit mean?
• Overview and Importance of Nonprofit
Industry
• Forming a Nonprofit Organization

8. What Does Nonprofit Mean?
• Tax Exempt Status
– 25 tax exempt categories
– Public Benefit, Mutual Benefit, Religious
Benefit
– 10 subsectors of 501c3 organizations

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. What Does Nonprofit Mean?
• Differences than For-profits
– Can make a profit
– Advancing the Public Good
– Nonprofit specialized accounting,
fundraising, board structure

11. Overview and Importance of
Nonprofit Industry
• Number of Nonprofits Today
• Number of Nonprofit Employees
• Number of Nonprofit Education
Programs

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. Forming a Nonprofit Organization
• Two Options:
– Get Fiscal Sponsorship and then apply for
permanent 501c3 status
– Apply for 501c3 status

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. 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. 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. 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. 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. 2. Mission Statement
• Video
– http://www.youtube.com/watch?
feature=player_embedded&v=LJhG3HZ7b
4o#!
– Use concrete language
– Talk about the why

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. Mission Statement Exercise
• Create a Mission Statement for your
Nonprofit

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. Board Member Activity
• Who will you recruit as board
members?

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. 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. 4. Get a Lawyer
• You can incorporate without one,
however it is helpful to receive legal
advice from the start

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. Articles of Incorporation
• http://www.sec.state.ma.us/cor/corpweb
/cornp/npfrm.htm
– Form 502 MI

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. 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. 8. Apply for Federal EIN#
• National application SS-4 with IRS
• Permanent identity for all government
reports and documents

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. 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. 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. 11. Apply to Solicit Donations
• Michigan Department of the Attorney
General, Charitable Trust Section
• Annually file

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