4 Tips On How To Set Up A Non-Profit Organization

By Rebecca Lake. May 7th 2016

If you’re passionate about a specific issue, establishing a non-profit organization is one way to spread awareness while also raising money to further your cause. Unlike a traditional business, non-profit organizations are not designed to generate a profit that is distributed to shareholders or investors. Instead, any money earned by the organization is used to fund its operation. The Internal Revenue Service recognizes a wide range of organizations as non-profits, including social clubs, fraternal organizations, political groups, charitable organizations and trade associations. Starting a non-profit is not an easy task, but the following tips can help you to get your organization up and running.

Do Your Research

The first step in setting up a non-profit organization involves doing some background research to familiarize yourself with how a non-profit works. Non-profits operate on a business model but their primary mission involves promoting a social cause rather than generating income for investors. You need to evaluate whether establishing a non-profit is the best way to achieve your overall goal or if another business structure might be more appropriate. For example, it may be more beneficial to create a for-profit business model and establish a non-profit subsidiary to carry out charitable work.

You also need to determine whether there is a need for the type of organization you want to create. You can start by looking in your local area for other non-profits that promote a cause similar to yours. If other organizations already exist, you need to consider whether it would make more sense to work with an established non-profit versus starting your own. If there aren’t any organizations similar to the type of non-profit you have in mind, you may need to do some research as to why. For example, does the issue or cause you’re interested in simply lack visibility or is it an unpopular topic? Non-profits largely operate on donations and if yours is based on a cause that few support, you may find it difficult to obtain funding.

Develop Your Business Plan

If you’ve established that there is a need for the type of non-profit you want to establish, the next step in getting started is to create a business plan. A business plan essentially spells out what your mission is, how the organization will be run, what you expect your budget and income to be and how you plan to achieve your goals. A business plan typically takes the following format: executive summary, description or services and/or products, needs assessment, description of organization and management, marketing strategy and financial breakdown.

The business plan has several purposes. First, it allows you to develop a cohesive blueprint for your non-profit that you can use to measure your progress and success. Second, it creates a sense of accountability for everyone who is involved in the organization and operation of the non-profit. Finally, it serves as a tool for attracting investors and donors to your organization. If you’re not sure how to go about drafting a business plan, your local small business administration office can provide you with resources and advice to help get you started. (To learn more about how to create a business plan, see 8 Helpful Tips For Making A Strategic Business Plan.)

Legal Aspects Of Starting A Non-Profit

Before you can start operating your non-profit, you have to ensure that it has been properly established as a legal entity. The first step is to file articles of incorporation with your state’s corporate filing office. The procedure varies from state to state, but generally the process involves choosing a name for your organization, filing the proper paperwork and paying the incorporation fee. Incorporating protects you and anyone else who serves as part of the organization’s administration team from liability in the event that the non-profit is sued.

Once you’ve incorporated, the next step is applying for a federal Employer Identification Number (EIN). You can do so by calling the IRS, downloading an EIN application from the IRS website and mailing it in or by completing an online form. There is no charge to obtain an EIN. After you’ve established a federal tax ID for your non-profit, you will need to apply for tax-exempt status with both the federal government and your state government. Depending on how your non-profit will operate, you may also need to apply for additional state or local permits for zoning, sales tax, etc.

Getting Your Non-Profit Funded

Once your non-profit is legally established, the final hurdle you must face is getting funding for your cause. There are a number of avenues you may pursue to generate funding and it’s recommended that you create a fundraising plan to map out your options. Depending on the size of your organization, you may choose to start small and seek out donations from residents or businesses in your area. Another option is to research opportunities to form corporate sponsorship agreements.

If you’re trying to launch a large-scale operation, you may require the assistance of private donors or investors. For example, you may be able to secure funding from a private endowment or foundation. You should also research grant opportunities through the federal government. There are also a number of public charities that offer grant funding to non-profit organizations. The key to a successful fundraising plan is to consider all of the available funding opportunities and to focus on generating income for your organization over the long-term. As part of your fundraising efforts, you should take time to develop a marketing strategy that will help to increase your organization’s visibility and appeal to your target investors.

Starting a non-profit can be an extremely rewarding experience but it does require hard work and determination. Knowing what to expect during the process is the first step in ensuring that your charitable venture is a success.

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