Starting a nonprofit organization is an exciting and rewarding venture. The beginning phase is the most important phase of development. It pays for founders to take a detailed and well-planned approach to forming a nonprofit organization. Initially, forming a nonprofit takes a lot of research, time and preparation.
Founding board members need to be sure there’s a need for the nonprofit within the community and that they’ll be able to fundraise the money needed to start and sustain the organization. Numerous nonprofits are in existence, which makes the competition for getting donations and grants quite fierce. Lack of funds will surely affect sustainability. To succeed in the nonprofit realm, founding members will need strong start-up and sustainability funds, qualified people and the tools to help them along the way.
One of the best tools that nonprofit organizations can invest in is a secure board portal. The start of a nonprofit organization isn’t too soon to consider getting a board portal.
Doing Diligence on Assessing the Need for a Nonprofit
It’s crucial for founding board members to carefully assess whether there’s a need for the type of nonprofit they have in mind. Founding board members need to assess whether there are any other similar nonprofits already in existence. If so, both organizations will be competing for donor funds. The existing nonprofit will probably have the edge over tapping existing donors, which will make it difficult for a newer, similar nonprofit to sustain itself over the long term.
If your idea for a nonprofit solves a problem that other nonprofits aren’t addressing, founding members need to try to define their market and the demand for their services. It’s important not to overlook this step because donors will want you to demonstrate need before they send you that all-important reward letter.
Another consideration that nonprofits tend to overlook is the current and future economic climate. During periods of economic volatility or downturn, people tend to donate less to charities, even those they care deeply about. It’s important to consider whether your community will be able to help your nonprofit remain sustainable during challenging economic times.
Does Your Idea for a Nonprofit Qualify for Tax-Exempt Status Under the Law?
Before getting too far into the planning process, founders need to make sure that their idea for a nonprofit will qualify for federal and state tax-exempt status. The law states that nonprofits seeking tax-exempt status must primarily be involved in educational, scientific, religious or charitable endeavors.
State laws define the rules for nonprofits. Your state association for nonprofits outlines the laws and rules that nonprofits must follow to keep their tax-exempt status.
Benefits for Nonprofits
The federal and state governments want nonprofit organizations to succeed because nonprofits provide many products and services that governments can’t provide on their own. The design of nonprofits is set up to offer benefits to support nonprofits and to help them succeed. Nonprofits that qualify under state and federal laws and that file all of the appropriate forms are tax-exempt. Boards can then use the money they save on taxes to benefit the people they serve.
In addition to tax benefits, nonprofits are set up to keep the board directors’ personal assets separate from those of the company. That way, if the nonprofit fails, board directors don’t have to worry about groups or individuals tapping into their personal assets. Nonprofit laws also relieve directors and officers from being held personally liable for the organization’s debts and liabilities.
Under the law, nonprofit organizations have perpetual existence. If the founding directors leave the organization or pass away, the organization lives on as long as it complies with federal and state laws.
Nonprofit organizations are eligible for grants, which they don’t have to pay back. Attaining tax-exempt status gives nonprofit organizations credibility with donors. Philanthropists, grant-makers and other large donors won’t often give funds to organizations that don’t qualify as tax-exempt organizations.
Certain states offer additional benefits for qualified nonprofit organizations, such as reduced postal rates and certain exemptions from property taxes.
Checklist for Starting a Nonprofit Organization
If you’ve made it this far and you’re still sure that your nonprofit will succeed over the long term, it’s time to start working down the checklist of tasks you’ll need to complete to get your new nonprofit organization off the ground and headed toward success.
- Get a board portal for storing all founding documents and collaborating with new board members
- Write the Articles of Incorporation
- Write the bylaws
- File Federal IRS Form 1023
- If state requires, file state-level tax exemption forms for 501(c)(3)
- Write mission and vision statements
- Write a business plan
- Do you have or need a fiscal sponsor?
- Identify source of start-up funds
- Make decision about office space
- Budget for utilities
- Purchase initial office supplies
- Hire staff
- Obtain necessary permits, certifications, etc.
- Where will you get funds to sustain the organization?
- Identify ways to measure the impact of your nonprofit
- Set up an organizational structure with designated terms for board directors
- Set up a one-year and a three-year budget
- Develop a marketing plan
- Plan and launch the first fundraising event
- Make a resource development plan
- Establish community partnerships
- Recruit and train volunteers
- Write basic ethics, conflict of interest and whistleblower policies
- Hold your first board meeting
Special Considerations for Appointing Board Directors
In networking with like-minded people who share your passion for getting a nonprofit started, it may be easy to find board members to share in the start-up phase of the nonprofit. New board members should be aware of, and be willing to accept, that they will have legal and fiduciary responsibilities as part of their board duties. Carefully choose people who bring a diverse set of skills and perspectives to the boardroom and are willing to contribute meaningfully to the business plan. The initial board members should be the type of people who are willing to take on leadership responsibilities and to work as a team to get things done.
A board portal by BoardEffect is a good initial investment because it provides secure online storage for all founding documents and future documents and alleviates worry over paper documents getting lost or accidentally destroyed. Board portals streamline the processes for meeting preparation and following up on tasks. Getting a board portal as the first course of action is a good step toward keeping cyberattacks at bay.
The efficiency that board portals provide frees up time for board members to work on the most important task at hand — the new nonprofit’s sustainability plan.