Maybe you have a great idea for a charitable organization you would like to start. Or perhaps you already run one and now you’re wondering if your organization might qualify as tax-exempt. Here is some general “how to start not for profit organization” information.
1. There are many benefits to being a not for profit organization. One of the most obvious is that of not having to pay many forms of taxes. Additionally, many grants are only offered to not for profit organizations. Discounts on services such as postage may also be available depending on your particular circumstances. You may be able to set up a lobbying group if that fits in with the plans of your organization.
2. You only qualify for not for profit status if you are an organization; individuals are not eligible. Your group must either be incorporated or be operating as an association or a trust. The Internal Revenue Service (IRS) has an excellent publication which can help you determine if your organization qualifies as a tax-exempt one. Publication 557 also provides checklists to make sure you have all the information you need when you get ready to complete your application. Visit the website of the IRS to find out about the latest guidelines and forms available.
Some types of not for profit organizations are charitable, religious, scientific, educational or social clubs. Of course, there are many more. You will need to check with the IRS to verify if your specific organization does indeed qualify.
3. You should have a description of the purposes and activities of your organization. It may be helpful to have a mission statement so you are very clear on what you hope to accomplish.
4. Your organization must already have an Employer Identification Number or be in the process of getting one.
5. You will need to have some detailed financial information available. If the organization has been in existence for longer than three years, it must provide current information as well as information from the past two years. If it is a new organization, it must provide current information as well as projected budgets for the upcoming two years.
6. In addition to these basic requirements, the organization should also be able to provide a strategic business plan, articles of incorporation and a set of bylaws.
Once your organization has been classified as not for profit, there are some other tasks to remember.
- There is usually more administrative paperwork necessary to operate a charitable organization than a for-profit business so you need to have a good recordkeeping procedure in place. There will be many new tax-related forms that you need to file.
- You will need to check with your local state business office to determine their requirements. Additionally, your local city and county governments may have additional requirements.
- You will need to be aware of changes in regulations so that you can maintain your not for profit status. Be sure to treat your organizational responsibilities just as you would if it were a for-profit [tag-tec]business[/tag-tec].
Although it can be very time-consuming, once you follow the “how to start not for profit organization” guidelines, your organization can benefit from increased funds to support your cause.