Hey Socialife Peeps!
Today I’m going to be talking to you about how to start your own nonprofit.
If you’ve got a big idea and you know that, you think it can change the world, and you want to dive into the nonprofit sector, today I’m going to give you seven tips on how to do that efficiently and quickly. I’m going to help you avoid searching around, trying to figure out exactly how to get through this legal process.
I will say that I am not a lawyer, and I cannot advise you on how to go through the legal process. But, I do have some resources that I’d like to share with you, and the process that I took so that you can see that the process isn’t as daunting as it may seem. It is just like starting a business, but because you are dealing directly with the IRS, and it is a 501, or you’re trying to get your 501 C3 status, you have to make sure that you do everything correctly, and dot your I’s, cross your T’s, make sure you have all of that done. Today, that’s what we’re going to be talking about. Let’s jump right in.
The first thing you want to do when you’re starting a nonprofit, is you want to think about your name, your mission, your vision.
Things that you have probably already started dreaming up, and thinking about, and your processes, things like that. You want to think about the services you’ll be providing to your demographic. One of the most important things that you’re going to want to work on, is whether you’re a membership organization, or a non membership organization. Because, there will be a bifurcation at some point during the process, that you’ll have to decide whether you’re a membership, or non membership. It’ll depend on some of the forms that you fill out. Because we are a non membership based nonprofit, that’s what I’ll be talking about today, and that process.
Next thing is, you need to get your name. That’s number one. Your name obviously is very important.
You may have already thought of a name, but now you need to make sure that, that name is available. The way to do that is you’re going to check at IRS.Gov, and you’re going to go to their search tool. They have a name search tool. Once you do that you’re going to put in your name, they’re going to send you … You’re going to need to reserve that name first. Then, that name isn’t yours. It’s just reserved. That means that they are going to send you an inquiry back. Once you get that inquiry letter and you publish that name, and you let them know that it’s published, that means that your name has been reserved. That means that now it is officially your name. They will send you a letter to let you know that whole process, and they’ll tell you all of that on IRS.Gov, what the actual process is.
But, until they say that the name is actually yours, that name is only reserved. Then, once you receive the final confirmation on that name, you will need to publish that in three different papers. What I did is I just published it in three different counties, and then that makes it official. Essentially that’s saying, “I’m starting this business. This is officially my name. It has been published under my name associated with my business.” That’s what you’ll need to do. I think that probably costs about, it’s probably about $25 I think per paper, to publish it. Basically, that’s just proof that you are actually using the name for a business. That’s your first step.
Your second step is your articles of incorporation.
Your articles of incorporation, they seem a little daunting but really it’s actually a very simple process. If you pick up the Nolo Resource Book on how to start a nonprofit, that is a … It’s written by a lawyer, and it’s a resource that will actually walk you through the entire process step by step. I do recommend getting that for any nonprofits that are getting started, because it will save on time as far as using a lawyer, and then on top of that it will also save on you making any sort of mistakes, because it walks you through step by step.
When you’re doing your articles of incorporation, the first thing I would say is before you start your articles of incorporation, or at least before you send them in, you’re going to want to create your bylaws first. Even though that’s not my second step, this is something that I would actually just recommend to you. Because, once you finish the articles of incorporation, that process goes a lot quicker than you think. Or, it can go a lot faster. You don’t want your bylaws to be what slows you down. I will get there in just a minute. But, basically you’re going to want to do your articles of incorporation. This is essentially the same thing for everyone. Even though it seems like there’s a lot to do, it’s really just nine articles that you’re taking, and you’re inputting your information. But, they give you essentially the word for word that you need to use for each article. So, that makes it pretty simple for you to do.
You’re going to do that. Now, when you send in your articles of incorporation you’re going to need to send in your cover letter as well. That cover letter is $30. Then, you’re going to need to get that certified copy back. If you send it in and you don’t use the cover letter, and you don’t use the requested certified copy, you’ll need that certified copy later in the process, so you need to make sure you do that. It’s a total of$35, five dollars for the copy, $30 to actually send it in, and have it filed and everything. You just need to make sure you have that cover letter, which is also in the Nolo Resource Book. Essentially, it’s a plugin situation where you just plugin your name, and plugin your services, and all of your own personal information. Print that up, add it to your articles of incorporation, and send that in. Send it into the secretary of state.
That takes, they say it takes about two to four weeks. I received mine back in two weeks, and the process went pretty quickly for me. That’s articles of incorporation, that’s step number two. You need to make sure that before you actually send that in, that you start your bylaws first, and you’ll want to at least start to tackle your tax exemption, 1023-EZ Form. Which, will be probably the most tedious part of the whole process. That’s step number two.
For step number three, you’re going to start working on your bylaws.
I will not lie to you, the bylaws are time consuming. I won’t say they’re hard. They’re not necessarily difficult, it’s just time consuming. This is really where you’ll see your whole organization really come together as a nonprofit, and it’ll start to be outlined because they’ll be asking you about who’s on your board, and you’ll need all their information, so you’ll need to have your board developed already. You’ll need to know your purpose, which is generally your services and your mission. What are you trying to do with your organization? Then you’ll need to know the type of corporation that you’re going to be. You’ll know that from when you incorporate and all of that, you’ll know what type of corporation you’ll want to be.
Then, you’ll need to have regular meetings schedule, and also your annual meetings schedule. So, how often are you going to meet, when are those meeting dates going to be, and this is a rough outline. Obviously if things don’t work out, and you … We use the second Tuesday of every month. But, sometimes we have to move those around according to the boards schedule. But, they need to know that you have a regular meeting schedule. If you’re going to do quarterly meetings, you’re going to do weekly meetings, monthly meetings, yearly meetings. However often you’re going to be meeting for your board, you’ll need to have all of that figured out so that you can add all of that information into your bylaws.
Then, your annual meeting date. When are you going to meet once per year? Then you’ll also need to figure out your fiscal, or calendar … Are you fiscal or calendar, your scheduling? What kind of calendar year are you going to be on, fiscal or a calendar year? Then lastly, and you have probably already decided this, are you going to be membership or non membership? Because, the bylaws is where the bifurcation comes from. They’ll have different types of bylaws that you’ll need to fill out if you’re a membership based nonprofit, as opposed to a non membership based nonprofit. I believe the non membership is a little bit easier. But, if people are going to be paying into a membership to be part of your nonprofit, or you’re going to have a membership base, then you need to obviously use the membership side of the bylaws.
Those are really the bulk of the information that you would need for your bylaws. But, really this is just a time where it’s a kind of tedious process, and you just need to be more meticulous about what you’re writing, and what you’re saying. Because, once your bylaws are created, it will take the board’s decision, and the board vote to change those bylaws, which is why most bylaws aren’t generally changed in organizations, because that’s what they’ve been running off of for the last however many years they’ve been around. This is kind of a big deal. It will take some thought, which is why I said to complete this, or at least be starting this process before you do your articles of incorporation, or before you send them in. Because, your articles of incorporation will actually be pretty simple. But, your bylaws are going to take a lot more time.
Once you complete your bylaws, that would be the end of step three.
Now, step four is your EIN number. You’ll be using this number, your Employee Identification Number.
You’ll be using that number for quite a few things. When you fill out information, when you’re applying for grants, when you’re just doing things that involve your nonprofit, they will ask you for this EIN number, and also your tax exempt number. These are two numbers that you’ll need to keep track of, and know where they are. You’ll need easy reference to them. This is probably one of the simplest steps out of the whole thing. You’re just basically going to go to IRS.Gov, you’re going to look up the SS-4 Form online, and you’re going to feel that out. The big thing is, with all of these things you’re going to need to print them out, and make a copy for yourself so that you can have them in your corporate records book.
That’s one of the things that you’ll need throughout this whole process, is you’ll need a corporate records book where you can just keep all of this information, just keep it filed and make it so that you have easy reference to it so that if someone else were to come in and take over your organization, they would know where all of this information is that they would need to keep referring to. It’s very important that you have a corporate records book, just so that you have access to all of these important documents. It’s also a requirement of the IRS as well, so you’ll need to set that up.
You’re just going to make sure that you fill out this form, make sure you print it out, and then keep it in your corporate records book. It is absolutely immediately, it’s an immediate response. You fill out the form, you press submit, and then they give you an EIN number. That’s the form you need to fill out … I mean, print out, I’m sorry. You need to print that form out, put it in your corporate records book, and then you’re done with that section.
Step five is, the 1023-EZ. This is where most people can really mess up, or delay the process of becoming a tax exempt status.
This is where you have to pay the most attention, and you have to really have a lot of attention to detail. It’s just a tedious form, it’s a long form. After you complete your bylaws, this form has to be turned in within 27 months. That may seem like a long time, but when you’re in the midst of running your nonprofit, and you have to fill this form out, I would recommend that it’s just better just to do the whole process all at once. Which, is why I say before you send in your bylaws, or your articles of incorporation. Before you start the whole process, you’ll want to just send this whole thing in, and get it done. Just do it all at one time. Take two days, and finish the entire thing.
Because, this 1023 EZ will take some time, and just some focus. That’s really all it comes down to, is you just need to focus on it, and you’ll need to know that it’s going to be tedious, and that you’re going to have pay attention, and I would just plan to not do anything else for that four hour block of the day, and just get that done so that you can send it in, and then it’s out of your hair, and you don’t have to remember within 27 months to send this in. But, if your organization is not completely set up and ready to rock, then you do have 27 months to do that. That’s step 5.
Now we’ll move onto step number six, which is creating a packet for the IRS for you to send in, and then they will look over it, and that’s how you’ll receive your tax exempt status.
In this packet you’re going to have a certified copy of your articles of incorporation. You’re going to have signatures from your board. You’re going to have your bylaws. Then, you’re going to have copies for yourself of all of these things, because you may not get these back. Then you’re going to fill out a checklist that comes with, that goes with this form once you send in … I believe it comes with the 1023-EZ. But, you’ll need to make sure that you have this checklist for the very front of this whole packet. Then, add it to the front, and then send it in.
They say it could take up to, I want to say maybe eight months or so. It seemed like it was going to take a long time, but I actually received mien back in three months. I sent it in, in March, and I think I got it back in June or July. Then, once I received it back it said that my tax exempt status was actually retroactive for a year. I’m sorry, retroactive from the start of the year, so from January. I don’t know if that’s how it works, but it was retroactive to the first of the year.
That meant that all of the income that I received from that time, any donations or anything that came in from that time period, from January to June, would be considered tax exempt under my tax exempt status. I wouldn’t depend on that, but just be aware that, that is a possibility, and that’s how my process worked for me.
The last thing is, you’re going to receive your federal tax exemption.
Woo-hoo. They’re going to send you a letter, and basically you need to make sure on that letter that it does call you a nonprofit, and not a foundation. You just need to make sure that’s clear. Then, they’re going to let you know whether you need to fill out a 990-EZ form every year, and basically you’ll fill it out online, they’ll send you a postcard, and then you’ll be filling one out every year, or two there on for your nonprofit.
That’s essentially the whole process on how I started my nonprofit, and how you can start yours too. The main resource that I would say is most important is the Nolo Resource, and I will make sure I have that in the link below.
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