How to Become a Nonprofit Organization

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First and foremost, nonprofit organizations are created to do some sort of good. Whether they aim to help homeless men and women, provide shelter for abused animals or advocate for better education for school children, all of a nonprofit organization's resources are charitable in nature.

Nonprofit organizations can be religiously affiliated, research oriented or even educational. While not for profit organizations or entities can have employees that are paid to do their work, they are expected to put all of their money, time and energy into accomplishing their charitable goals. Not for profit organizations are required by most states to have a board of directors, but they do not have shareholders that benefit from the profits generated by the company. Once a nonprofit organization has been created, it can apply to the Internal Revenue Service for a special tax exempt status. If the not for profit organization passes the IRS's careful screening, they are not required to pay taxes on any income that they generate. This tax exempt status, also known by the IRS tax code 501(c)3, also means that any donations people make to the organization are tax deductible.

If you are thinking of starting a nonprofit organization, here are some steps to getting started:

Start with a mission. Whether you aim to provide healthcare for abused animals, serve meals every week to the homeless or raise funds for the researching of wildlife, every nonprofit organizations starts with a purpose. Make your mission something that is measurable such as serving 200 meals per week to the poor or homeless or raising $10,000 to fund research for cancer treatments. Your nonprofit organization will not accomplish its goals if they are vague and left open to interpretation.

Find others in your area that can help. Find out if another not for profit organization in your area is already filling the void you see. Your nonprofit organization will need more than just one person to make something happen, and it's always useful to model your business plan after someone else's, or just find someone who can give you some much-needed advice.

Figure out if your mission will be accomplished by either a nonprofit organization or for-profit organization. Not every organization that helps the community in some way is a nonprofit organization. You may not need nonprofit status at all to accomplish something.

Decide which business plan to use. Many charitable organizations come in the form of either unincorporated associations or trusts, in addition to corporations with nonprofit status. Depending on what you want to accomplish, you may not wish to become a nonprofit organization. For example, a neighborhood group that forms to build a new recreation center or park may decide to remain an unincorporated association. Most organizations who wish to apply for tax exempt status from the IRS, however, incorporate their nonprofit organizations. Consulting with a corporate attorney in your area or checking in with your state's department of corporate division will help you decide which the best route is for you.

Decide if it is beneficial for you're not for profit organization to apply for tax exempt status. Tax exempt status from the IRS can be highly beneficial, but is also a big responsibility. The IRS performs a careful and often time consuming screening of your nonprofit organization. There are fees to file the paperwork, in addition to annual information returns to file. Hiring an attorney to help you file paperwork and make sure your nonprofit organization meets all legal requirements is something you may need to do.
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