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In order to start a successful tax-exempt nonprofit, be aware you’ll be launching a complex organization and you must first realize two salient things.
It has to be operated in a businesslike fashion, and you’ll encounter fierce competition for money.
The key characteristic for your success is building trust. That would be trust with the Internal Revenue Service, state authorities, donors and other sources of funds, and your board members.
Bear in mind charities don’t always succeed. Don’t just take the leap without due diligence and taking pragmatic precautions.
Incidentally, there are attorneys and CPAs who will give you pro bono counsel in setting up a nonprofit. Consider asking your local associations for a volunteer from each profession.
For success, you need focus and strategy.
Here’s the checklist:
1. Research
First and foremost, always remember that you are running a business.
Unrealistic thinking will get you into trouble with the IRS and your state authorities.
For success, determine if there is a need for your charitable organization.
2. Business plan
A business plan is imperative, especially if you’re seeking donations and/or grants. Your plan must have a needs assessment and discuss what you anticipate in raising funds, your products and services, and to whom you provide them.
Your mission statement must adequately explain your organization’s purpose and be cohesive with your branding and fundraising.
You need to plan how you’re going to make enough money to survive. You need a great branding logo and slogan, and Web site.
3. True nonprofit status
Not every great idea qualifies as a charity. There are two types of charities: Public charity and private foundation.
Public charities receive funding from the government or the public with broad support. Private foundations receive funds from investments and endowments.
“Always bear in mind that your own resolution to succeed is more important than any other.”
-Abraham Lincoln
For 501(c)(3) status, the nonprofit must be charitable, religious, educational, scientific, literary, testing for public safety, fosters amateur sports competition, prevents cruelty to children or animals.
4. Legal requirements
You’ll be regulated by the IRS and your state. Every locale is different so do your homework on what’s required.
The regulating entities want to be convinced that you’ll truly serve the community and that donors won’t be defrauded.
5. Record-keeping
You must keep good records and comply with reporting requirements. Manage all risks, get the right insurance and install financial controls.
6. Fundraising
Take a sophisticated approach to fundraising. Not to disillusion you, but you must approach fundraising with a vengeance – almost mercenary-like. Consider other charities as competitors.
The competition for dollars will be fierce. So develop a marketing plan.
7. Board of directors
An excellent board is critical for success. Recruit the right people and keep them engaged.
The board will be legally responsible to insure you adhere to your mission. Especially, your board will provide expertise in financial oversight and fundraising.
Mistakes to avoid
Not to be repetitive, it can’t be emphasized enough to avoid these typical mistakes:
— Again, never forget your nonprofit must be run like a business. Write a comprehensive business plan.
— Make certain you adequately plan your financials. You need a funding plan and a suitable financial records system
— Approach your dream with clear eyes. Be pragmatic about incorporating in your state and applying to the IRS for tax-exempt status.
— You must have a passionate, well-balanced board to achieve your mission. Board members must be loyal to your mission and market your organization to the community.
From the Coach’s Corner, here are links to related information:
Social Media Tips for Nonprofits to Capture Fundraising Dollars — Social media has leveled the playing field for small nonprofits competing with large nonprofits in looking for dollars. Formerly, big charities had the advantage because of their efficiency, reputation and size.
9 Ways for Nonprofit Boards to Perform Better — A significant number of nonprofit directors admit their boards are ineffective, according to a Stanford study which also makes nine recommendations for success.
How Nonprofit Boards Can Insure CEO Effectiveness — If you’re serving on a nonprofit board, congratulations. But remember, you need to be diligent — not a rubber stamp for the CEO. Here are strategies.
Embezzlement: Guidelines to Uncover and Prevent it — Embezzlement is a widespread nightmare. Here are proven strategies to discover embezzlement, and to prevent from occurring.
“Always bear in mind that your own resolution to succeed is more important than any other.”
-Abraham Lincoln
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