Are you planning to start a nonprofit?

Are you thinking of starting your own nonprofit?  What do you hope to achieve? How will you go about starting it?  What benefits do you anticipate?  What drawbacks might you expect?  If these questions seem unnecessary, you may be in for a big surprise.

Nonprofits are an important feature of American society.  From the earliest days of our history, Americans formed “associations” to accomplish purposes about which they cared deeply.  These associations express the American spirit.  Where other countries relied on State or Church to provide critical social services, Americans chose to address pressing social issues quickly, efficiently and independently.  But anyone considering starting a nonprofit today should recognize that it may not be an easy road.  It is essential to have clear goals and to understand the rules that apply.

  1. What do you hope to accomplish? Who will help you?  Does an existing organization already do this work?
  2. Where will you get the money for start up expenses? Can you afford to self-fund or do you have a source for seed money?  How much will it cost?
  3. Do you expect to make a salary?
  4. If you form a charity, do you know what “private benefit” and “private inurement” mean?
  5. Are you aware that a charity cannot engage in political activity or support/oppose a political candidate?
  6. And finally, do you know that a charity must keep its assets in the charitable sector even after the organization dissolves?

It’s probably more complicated than you might have initially thought.  Both the State Attorney General and the Internal Revenue Service have oversight over nonprofit organizations – and they cannot solicit contributions without registering with the State.  Also, be aware that a public charity must show that much of its revenues come from public sources, not from single donors.  And – one last thing:  should you be a nonprofit corporation or an unincorporated association or possibly even a charitable trust?  All of the above can be exempt from federal income tax if they qualify, thus providing an attractive opportunity for donors to give tax deductible contributions.

But don’t be discouraged by the above.  If you have a cause about which you are passionate, go ahead with your plans.  Take the time, though, to get professional help and educate yourself about the ‘do’s and don’ts’ of starting and running a nonprofit.  Don’t be discouraged.  If you really believe in your cause and are willing to do some hard work, proceed.  This can be a great adventure for an educated start-up entrepreneur.  It just takes careful planning and realistic goals.    

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