The nonprofit sector is diverse and innovative. People are always creating solutions to the many challenges that arise. We see a problem and seek to fix it. We experience something wonderful and we want others to share in our joy. There are two ways that nonprofits are different from for profit organizations: most nonprofits seek contributions from others as a form of revenue, and board members or trustees do not benefit financially.
Nonprofits are often referred to as 501(c)(3) organizations. This is in reference to the IRS tax code that defines an organization as tax-exempt. Here’s what the IRS says:
“The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”
“The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual.”
Before you file for 501(c)(3) status we suggest you take the time to answer the following:
- What are the goals, vision and mission of the proposed nonprofit?
- Have you done the necessary research to determine if there is a need for the proposed nonprofit?
- Who will your nonprofit serve?
- Do you have community buy-in?
- What type of people will you need to serve on the board? Have you identified specific people who fit your criteria? Have you talked with them about your idea and their willingness to serve on the board?
- How will you secure the funds you need to launch and sustain your organization? Who will you solicit? How will you secure their financial support?
- Do you have a business plan, strategic plan and fundraising plan?
- Are there organizations providing similar services?
- What will be unique about the nonprofit?
- Is your nonprofit a profit making business that has “gone bad?” Is it an unsuccessful business that you want to sustain with a different tax status?
- Have you created a case for support that clearly communicates your vision, fundraising goals and projected impact?
- Do you need to obtain nonprofit status in order to bring your vision to life? Could you become a program of an existing nonprofit?
Take your time: your community is worth it.
Image courtesy of Master isolated images at FreeDigitalPhotos.net
Mel and Pearl Shaw are the authors of “Prerequisites for Fundraising Success” and “The Fundraiser’s Guide to Soliciting Gifts.” They provide fundraising counsel to nonprofits. Visit them at www.saadandshaw.com. Follow them on Twitter: @saadshaw.
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