How to file for nonprofit organization
How to Start a Nonprofit Organization in 2023 (Step-by-step)
Timecodes:
how to start a non-profit organization
in 2021
otherwise known as a 501 c 3
organization so a nonprofit organization
is a business entity in which your main
goal
is to not make a profit but rather to
make money
in order to expand on a social cause so
a social cause could be something like
feeding the homeless or
helping out victims of harsh
circumstances
but of course as tax professionals we
cannot ignore that
having a non-profit has some incredible
tax benefits for its owners
for example 501 c 3 organizations
are completely tax exempt which allows
them to use
more money towards their desired social
causes so
you pretty much win in both ways okay
you save money on taxes
and at the same time you're able to
support your favorite
social calls so in this video what i
want to do is show you
exactly how to start a non-profit
organization
step by step stay tuned
hey there i'm sean with life accounting
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continue to grow yourself
right so why start a non-profit
organization well
if your goal is to support a cause for
the long
term then you're going to need an
organization because you get
a lot of great benefits for starters
your ability to receive
funding from sources like grants are
significantly increased
because once people see that you are an
established
501 c 3 then two things start to happen
first the level of trust in your
organization goes up because
setting up a non-profit organization is
not easy and secondly and probably more
important
when people actually donate to you and
give you money
then they can actually use that donation
as a tax
write-off which is considered a
charitable donation
on their tax returns so it becomes a
win-win for everyone so you get a
donation and they get a tax write-off or
a tax deduction
for example i believe google gives up to
ten thousand dollars for non-profits
to advertise their causes on google
and then google is able to write off
that expense another great benefit of
nonprofit organizations
is that you get limited liability
protection
which is basically the same type of
protection that you would get
when you own something like an llc right
you get
limited liability protection which
usually means that if
your nonprofit were to get sued then
your
personal assets are protected against
any claim about your non-profit
a third and powerful benefit of owning a
non-profit organization
is your ability to hire there are
thousands no
millions of people who just want to do
good and are willing to work for free
and then on top of that there are many
companies that are willing to give you a
discount
on their products or their services in
order to support
a cause that they believe in and that
ability to raise what i would call
time is sometimes even stronger
than your ability to raise money and of
course
from our tax planning perspective the
biggest
biggest benefit of having a non-profit
is being able to have a
tax exemption status once you
incorporate
your 501c3 which basically means that
the corporation or the nonprofit
doesn't have to pay any taxes all right
so let's go ahead and talk about how to
start a non-profit
organization step by step starting with
step number one ask yourself six
big questions who what when
where why and how so starting with who
who will be involved because when you
incorporate a non-profit organization
depending on the state that you live in
you may be required let me repeat you
may be
required to have a certain amount of
directors
or people a part of your nonprofit
organization
for example in the state of georgia your
nonprofit must include
at least three directors not related to
each other
on the other hand if you are starting a
nonprofit organization
in the state of california then you need
at least three directors not related to
each other
you also need a president a secretary
in a treasurer or some type of cfo so
in georgia you need three people in
california you're required to have six
people but hey
the main point here is that you want to
make sure
you have enough people on board required
to start your non-profit
the next big question is what so the
number one mistake i see people making
is just simply thinking because they
have a non-profit
money is just going to fall from the sky
and they're going to be able to do
anything they want to do but listen
raising
money is hard and running an
organization
is even harder so you want to think very
carefully
when you're incorporating your business
and thinking about your business plan
what's your budget what's your admission
and why
why why would someone donate to you
as opposed to another non-profit
organization
so big big things to consider here the
next question to ask yourself is when
i know i know right most people when i
say win
they say right now but getting your
non-profit incorporated
the right way takes a lot of time
you're going to have to work with your
state and get articles of incorporation
which i'm going to go over in a few
steps in a minute
and you're going to want to apply for
your tax exemption
status now all of this can take a few
weeks
up to a few months to finalize
so just make sure you're considering
that when you think about your timeline
now the next two questions to ask
yourself are where and why and i'm just
going to assume if you're watching this
video that
you know exactly where you want to be
established and you know why
you're doing it but of course if you
haven't then stop
and think before you get incorporated
and the last question to ask yourself is
how okay and this goes back to
having a great business plan but what i
want you to do is think hard about
how you want things to go because again
running a non-profit
is hard it takes a lot of time and if
you're not prepared to manage it
then you need to come up with a plan all
right moving on to step number two
choose a name for your nonprofit
organization now
chances are if you're watching this
video then
you're probably already excited about
starting your non-profit organization
and i'm willing to bet that you've
likely thought of a name as well
hey sean look i'm drowning in non-profit
business names
okay so i just have two quick tips for
naming your non-profit organization
tip number one choose a name that
identifies
with your cause so for example when you
hear
a non-profit name like the american
cancer society
it's very clear what they stand for and
what they help with
right it's something around cancer so
make sure that whatever name that you
choose people can
easily identify what your organization
stands for
so number two once you have a name in
mind make sure that it's not taken so
what you're going to want to do is run a
name search
using your state tools such as going to
your secretary of state website
and then doing a name search you can
also use some federal tools to do a name
search or
you can run a domain search or a website
url
search to see if there are any websites
with the same name that you are thinking
about
when it comes to your nonprofit now the
next step is all about how to actually
get your nonprofit incorporated but
before we go on let me just take a
moment to ask you
are you enjoying this video so far if
you are
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people who want to learn
how to start their non-profit
organization moving on to step number
three
get incorporated so getting your
non-profit incorporated is very similar
to getting
really any business incorporated even
when you're setting up a business like
an
llc or a limited liability company now
regulations do vary greatly from state
to state so the steps that i'm about to
share with you right now
shouldn't be taken as a substitute for
competent legal counsel
and please always do your own research
okay
even if you have legal counsel i would
still advise doing your own research
okay so when you're filing for your
articles of incorporation
also called certificate of incorporation
in some states
you're going to want to do the following
one
get a registered agent so your
registered agent can be
you or someone else that you appoint it
can even be an
outside third party team like a legal
team that you've hired
now the registered agent is mainly
responsible for sending
and receiving any legal documents so
what you're going to want to do is put
that register agent's information such
as their address
email number full name of course etc
when you're actually filing for your
articles of incorporation
the second thing you're going to want to
do is select your officers and directors
so
as i mentioned earlier some states may
require
you to have a certain amount of officers
and directors
and while you're filing your nonprofit
you will need to list the names
of those officers and directors so of
course make sure you have their full
names
and their contact information such as
their email address their number
and their physical address where you're
ready to get incorporated
three you may need to provide a
certificate of disclosure so
this is simply a document that basically
confirms there has been
no failure on the part of the nonprofit
or
any of its directors or officers to
disclose
all the important information this could
be things such as reports
forms statements or other documents
filed
by the non-profit number four you may
need to provide proof
of a corporate name now this of course
is pretty self-explanatory and usually
something that is
easily done especially if you are filing
your non-profit online
they'll do all the work for you pretty
much and five
and finally you're gonna have to pay
fouling fees okay
again pretty straightforward but of
course filing fees vary from state to
state depending on where you decide to
file your nonprofit
but in order to get your articles of
incorporation you're going to have to
pay some filing fees
now in addition to these five things it
may also be beneficial for you to
include
bylaws or an operating agreement for
which the nonprofit organization
will be managed just in case you end up
having a legal issue
with any of your directors or managers
or co-owners
inside of that operating agreement you
may want to adopt policies such as a
conflict of interest
or compensation policies so that
everything is
laid out as clear as possible now once
you have completed your articles of
incorporation
then after a few weeks you should be
approved
and then you're ready to move on to step
number four
step number four file for federal tax
exempt status that
501 c3 status all right so this is a big
one and probably the most important
aspect of starting a non-profit
organization
so when you're ready to file for federal
tax exempt status for your nonprofit
there are several forms that you can
choose from
each form has a different fee associated
with using them but please
please please do not choose a form based
on the filing fees okay
just because one form is cheaper than
another form
does not mean it's the right fit for you
so
again do your own research or seek out
legal console for deciding which form
that you need to choose
now one of the most popular ways to
apply for that tax exempt status is to
use form
1023-ez
this is a form for organizations with
gross receipts
less than 50 000 or have assets
under management of under 250
000 dollars of course as you grow beyond
those financial thresholds you may need
to reapply
using something like a regular form 1023
okay another important note is that
whoever is filing these forms
must have a registered account with the
irs
along with filing for this exempt status
you're going to want to file for form
ss4 so that you can get a federal
employer identification number
or ein for sort which will basically
be required if you want to set up a bank
account hire people
um your use it for paying staff and
other non-profit
identification measures so that's how
you file for
your tax exempt status now let me be
clear that not
every application is accepted the irs
will review they're going to make sure
you fit some requirements
and they may possibly correspond with
you which would mean they're
asking more questions or requesting more
documentation
now after all that the process of
receiving a determination letter from
the irs
may take anywhere from a few weeks to
several months
and as of right now as of july 2021
while i'm recording this video
we are seeing a lot of delays coming
from the irs
and sometimes after weeks of waiting you
still may need to submit
additional information to the irs for
them to be able to make an official
ruling on your application now once you
do hear back from the irs
determining that your 501c3 has been
obtained then congratulations your
non-profit
is set up but there is still one more
step
that i want you to be open to taking
step number five
keep up with your state filings
compliance
and ongoing reporting one of my all-time
favorite quotes is from stephen covey
when he says
think with the end in mind so of course
i don't want to leave you with just how
to get started but i
also want to let you know what it takes
to maintain your nonprofit
in the months and years that followed so
many states and local governments will
require you to complete
more filings to receive recognition as a
tax
exempt entity so remember in the last
step we applied for
federal exempt status so now
we need to let the state know the good
news here is that usually when the
federal government
recognizes your nonprofit as tax exempt
the state will follow suit but you still
have to go through some additional
filings and fees
for local compliance such as registering
before you start any fundraising
you may need to register before engaging
in any type of lobbying
you may need to secure permits and
licenses for things such as
the goods and services that your
nonprofit provides so let's say for
example that you are serving food
you might need a license for that if you
are helping
children you may need a license for that
or if you're hosting an event in a
certain
public area then you may want to go out
and get a permit for that
also to improve your tax status you're
going to want to file for
tax exemption at the state level so you
can avoid doing things like paying
property taxes or sales taxes
so overall if you want to keep your
nonprofit in a healthy position what i
want you to do is think about
these four things one you need to set up
your internal
processes so stuff like how you're gonna
hire staff how you're gonna
manage your money through your
accounting system
okay two you need to keep track of all
your regular
activity such as the board meetings that
you're having with
the key officers and the directors that
are a part of your organization
third key you need to report taxes with
hell
every single quarter which includes your
federal taxes
your state taxes and possibly even local
taxes
and then four you also need to keep up
with
annual reporting so some of the things
you need to report annually
is your form 990 you also need to file
an annual tax return of course and you
want to make sure you're renewing your
nonprofit
and paying your renewal fees all right
so now that you made this far i have
one additional bonus tip for you and
that is to ask yourself
do you need a non-profit organization
because you may not depending on what
your goals
are so ask yourself some of these
questions are you just trying to help
out one person or a small group of
people
are you just trying to put on an event
to raise awareness or raise a little bit
of money
is it just a one-time tax write-off like
you just made a lot of money
you're looking for a huge tax write-off
if the answer to any of these questions
is yes
then you need to reconsider if you need
to go about incorporating a non-profit
because for example you could put on a
big event
help out a lot of people support a cause
and still get a huge personal tax
deduction for doing so
however of course if your goal is more
long term like you want to help
people for many many years to come then
of course starting a non-profit
organization
can be a great option for you alright so
that's it for this video guys i would
love to talk to everyone in the comment
section so
if you enjoyed it please write us a
comment access any questions you want or
just share your overall feedback
and let's talk about it all right we
have two more videos that are coming up
next so if you haven't checked those out
already
make sure you do and i'll see you over
[Music]
there
you
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