Starting a non-profit organization can be rewarding. Besides serving the community, it can also help you fulfill your philanthropic goals. The difficulty, however, is in getting it running and ensuring sustainability.
Registering and sustaining a non-profit requires planning, organization, and strategic execution. This post discusses how you can register your non-profit organization in six easy steps.
Unlike other businesses, which are created to make profits, non-profit organizations need to file a 501(c)(3), which is the IRS code that allows for tax exemption. This is one of the most crucial steps in this process that makes non-profits different from other organizations.
Here’s a six-step process on how you can get your non-profit organization up and running.
How to Register a Non-Profit Organization: A Step-By-Step Guide
You’ll need to set up your non-profit business in a way that you’ll impact your target group of people and attract funding.
Let’s look at how you can do so in detail.
1. Research Business Purpose and Need
Before you register your non-profit organization, you need to be clear on its purpose and ensure you’re serving a valid need.
Knowing what you want to accomplish with your organization will help you attract funding and find support, workers, and volunteers more easily. It’ll also serve as a source of inspiration that will keep your business going.
Part of finding the need and purpose of your business includes having a financial plan in place. You need to know how much it’ll cost to get your organization off the ground.
This includes basic infrastructure, initial filing fees, the costs you’ll incur to get permits (if any), and the ongoing financial cost for sustainability.
Being clear on your purpose will also make it easy for you to decide which type of NGO you should start. Here are some categories you can explore.
2. Name Your Organization
This is a crucial step for any business, as your business name will represent your public image. You need to pick a name that’s unique and one that reflects your organization’s values, mission, and purpose.
You can use a descriptive name but be careful not to make it too long as it should be easy to memorize as well. But if you still choose a long name, make sure you use abbreviations.
To ensure your business name is unique, check with your state’s filing agency. You can also ensure the domain isn’t already in use, even before creating a website, to avoid complications in the future.
Depending on your state, you’ll be required to add Corp., ltd., LLC, or co. abbreviations in your company name.
3. Build a Solid Foundation
Here, you conduct a series of activities to build the base of your non-profit organization. The first requirement is appointing a board of directors. These are the people who will be in charge of controlling the operations of your non-profit as soon as you register it.
Therefore, you’ll need to analyze them by skill and define their roles. Part of your board should consist of people with finance and marketing skills and another with legal expertise.
Then, find board members with experience in the field your non-profit will operate in. Some states require you to list member names in the incorporation documents.
Second, you’ll need a mission and value statement to provide direction and motivation to your organization.
This is also the step where you create your non-profit’s bylaws that will determine how your management operates. Your bylaws spell out items such as your meetings, rules governing director appointments, and so forth.
4. File Your Incorporation Documents
Incorporation is how you get your state to recognize your non-profit as a legal business. You’ll submit certain documents to your state’s filing office in this step and wait for their approval.
Usually, the state’s filing office is your Secretary of State’s office. However, this differs by state, so make sure you confirm the same for your state.
Now that you have a suitable name, a board of directors, and bylaws, you need to include these details along with other required incorporation documents.
The fees you incur to register in your respective state will vary.
Every non-profit business also requires a Registered Agent, much like other forms of business. So, you’ll also need to appoint a qualified Registered Agent during incorporation.
You’ll also need your Employer Identification Number (EIN) to start your non-profit. You can file your Tax ID or EIN with the IRS. This will ensure that you can transact legally in your state and track your financial activities.
5. File for Tax Exemption/501(c)(3)
Tax exemption is not taken care of during incorporation. It’s an independent step all non-profit organizations have to take after they’re registered legally.
Here, you file a form with the IRS within the first few months of your operation to get exempted from federal taxation. There are different forms for each type of tax exemption status.
You’ll need legal help to determine where your organization falls. Luckily, online platforms that provide incorporation services can take care of this process for you. Incfile is one such organization that can help. Check out GovDocFilling's Incfile Review for more information.
The form you end up filling out will determine the fees you’ll pay for this process and the type of tax exemption. So, make sure you get it right.
6. Maintain Continuous Compliance
You’ll need to check with your local government to see if there are any further legal filings you need for tax exemption. Then, review the IRS requirements on how to maintain your tax-exempt status.
For instance, you’ll need to fill out forms like Form 990 to show your finances, processes, and activities when filing your annual returns with the IRS. You’ll also need to keep a record of your payroll, worker’s compensation, unemployment taxes, withholding tax, etc.
Every state also requires that you file annual reports. Some states have rules regarding fundraising, special permits, and licensing.
For instance, you may need to register before starting a fundraiser or get special licensing if you’re operating in healthcare. Be sure to check those out before starting any activities.
Ready to Register Your Non-Profit Organization?
Despite its benefits, registering a non-profit organization can be daunting. Hopefully, the information in this post acts as your guide and makes things a little easier.
In addition to this essential information, you’ll need to get expert help to get the ball rolling, both legally and financially. This way, you’ll make no mistakes with the tax exemption application or ongoing compliance.