Starting a Non Profit Checklist

I’m often asked about the steps involved in starting a non profit. While there are some standard steps you can take, there are also variations based on the state in which you are planning on forming.

You see, while 501(c)(3) – what people traditionally think of as non profit status – is an Internal Revenue Service (IRS) classification for tax exempt status (on the basis of there not being a profit motive and the purposes of the organization being in the public interest). The status of a non-profit is more rightly understood as being conveyed by each state government. Because of the 14th Amendment, each state recognizes the declaration of another, however if you plan to open an office in a second state you will also need to register as a non profit in that second state and so on.

Sometimes these rules and regulations can seem circular, and that’s for the simple reason that they are often interrelated. You will see this as you progress through the checklist.

 

Starting a Non Profit Checklist

Here is a list of sixteen (16) steps involved when starting or forming a non profit organization, or the non profit part of a hybrid company:

  • Complete community needs assessment

A Community needs assessment is essential for making sure you are meeting a real need, rather than a limited need or one that would be better served by an existing non profit organization. This is the time to conduct as much research as possible about other organizations that might be serving a similar need or population.

  • Decide whether Non-Profit will be a membership organization or not.

If you don’t know what it means to have a membership organization, then now is the time to read up!

  • File the certificate of incorporation (with Secretary of State or State Attorney General)

Each state has their own requirements. It is best to speak to an attorney barred in the state where you are hoping to file to discuss the requirements and ongoing reporting that will be expected.

  • Select individuals to serve on the board of directors

Recruiting your first board is one of the most important set of decisions a founder will make.

  • Complete Strategic Planning process

Strategic planning can be done by a founder alone, but is best done with a founder and a board of directors. This is because buy in is essential to a useful and effective strategic plan!

  • Develop vision and mission statements

A vision statement presents the crux of the goals of the organization – what is it trying to achieve in broad terms? Mission addresses the audience to whom the organization is directed and to some extent how the vision is to be achieved. This should ideally be completed as part of the strategic planning process initially and then govern future discrete planning.

  • Establish bylaws and board policies

If the strategic plan is the heart, the bylaws and board policies are the bones and sinew. While rules might seem to offer rigidity, they are in fact helpful structure to ensure that the organization is running in accordance with state and federal law and the intent of the founder and board of directors. It is self-imposed to some degree, but that regulation can be incredibly helpful.

  • Obtain an employer identification number (EIN)

This can be obtained from the Internal Revenue Service.

  • File for federal tax exemption

This process can be complex – you may not be able to do so until you are clear on the mission of the organization. It may also be necessary to consult with either or both an attorney and an accountant with experience in non profit formation (or structuring hybrid for profit/non profit organizations).

  • Request IRS determination letter

The IRS often sends this letter as a consequence of a successful filing for tax exempt status. But, you may find that it is helpful to periodically request proof of continued determination: some funders require these letters to be recent.

  • Open a bank account and establish check signing procedures

As part of the board procedures and the personnel policies, it is important to establish internal fiscal controls. You may need proof of a board resolution to open a bank account (in addition to both federal IRS determination, and state certification).

  • Follow state and local non-profit regulations

Earlier I mentioned the need for research when filing a state certificate, especially around upkeep, regulation, and ongoing reporting to maintain the non profit status. This is the step where i’d recommend developing your own checklists to ensure that you are meeting all legal and government requirements in a timely manner.

  • Establish a payroll system and procure necessary insurance coverage

As part of readying to hire staff — if that’s part of your strategic plan — I would encourage you to consider the practical details of how your payroll system will function. Separately from this, it is essential that you have necessary insurance cover – whether general or professional liability, property etc – for your activities and those of your volunteers. Find an insurance agent who understands the needs of non profit organizations or social enterprise organizations.

  • Find office space and obtain office equipment

Even if the office space is a spare bedroom in someone’s home initially, space to conduct the business of the organization is still needed. It may never need an office or storefront, but this is a topic that needs to be explored, discussed and prepared for.

  • Recruit staff and prepare a personnel manual

There are a series of steps involved with recruiting staff: including job descriptions, personnel policies, compensation packages, and a recruiting plan.

  • Develop an overall fundraising plan

It is a reality that in order for an organization of any kind to function you have to figure out where the money is going to come from – both for program costs and overhead (even if the latter is minimal).

FREE CHECKLIST

I’ve put together a checklist for starting a non profit that may help you as you consider the steps in some form of logical order. This is free to use by you – please don’t distribute copies without the copyright line, alter or republish in any way in any format.

Download: Starting a non profit checklist

Please let me know what you think of the checklist!

See also the Non Profit and Social Enterprise Resource Directory  for more quality resources to help you make your community a great place to live!

Speaker. Reader. Thinker. Writer. Traveler. Advocate

Anna Blanch Rabe, founder of Anna Blanch Rabe & Associates, has been working with Social Enterprises, socially-responsible businesses, educational institutions, and non-profit organizations since 2006 to develop and effectively execute strategic, digital, and narrative initiatives to gain exposure, develop community- capacity, attract talent, and reach new customers. Anna is an Australian-born speaker, writer and advocate. Connect with Anna on Instagram, facebook page, & Twitter.

Anna Blanch Rabe & Associates LLC is a Communications Consulting serving community minded businesses, non-profits, and social impact businesses with high quality communications strategy, advice, and content.

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