Download Boot Camp for Changing the World

How to Start Manage and Grow a Nonprofit
Organization
Alexandria, Small Business Development Center
JL Ayers Consulting, LLC www. jlayersconsulting.com
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
Jennifer Ayers, MPA,Consultant, JL Ayers Consulting, LLC

Larry Checco, Checco Communications, Branding Expert

Tom Hay, Ph.D., A2B Research and Development, LLC

Page Moon, Focus Data Solutions

Cathy Pennington, CPA, Shareholder Renner & Company

Benjamin Takis, Attorney, Tax-Exempt Solutions, PLLC

Robert Weil, Law Office of Robert J. Weil, PLLC, Non-profit
legal counsel
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Overview:

Reasons to start a non-profit


Is an NPO the right solution?
Why Non-profits have different rules (sort of)
Board Development

Finding Board Members
Getting Started

Types of non-profits and tax-exempt organizations

Steps to non-profit formation

Form 1023 issues
Setting it up Right

Controls

Bookkeeping

Avoiding Problems

Open Discussion Lessons Learned
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 Change
the world
 Do good and help people
 Solve a problem
 Support a profession or shared goal
 Change
 Leave a legacy or make an impact
 Give money to others
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 Who
will Benefit from this organization’s
efforts?
 What
 Will
unmet need does it fill?
I let other People tell me what to do?
 Are
there other organizations that do the
same or similar things?
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A
donation to a reputable organization
 A For-Profit Venture (sole proprietorship,
LLC, C Corporation, Benefit Corporation)
 Volunteering
 Legacy Gift
 In-kind donation
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 Fundamentals




of NPO Theory
Revenue should be used to support activities
Money supports mission and services provided
Cannot be distributed to individuals
Accountable to the public- to retain status they
must do what they say they do
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 Skills
Needed
 Start small, plan for growth
 Personality and Strength
 Mix of Experience



Application
Interviews
Strength finders or Assessment
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Benjamin Takis Tax-Exempt
Solutions, PLLC
JL Ayers Consulting, LLC www.
jlayersconsulting.com
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A
non-profit is an entity (typically a
corporation) that does not distribute net
earnings to its owners or shareholders. Nonprofit status is determined under state law
 501(c)(3)
(or other tax-exempt status) is a
federal tax classification. Non-profits may or
may not qualify (it is possible to have a
taxable non-profit).
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501(c)(3) is one of many different tax-exemption
classifications under federal law.
Other examples:
 501(a): qualified retirement plans
 501(c)(4): social welfare organizations
 501(c)(5): unions
 501(c)(6): trade associations
States generally rely on federal 501(c)(3) status
when granting tax-exempt status under state law,
but not always
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
Earnings generally tax-exempt
under federal and state law
(also applies to other taxexempt organizations)

Donations are tax deductible
(unique to 501(c)(3)
organizations)

Eligible for grants from
foundations (unique to
501(c)(3) organizations)
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Charity
 Education
 Promotion of Health
 Advancement of Religion
 Advancement of Science
 Lessening the Burdens of
Government
 Testing for Public Safety

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Promotion of Social Welfare
 Promotion of the Arts
 Environmental Protection
 Fostering Amateur Sports
Competition
 Prevention of Cruelty to
Animals

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(1)
(2)
(3)
(4)
(5)
(6)
File Articles of Incorporation
Get an Employer Identification Number
Have your first Board Meeting: adopt Bylaws,
Resolutions, and Policies
Open a bank account
File Form 1023 and applications under state
law (27-month deadline)
File Forms 990 while you wait for tax-exempt
status
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 Corporate
name
 Duration (“perpetual”)
 Statement of Purpose (required for Form
1023)
 Whether or not you have members
 Authority of the Board of Directors, and the
process for appointment
 Plan for dissolution of assets (required for
Form 1023)
 Names of initial Directors, Incorporators, and
Registered Agent
 Authority to amend
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Once Articles of Incorporation have been filed,
the Board of Directors should have their first
meeting and take care of initial business:






Adopt Articles
Adopt Bylaws
Appoint Officers (Executive Director, Secretary, Treasurer)
Adopt Conflict of Interest Policy
Establish the authority of selected officers to open a bank
account and sign checks on behalf of the organization
Establish the authority of selected officers to apply for taxexempt status and sign a power of attorney
This meeting should be documented by written
resolutions and minutes
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User Fee: $400 or $850
 Timing: File within 27 months of incorporation
for retroactive tax-exempt status
 Be prepared for a long wait: look into fiscal
sponsorship in the meantime, and file Forms 990
 Must have proper statement of purpose and
dissolution clause in Articles of Incorporation
 Treated as “public charity” (and not a private
foundation) for first 5 years. Must satisfy “public
support” test after that.

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
Narrative:
 Describe your major activities, and give some
concrete examples (3-5 paragraphs is usually
enough)
 The Form 1023 narrative is not a grant
proposal and shouldn’t look like one.
 You should know all the IRS hot-button issues
associated with organizations likes yours, and
avoid triggering IRS concerns.
 Note: if you engage in activities that are not
described in the narrative or elsewhere in the
Form 1023, the validity of your tax-exemption
letter may be called into question.
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 Conflict



of Interest Issues:
The IRS closely scrutinizes transactions
with officers, directors, and related
organizations.
Be sure to adopt Conflict of Interest Policy
Procedure for approving compensation:
(1) Approve compensation in advance: (2)
Document compensation arrangements in
writing; (3) Record board decision in
writing (i.e. minutes of board meeting);
(4) Obtain comparability data from at
least 3 similarly situated organizations;
and (5) Document the data and its source
in the meeting minutes.
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Why a Nonprofit?
Catherine M. Pennington, CPA
Renner and Company, CPA, PC
 It’s
all about the mission
 Some of it’s about the taxes
 Who benefits
 Does the world need another nonprofit?
 Most




common:
501-c-3
501-c-6
501-c-7
501-c-13
Charity
Business League
Social/recreational club
Cemetery company
 Operate

on behalf of others
Private benefit
 Stakeholders
not shareholders
 Financial stability
 Separate
bank account
 Don’t cut corners


Filing
Reconciliations
 Segregation
of duties
 Chart
of Accounts
 Transactions
 Monthly reconciliations
 Policies

Conflict of interest
 Recruit
a good Board
 Do I need an audit?
 Reporting


Board
IRS
Should NPO’s Operate Like a Business?





Be profitable and earn money to support programs
Market themselves and understand the market
(stakeholders/those they serve)
Efficient and effective use of dollars
Retain and develop staff
Follow Best Practices
What types of people make the best leaders?
When do I open my checking account? What do I
need to do first?
What are common mistakes?
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Planning for Growth
Bob Weil, Tom Hay & Jennifer Ayers
Governance

Running a board meeting
Do’s and Don’t of Being on a Board of
Directors
Policies & Risk
 Legal Parameters for Good
Governance
 Why having good policies are
important to reducing risk
 Who’s liable?
Development Strategy




Different types of fundraising
Where to find resources – build
relationships
Building Metrics & Outcomes
Operating Well
Larry Checco, Page Moon, Ben Takis, Cathy
Pennington & Jennifer Ayers
 Charity Rankings- Best Practices
 Financial Operations




Policy & Risk


What to know about employees
Marketing Strategy



Financial considerations for managing grants
reporting Financial Data
Auditing/Controls
Messaging and branding
Getting People to Notice
Developing an IT policy &
determining your needs
Planning Basics- why you need a plan
February 25
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March 27
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Benjamin Takis, Attorney, Tax-Exempt
Solutions, PLLC
[email protected]
Catherine M. Pennington, CPA
Renner and Company, CPA, PC
[email protected]
Jennifer Ayers, MPA
JL Ayers Consulting, LLC
[email protected]
 Society
for Nonprofit Organizations
www.sfnpo.org
 ASAE http://www.asaecenter.org/
 Council for Nonprofit Advancement
 Foundation Center
 Chronicle of Philanthropy
 Center for
 Board Source
 Nonprofit Oyster
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