starting a nonprofit organization focus area: grants education instructor: vince franco

Grants Assistance Hotline 1.866.973.2760 www.NativeLearningCenter.com

Starting a Nonprofit Organization

Focus Area: Grants Education

Instructor: Vince Franco


For additional help

Technical Assistance Hotline 1-866-973-2760


Course Description & ObjectivesCourse Descriptions:Once you have a focused organization and a plan in place, you may be ready to start a 501 (c)(3). This course will guide attendees through the process of establishing a Board of Directors, incorporating as a nonprofit organization, creating bylaws, holding organizational meetings, and much more.

Course Objectives:After this course, attendees will be able to:• Describe the process of incorporation;• Utilize best practices to form a Board of Directors;• Conduct a meeting to adopt bylaws and goals;• Create a records book; and,• Apply for 501 (c)(3) status using IRS Form 1023.

Starting a Nonprofit Organization

#1


Your PresenterVince Franco

Grants Compliance ManagerNative Learning Center (NLC)

6363 Taft StreetHollywood, Florida 33024

[email protected]

Ext. 10651

mailto:[email protected]


Any Questions?• If you have a question please use the hand tool to raise

your hand and type your question into the chat box (next slide).

• The presenter will work to answer your questions as quickly as possible. Questions will be answered in the order they were received.

• Please remember to complete the class survey at the end of this course.


How to ask a question


Technical Issues? Unable to hear us?


Topics• Building an Organization and Defining Your Mission (Review)

• Choosing a Business Name• Incorporating your Organization• Articles of Incorporation• Putting Together a Board of Directors• Developing Bylaws• Holding an Organizational Meeting• Registering for an Employer Identification Number• Applying with the IRS for 501(c)(3) Nonprofit Status• Sales Tax Exemption• Contributions and Applying for Grants and Funding


Building an Organization and Defining Your Mission (Review)

• Implementing a Needs Assessment It is a survey of potential customers Helps to identify other organizations doing what you do

• Conducting a SWOT Analysis Defines your Strengths and Weaknesses (Internal) Defines your Opportunities and Threats (External)

• Developing a Mission and Vision Statement A strong mission shows why an organization exists and its overall purpose A strong vision supports the mission by showing the future path of an organization

• Creating a Logic Model, Goals and Strategic Plan Helps to define the purpose of an organization Helps to determine the everyday direction as well as long-term objectives

• Developing Partnerships


What do you think a successful nonprofit organization looks like?


Choose a Business NameFirst, you need to choose a business name and check for availability. Every state has a Division of Corporations that will allow you to search for available corporate names, as well as outlining any restrictions on naming. You should also familiarize yourself with the statutes in your state that deal with incorporation and nonprofit organizations.

In the State of Florida, go to: http://www.sunbiz.org.

Avoid numbers and colors Avoid fads and clunky names

Keep it short Make it memorable Sound like you belong

Check with the State Do your homework

http://www.sunbiz.org/


Choose a Business NameIn most states, the potential nonprofit's name may not be the same-as or similar-to other names on file. In addition, watch out for the situation stated below.

Nothing is more important for an organization than having a name that is logical and easy to remember. Some names look great, however, the names may be memorable for the wrong reasons. Many bad names come about because of poor planning. However, some of the worst names are unintentional.

The nonprofit’s name must contain the term Corporation or Incorporated or the abbreviations Corp. or Inc.

Be aware that the term Company and the abbreviations Co. or Comp are exclusively reserved for profit firms.


Choose a Business NameHere are some naming situations to avoid.

And here are some examples of bad names and name changes.

Now that you have carefully considered a name, let’s move on.

Unusual Spelling Would-4-Sail This company sells wood

Unusual Phrase Killer for Hire This in an insect control company (I hope!)

Redundancies Internet Gold-Golden Lines Website Design

Complexity Ziffren, Brittenham, Branca, Fischer, Gilbert-Lurie, Stiffelman, Cook, Johnson, Lande & Wolf

Legal Firm

Boring Business Systems Royal Mail (1635) to Consignia (2001) Curl Up and Dye

Ruth’s Chris Steak House Abbott Laboratories to AbbVie Sleazer Clothing Emporium

Comp USA Bookgoo IP Anywhere

OK Service Station Ontario Rabbit Education Organization Fifth Third Bank


Incorporate your OrganizationIf you are located outside of

Florida, thenyou will need to check with the National Association of Secretaries of State to determine the process and filing fees for incorporation. Go to: www.nass.org.The filing fee is usually between $50 to $200, but it varies by state.

For more information on incorporation

in the State of Florida, go to the Division of

Corporations at: http://www.sunbiz.org.

Next, let’s look at what you need.

http://www.nass.org/





Articles of Incorporation• Incorporation is a process that establishes

an organization as a legal entity. It also shifts liability of the organization from an individual to the corporation.

• Usually conducted at a state level.

• Usually requires the completion of Articles of Incorporation and a fee.

• Articles of Incorporation require serious decision making regarding the structure of the organization.

Let’s look even closer.

•


Articles of IncorporationArticle I Name Name of the Corporation shall be…

Article II Duration Duration of the Corporation shall be perpetual.

Article III Principal Office Principal street and mailing address of the Corporation is …

Article IV Purpose Corporation is organized exclusively for charitable, scientific and educational purposes within the meaning of 501 (c)(3) . The mission of the Corporation is to provide…

Article V Manner of Appointment & Election

Manner in which the Board of Directors of the Corporation are appointed and elected is provided in the Bylaws of the Corporation.

Article VI Initial Board of Directors & Officers

Title, name and address of each initial Board of Directors and Officers are …

Article VII Limitations & Powers Earnings of the Corporation shall not benefit the Directors of Directors, Officers, or other individuals. Salary to employees shall be…

Article VIII Dissolution of Assets Upon termination, assets of the Corporation will be distributed within the meaning of 501 (c)(3). The assets will be distributed to…

Article IX Initial Registered Agent Name and street address is…

Article X Incorporator Name and street address is…


Board of DirectorsIn most states, you must have at least three Directors, who are age eighteen or older, for your nonprofit organization. Normally, your Directors do not have to reside within the state, but check your state’s requirements.

All of the Directors should be selected, in part, for their ability to raise money. This is very important because raising funds is an organizational effort and everyone should be involved in generating revenue to operate the organization. Look for people with work experience in sales or business.


Board of DirectorsWhat are some common themes and recommended personal qualities of a strong Board of Directors member?

For more information on the qualities of Board members, go to: http://www.governanceprofessionals.org/society/Governance_for_Nonprofits_-_Board_Members_Personal.asp

Common Themes… …Qualities… …More Qualities

Honesty and a strong sense of ethics Someone who wants to learn and seeks out information

Ability to refrain from performing staff functions

Ability to communicate and work with others

Someone who can pose the right questions

Ability to critically evaluate an issue

Energy and enthusiasm Someone who represents the community that you serve

Fortitude to hold people accountable

Good listening skills Someone willing to make sure the mission of the organization is

realized

Patience and resilience

http://www.governanceprofessionals.org/society/Governance_for_Nonprofits_-_Board_Members_Personal.asp





Bylaws There are usually no set criteria for the content of Bylaws, but they typically set forth internal rules and procedures. There are a number of web pages out there that have sample Bylaws, including http://www.ehow.com/how_7518601_develop-bylaws-nonprofit.html and www.grantspace.org.

You might or might not be required to file Bylaws with your state, but in most cases, you must keep a copy at your organization's principal place of business. Check with your state to make sure.

Let’s look closer at Bylaws.

BYLAWS

Article I Purpose

Article II Office

Article III Board of Directors

Article IV Officers

Article V Committees

Article VI Employees

Article VII Miscellaneou

http://www.ehow.com/how_7518601_develop-bylaws-nonprofit.html



http://www.grantspace.org/


Bylaws

Power*: authority to “oversee” or authority to “manage” the affairs of the organization. New nonprofits may require Directors who have the ability and authority to oversee operations. More established nonprofits may require Directors who manage the process.

Article I Purpose A. Purpose B. Mission & Vision C. Other

Article II Office A. Location(s) Article III Board of Directors A. Power* B. Residency C. Number D. Election E. Term F. Vacancies

G. Removal H. Resignation I. Quorum J. Meetings K. Waiver of Notice L. Informal Action M. Participation N. Voting O. Absence P. Compensation

Article IV Officers A. Officers B. Term C. Removal D. Resignation E. Powers & Duties (Chairperson, Vice Chairperson, Secretary & Treasurer)

Article V Committees A. Executive Committee B. Finance/Audit Committee C. Other Article VI Employees A. Executive Director B. Employees & Agents C. CompensationArticle VII Miscellaneous (Operational)

A. Fiscal Year B. Gifts C. Checks, Drafts, Loans, Etc. D. Deposits E. Books & Records F. Amendments G. Indemnification H. Insurance I. Validity J. Other Issues


Organizational MeetingHold an Organizational Meeting and create a Records Book. You will need this book to store important documents concerning your organization.

Check your state’s nonprofit recordkeeping requirements

for specific information about what

you need to record in your

Record Book.

Bring this book to all meetings.

CORPORATE RECORDS

Articles of Incorporation

Bylaws

List of Board of Director Members

Official Minutes from Meetings

Other Documents


Organizational MeetingConsider implementing the following activities before and during your first organizational meeting.

Before the meeting:• Select a date, time and location, and then announce the meeting. If not

already included in your Bylaws, select a date, time, location and frequency that is conducive for all. Send emails or postcards to confirm.

• Create a first agenda that includes the issues below.

During the meeting:• Name and approve the Board of Directors, Officers,

and the Executive Director;• Adopt the Bylaws and major goals or strategic plan;• Adopt a budget and major events, if any;• Approve an accounting system and fiscal year; and, • Select a bank. Look for a bank that has accounts

for nonprofits with low minimum deposit requirements.

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Employer Identification NumberRequest an Employer Identification Number from the IRS, with or without employees of the organization. This can be done via an online application at www.irs.gov.

Use IRS Form SS-4, Application for Employer Identification Number.

The federal government and many state and local agencies use the EIN to identify your organization.

Let’s look closer.

http://www.irs.gov/


Employer Identification NumberSample of questions on the Application for Employer Identification Number (IRS Form SS-4). Keep in mind that some items will and will not apply to your organization.

Now it’s time to formally apply for 501 (c)(3) status.

1. Legal Name of Entity 2. Trade Name (or D/B/A)

9. a. Type of Entity 9. b. Name State of Origin

10. a. Reason for Applying? 10. b. Specify Type of New Business

11. Date Business Started 12. Closing Month of Accounting Year

13. Number of Employees Next 12 Months 15. First Date Wages Paid

16. Principal Activity 17. Indicate Product or Services Provided

New Business

Corporation

Other (specify)


Applying for 501(c)(3) Status with the IRS Become familiar with the Application for Recognition of Exemption (IRS

Form 1023). Read the instructions carefully. This is a comprehensive 23-page

form and may require you to seek accounting and/or legal assistance to complete it.

IRS Form 1023 requires a lot of leg work, but don’t worry, many other people have

completed this form successfully.

So let’s look closer.


Applying for 501(c)(3) Status with the IRS Listed below are standard questions and attachments for the Application for Recognition of Exemption (IRS Form 1023).

Standard Questions Standard Attachments, Narratives, ListsWhat is your Employer Identification Number? State-approved Articles of Incorporation

What is your date if Incorporation? Board-approved Bylaws

Are Officers and Directors related to Employees?

Narrative of your overall activities

Are you affiliated with a government unit? Compensation of Officers and Directors

Will you operate a school? Compensation of five highest paid employees

What is your status of public charity? List of duties, qualification, and hours of work

Are you a Successor to another organization? Narrative of fundraising activities

Have you adopted policies on compensation? Financial Statements, if more than one year old

Are you requesting a Definitive Ruling? List of grants received


Applying for 501(c)(3) Status with the IRSAfter approval of incorporation and the return of your filed Articles of Incorporation by the Division of Corporations in your state, which usually takes about 30-60 days, you can submit IRS Form 1023.

Once you get your IRS exemption, you can apply to your state for a Sales Tax Exemption.

So let’s look closer.

Keep in mind that you must file IRS Form 1023 within 27 months of the date of the establishment of the organization or when your Articles of Incorporation were approved and returned to you.


Sales Tax Exemption Who Qualifies?

501 (c)(3) Organizations determined by the IRS to be

exempt from federal income tax

What is Exempt? Purchases and Leases

What must be proven? 501 (c)(3) Status

What Documents are Required?

Copy of the Determination Letter from the IRS

Exemption Category 501 (c)(3) Organization

What Else is Needed? Employer Identification Number Incorporation Date

And…?

Does the organization receive income from the sale or lease of personal or real property or the sale of taxable services? If yes, provide a copy of your Sales and Use Registration Number.


Contributions

• Wait until incorporation is finalized in your state and you have the letter of 501 (c)(3) status from the IRS before trying to raise money through contributions.

• Why?

• Before incorporation, you are personally responsible for how you handle money. Also, you cannot tell potential donors that their contributions are tax deductible until you are officially declared a tax exempt nonprofit by the IRS.

Your Organization


Contributions • However, if you need to start raising funds before state-approved

incorporation and IRS-approved 501 (c)(3) designation, you can use a Fiscal Sponsor.

• A Fiscal Sponsor is simply another nonprofit organization that is willing to handle your donations for you. This situation is also known as Nonprofit Management or Nonprofit Incubation.

• For more information on Fiscal Sponsors, Nonprofit Management and/or Nonprofit Incubation, go to the Society for Nonprofit Organizations at www.snpo.org. In addition, go to the Foundation Center www.foundationcenter.org and use the key word of Incubator.

http://www.snpo.org/

http://www.foundationcenter.org/


Grants and Funding

• If your organization wishes to apply for grants, keep in mind that funders, whether private foundations, corporations, or government agencies, almost always require 501 (c)(3) status. For more information on these granting organizations, go to www.foundationcenter.org.

• In addition to tax exemption, contributions and grants, there are other benefits of 501 (c)(3) status, including special discounts on postage and rent. Some programs, like local Rewards Programs, require that an organization be a 501 (c)(3).

http://www.foundationcenter.org/


Topics Covered• Building an Organization and Defining Your Mission (Review)• Choosing a Business Name• Incorporating your Organization• Articles of Incorporation• Putting Together a Board of Directors• Developing Bylaws• Holding an Organizational Meeting• Registering for an Employer Identification Number• Applying with the IRS for 501(c)(3) Nonprofit Status• Sales Tax Exemption• Contributions and Applying for Grants and Funding


Closing Notes

If you have any questions or need help, call The NLC Grants Technical Assistance Hotline at 1-866-973-2760!

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starting a nonprofit organization focus area: grants education instructor: vince franco

Documents

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focused organization

mission reviewimplementing

course objectives

board of directorsconduct

irs form

overall purposea strong

organizational meetings