How to Start a Nonprofit Neel Hajra, President & CEO November 8 , 2010

1. How to Start a NonprofitNeel Hajra, President & CEONovember 8, 2010

2. Goal • General familiarity with nine basic steps for starting a nonprofit corporation

3. Step One • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

4. What Is a Nonprofit? ?

5. A Nonprofit Is... • “Nonprofit” is a type ofcorporation • Key distinctions • No dividends • Public good • Governed by board • Keystone of civil society Public Board Executive Director Staff & Volunteers

6. Two Meanings • Statenonprofitcorporation • Federaltax exempt status: “501(c)(3)”

7. A Nonprofit Is Not... NONPROFIT FOR-PROFIT GOVERNMENT

8. Step Two • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

9. Advantages • Nonprofit corporation • Limited liability • Perpetual existence • Employee benefits • Formality and structure • 501(c)(3) tax exemption • State and federal income tax exemption • Tax deductible donations • Eligibility for public funds • Lower rates on postal and other services • Estate tax benefits

10. Disadvantages • Crowded and noisy • Diminishing resources • Potential redundancy • Loss of control • Administrative burden • Political activity restricted • Dedicated assets • Asking for $$$

11. Considerations • Need? • Core support? • Funding? • Duplicative? • Is forming a nonprofit the best approach?

12. Step Three • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

13. Preparations • Vision and clear mission • Planning • Strategic • Business (including budget)‏ • Start convening board & supporters • Strong Executive Director

14. Step Four • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

15. Articles of Incorporation • Basic characteristics • Filed Articles = corporation created • Standard Articles for Michigan

16. Articles of Incorporation • Name • Not misleading • Not existing • Mission • Somewhat broad scope • Benefits public good • Concise language • Basis, Assets, Budget, Governance • Non-stock • Simple assets & budget • Directorship vs. Membership

17. Articles of Incorporation • Location of Office • Incorporators • One or more • Fiduciary • Names initial board • (extra) Include IRS restrictions • (extra) Protect trustees and volunteers

18. Step Five • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

19. Board of Directors • Initial Board is named at first meeting of incorporators, elected thereafter • Interests of corporation AND society • Duty of care, loyalty, and obedience

20. Board Responsibilities • Oversees everything!

21. Board Composition • Consider: • Passion / Interest / Commitment • Expertise • Connections / Resources • Diversity • Customers • Local resource: www.boardconnect.org • More info: www.boardsource.org

22. Step Six • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

23. Bylaws • Internal regulation and management • Adopted at first meeting by the new board

24. Bylaws • Purpose: “As stated in the Articles of Incorporation.” • Number of Directors: Must have three. Recommend at least five. • Term for Directors: Must be at least one year. Recommend at least two years and staggered terms. • Board Meetings: Must be at least annual, recommend monthly during first year.

25. Bylaws • Officers: Must have President, Secretary, and Treasurer. Recommend Vice-President as well. • Quorum • Must have at least a majority when Board is < 7 • Must have at least 1/3 when Board is seven+ • Recommend majority

26. Note: First Meeting • Name board & elect officers • Adopt documents • Approve activities • Good Template: Use the “Minutes of First Meeting” appendix from How to Form a Nonprofit Corporation, by Anthony Mancuso

27. Step Seven • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

28. Federal Forms • Form SS-4 • Employer Identification Number (EIN)‏ • Form 1023 • Primary form • 501(c)(3)‏

29. 501(c)(3) Requirements • Formed exclusively for benefit of the public good: • Charitable • Educational • Religious • Literary • Scientific • Testing for public safety • Prevention of cruelty to children or animals • Fostering national or international amateur sports competition

30. 501(c)(3) Requirements • Must be operated for exempt purpose • “UBIT” • No private inurement • Cannot distribute gains • Assets irrevocably dedicated • Cannot substantially engage in the influence of legislation • No partisan politics

31. Form 1023 Exceptions • Not required for: • Churches and related associations/schools • Branch of national exempt organization • Organizations with gross receipts < $5,000 annual

32. Form 1023 Themes • Activities and Operational Information • Personnel and business relationships • Technical Matters • Financial Information

33. Other 1023 Info • Most applications are accepted • Turnaround time is several months, and going up! • Good Form 1023 walkthroughs: • How to Form a Nonprofit Corporation, by Anthony Mancuso • Prepare Your Own 501(c)(3) Application, by Sandy Deja

34. Step Eight • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

35. Registrations • Charitable Trust (Dept. of Attorney General)‏ • Charitable solicitation registration (Dept. of Attorney General)‏ • Required if asking for more than $8,000 annually • Lobbying registration (Dept. of State)‏ • Required if direct spending exceeds $1675 total or $425 for individual • State and local withholding (Dept. of Treasury)‏ • Form 518 is required if organization has employees • Sales Tax (Dept. of Treasury)‏ • Property Tax (local assessor)‏ • Nonprofit postage rates (U.S. Post Office)‏ See www.mnaonline.org

36. Step Nine • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

37. Ongoing Admin • Annual filings • Insurance • Financials & Audits • Employment Administration

38. Recap • What is a Nonprofit? • Why? • Preparations • Articles of Incorporation • Board of Directors • Bylaws • Tax-Exempt Status • Registrations • Ongoing Operations

39. Resources • www.new.org (ResourceConnect Section) • Getting started & templates: • How to Form a Nonprofit Corporation,by Anthony Mancuso • www.StayingLegalMI.Org • Ongoing Operations • Michigan Nonprofit Management Manual,by Michigan Nonprofit Association

40. ResourceConnect • BoardConnect® • npServTM • The NEW Center

41. Good Luck!!