Does anyone know how to start a not-for-profit organization? Perhaps you can point me to some websites that offer this information. What kind of government paperwork is required, how much money it would take up front to register a name and a charter, etc.
Also, is this a potential way I could make a living? Are there limits on what someone who runs a NFP Org. is allowed to show as take home income?
Thanks for any help.
SFP
If it’s not for profit, doesn’t that kind of eliminate the prospect of getting money out of it? ~o_o~
I don’t know about that, schrodingerscat. Those “debt consolidation companies” that are so pervasive on TV aren’t in it out of generosity. I just don’t know how they make money and call themselves non-profit.
Peace,
mangeorge
Not for profit doesn’t mean you can’t pay salaries and expenses, buy cars etc. - My nephew who is wise in things like this told me last xmas (we were discussing this very subject) that you will certainly be scrutinized early on as a lot of people have had the same idea.
Or as he put it - they (the system) have a lot of people who start these things with the intention of stealing money.
There is a lot of info. on this topic on the Internet and published in books. See
http://www.nonprofits.org/npofaq/02/
The type of paperwork that is often required includes, but is not limited to, the following:
Articles of Incorporation
Organization By-Laws
Federal 1023 Request for Tax-Exemption
Federal 872-C Form
Federal 8718 Tax Form
Various Schedules, depending on your type of organization
State Tax-Exemption Request Forms
Sorry if I’m suggesting the obvious, but have you searched online? A quick search on Yahoo using the terms- non-profit startup how to -came up with quite a few hits (68,700 actually).
Total fees, including state and federal, totaled about $450 here in California, but this was about 7 years ago.
There are various commercial products available (CD ROM’s, “How To” Manuals, etc.) that provide the paperwork, checklists, filing requirements, etc. needed for non-profit incorporation. I used one myself and that made the entire process so much easier.
One incorporates in a state. Different states have different fees, and different requirements.
One then applies to the IRS for nonprofit status, provided the organization was founded for one of the nonprofit purposes the tax code recognizes.
The IRS generally recognizes two basic types of nonprofit corproations: ones which operate for the public benefit, and ones which function primarily for the benefit of the members, such as some fraternal organizations and trade organizations. The primary distinction is that contributions made by donors to 501©(3) organizations–the first type mentioned–are tax deductable, while contributions to the latter are not, since people are generally making the contribution in order to benefit themselves.
Incorporations are generally done through the Secretary of State’s office in a state. The IRS can mail you a kit with forms and instructions for applying for nonprofit status.
Salaries paid to employees of a nonprofit organization are carefully scrutinized to see that they are reasonable in light of the amount of work the person paid actually does, and the overall budget of the organization. The IRS and other regulatory authorities are on guard against organizations calling themselves nonprofit to avoid taxes, yet operating so that the surplus the organization generates goes primarily to the benefit of principals–that is, operating like a for-profit business. This does not mean that the employees of some nonprofit organizations are not paid handsomely; for instance, I expect professors and deans at Harvard make a nice salary.
Another thought: in various areas their are organizations of lawyers and/or accountants who provide pro bono assistance to nonprofit organizations. For instance, as an attorney, I have handled several nonprofit incorporations through The St. Louis Volunteer Lawyers and Accountants for the Arts. Such organizations are also typically a good source for volunteer board members.
“Nonprofit” is something of a misnomer in any case.
A more accurate term is “not *for * profit”. In corporations and other forms of business organization operating surplus is called “profit” and is available for distribution to the owners. In a nonprofit organization there are not, properly speaking, owners. Unlike a for-profit business, the operating surplus is not available for distribution to the operators–that is, they cannot declare themselves a dividend. Instead, they are obliged to reinvest this surplus into the operations of the organization, or else use it as a contribution to another nonprofit group.
Thanks for the answers so far. I guess I should have been a bit more specific. I was thinking of starting something that would collect money based on a medical condition… the money would be used primarily for research, but I would also assume that I would be allowed to pay myself and a staff a salary also. so, let’s say that I’m wildly successful, and money pours in. Can I decide to pay myself a 6 or 7 digit salary. or will the IRS frown on something like this?
irs just want their taxes
One can get in considerable trouble for paying salaries or giving other benefits to an employee which the IRS considers excessive. This is one reason nonprofit organizations are so forthcoming with information as to what percentage of their revenue goes to programs rather than to overhead such as salaries.
The issue as to what is an excessive salary for an organization is judged largely in light of the overall budget of the group, and the responsibilities of the individual. Some guidance can be gotten by looking at the reported salaries of existing nonprofit organizations. The tax returns of nonprofit organizations are public documents, and there are organizations and libraries which maintain data basis of tax returns and annual reports.
The IRS also looks closely at the salaries paid to stockholders of privately-held corporations. There is a concern that a stockholder might be listed an employee and receive a substantial salary,yet actually do relatively little work. This is a matter of interest as salaries are a deductable expense before tax, yet dividends paid to shareholders are not. By paying a bogus salary to a shareholder in lieu of a declaring a dividend, the corporation could reduce its taxable income and, therefore, the amount of tax it is obliged to pay.
"Can I decide to pay myself a 6 or 7 digit salary. "
I bet some charities already do that, but the reason is because they are trying to attract qualified fund raising people who have the proper experience. Do you?
uh… no. But what difference does that make? If it’s being done already (as you surmise), are you telling me there is a list of justifications out there that would identify what I could pay each employee? That would certainly make things easier, but I’ve never heard that a not-for-profit could pay a fundraiser $1 million because he is a good fundraiser, but couldn’t pay the same for someone who’s services are just as valuable (in my judgement, of course).
Slipster, etc… thanks for the good info.
El Gui - of course I looked on google. But, as you’ve pointed out, there are thousands of links that come up. I was hoping someone out there had first-hand knowledge of this and could boil it down quickly. The teaming millions never let me down.
A fundraiser can earn whatever the market can support. Many times, the officer in charge of running a large endowment will be given a salary connected in some way to his/her performance versus the market.
As for other employees, they can earn enormous sums of money as well. All that needs to be established is that the person in question provides a valuable service to the organization. 501©(3) organizations are extremely loosely regulated, despite some claims above. In fact, this is a major concern of the IRS at the moment.
I’ll refer you to http://www.charitynavigator.org/ which compiles a database of as many non-profits as possible, as well as their Form 990s. Any non-profit is required to provide a 990 upon request, which is how this website has them. They are public domain. You’ll need a password for the site, but I’ve yet to receive any spam from the account.
On the 990 you’ll find all sorts of good information - income, revenue, donations, board members, top salaries, mission statements, expenditure justifications, etc.