Creating an NPO can seem daunting at first, but knowing the steps will take you a long way.
Having the right tools for the job will ensure that your NPO is successful.
Let’s look at the 5 steps to creating a non-profit organization that will thrive in today’s world.
Step 1: Choose a Name for Your NPO
Naming your NPO might sound like a walk in the park but ensuring that you have a good organization name means following two tips.
Relate to the Company Cause
The first step is to name the company based on your cause.
If we look at something like Save the Trees Organization, it’s clear what they stand for.
You need to make sure that the name you choose will tell people exactly what your organization is all about.
If your creative juices are running out, you could make use of a company name generator to get an idea of where to start.
The second step is to make sure the name isn’t already taken.
Some federal tools could be helpful to do a name search, but you can also run a domain or website name search.
Once you see that your name is original, you can proceed to step 2.
Step 2: Who, What, When, Where, Why, and How?
You need to know the answer to these 5 questions if you want a successful NPO.
The ‘who’ refers to who will be involved in your organization.
Certain states like Georgia require you to include 3 directors who aren’t related to each other. So, it’s important to know who will be involved in the organization.
‘What’ refers to your business plan, budget, mission statement, and the type of nonprofit organization you’re creating.
‘When’ is the timeline of your NPO. You can’t expect things to work as soon as you start. You’ll need to work with the state to get articles of incorporation, apply for tax exemptions, etc.
‘Where’ and ‘why’ is knowing where you want your NPO to be based and the reason for wanting to create one.
Many who go into the field of Social Work often start NPOs to make a difference in the world. This means you can look for the fastest, cheapest way to earn an MSW so that you can create an NPO of your own.
Finally, ‘how’ refers to how you want things to go and how you plan to manage your NPO.
Step 3: NPO Incorporated
When it comes to incorporation, regulations vary from state to state.
The first step is to get a registered agent that’s either someone you appoint or yourself. This person is mainly responsible for sending and receiving legal documents.
You then need to select officers and directors and record their contact information.
You also need to provide proof of a corporate name and which you can do online.
Then, you’ll need a certificate of disclosure confirming that the NPO did not fail to disclose all relevant information.
These agreements should contain conflicts of interest or compensation policies to make everything clear.
Finally, you must pay filing fees. These vary from state to state, but if you want your articles of incorporation, you’re going to pay a fee to have them filed.
Step 4: File for Federal Tax-Exempt
This is arguably the most important aspect when it comes to creating an NPO.
When you feel ready to file for a federal tax-exempt status for your NPO, there are several forms you can choose from.
Each form has a different fee associated with it, but don’t go for the cheapest option.
The 1023-EZ form is the most used method of applying for a tax exemption. This is for small businesses with gross receipts of $500,000 or less and assets of $250,000.
Whoever files these forms must have a registered account with the IRS.
Another form you might want to file is form SS-4.
This will allow you to get a federal employer identification number that can you can use for setting up a bank account or hiring people.
Not every form will be accepted immediately. The IRS will ask further questions and request more documents if need be.
This process can take a few weeks, or several months, so patience is key.
Once you hear back from the IRS regarding your file and all is well, then your NPO is set up.
Step 5: Keep Up-To-Date State Filings and Reports
You can’t simply start an NPO; you must think long-term and drive your organization to success.
Most states and governments require you to file additional paperwork to be recognized as a tax-exempt entity.
When the federal government recognizes your non-profit as a tax-exempt organization, the state will follow suit.
You will still need to go through additional filings and fees for local compliance.
These include registering before starting any fundraising, registering before engaging in lobbying, and securing permits and licenses for goods and services.
If you want to avoid paying property and sales taxes, you can register for an additional tax exception from the state.