When you set up a business, it can be for-profit or not-for-profit. Typical examples of nonprofits are charities, religious, scientific, educational, and amateur sports associations.
Nonprofits differ insofar as they receive tax exemption status but need the same governance and management, including financial reporting as for-profit trading businesses.
In this article, we look at some of the essentials for getting your startup nonprofit operational at home in America.
Legal Entity – Incorporate 501c3
Many people have heard the term 501c3 before. For those who might not know, a 501c3 organization is an organization that receives special tax benefits. The reality is that the world needs more nonprofit organizations.
Get incorporated with a 501c3 before you start fundraising otherwise you risk your tax-exemption status.
Nonprofit organizations are driven by people who are typically generous with their time and resources, and Governments have done their bit with incentives to encourage nonprofit activity. The 501c3 provides nonprofit organizations with special tax exemptions.
Before completing the 501c3, get expert assistance from a nonprofit business accounting and tax professional. For example, if your startup is operational and accepting donations before you’ve filed the 501c3, you may not get your tax exemption status.
Speaking of working with tax professionals, all nonprofit organizations need to make sure they hire the right staff, and not all of them need be on the payroll.
You can take on volunteers, and accept assistance from professionals keen to give back to society by donating a few hours of their time every month. Accept, in a non-paid capacity, the expertise of accountants, marketers, salespeople.
While not everyone who works for a nonprofit organization has to have prior nonprofit experience, it is a good idea to have a few people to call on for their expertise and advice.
Make sure your staff understand what’s expected of them and what they will get in return. No one works for a nonprofit for the money, they are driven by other goals.
The backbone of every successful nonprofit organization is going to be collecting donations. A traditional business is set up to make a profit. By definition, nonprofit organizations are not operating with gain in mind. However, they do need a revenue stream to pay for their activities, a skeleton of paid staff, utilities, premises, and systems.
Make sure your nonprofit is digital, and it’s set up for eCommerce transactions for donations and sale of products in your online store. Select a recognized and compliant payment gateway, so your nonprofit is trusted, and your site visitors have no hesitation in making a donation or buying from your eCommerce store.
The more donation options available, the more people will be able to donate to the organization.
Setting up a nonprofit will be challenging especially in tough trading conditions like we’re facing right now with the pandemic global recession. Some nonprofit sectors are doing very well while others have suffered a great loss.
Do your research to get the timing for your launch just right, or you can take a leaf out of the book of many trading businesses that are now household names including Microsoft, Airbnb, GE who all started in a recession.
What will put it in good stead for success is a strong foundation of systems and processes.
Enjoying what you do to make a living is important as typically we work around 90,000 hours in our lifetime.
Setting up a charity will be immensely rewarding, and we have many articles on the topic to give you a head start in your research and ongoing support.