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January 31, 2024
Starting your non-profit organization (NPO) is a noble pursuit that creates positive change in the world. It brings people together and makes a difference in communities. Furthermore, it offers philanthropic individuals numerous benefits, like better credibility, grants, and donors.
Although an NPO can be the harbinger of transformative impact, starting one requires careful planning and dedication. This blog will guide you in successfully launching your own NPO financial management.
But before we delve into that, let’s first understand what an NPO is.
An NPO is an enterprise granted tax-exempt status by the Internal Revenue Service (IRS). This is because it promotes a social cause and offers a public benefit. Sometimes, they are also called 501(c)(3) organizations based on the section of the tax code that allows them to function.
Any donations made to an NPO are generally tax-deductible for the companies and individuals that make them. Additionally, the non-profit pays no tax on money gained via fundraising initiatives or donations.
Starting your own NPO can be easy if you understand and follow the proper steps effectively.
Here’s what you need to do.
If you are thinking of launching an NPO, first put in some essential research to see whether you can start a non-profit and if your mission will serve the community’s needs. But remember, you can face failure in your mission if you consider forming an NPO when it’s not required or feasible.
Before thinking about starting the NPO, ask yourself questions to determine the feasibility and need of the non-profit. Some of them include:
After assessing your NPO’s feasibility and needs, it’s time to build a strong foundation for its operation.
Here’s what you need to do for it:
This statement guides your organization’s actions and decisions. You need to:
This statement explains what your NPO does, how it does it, and why. You must:
It clarifies your NPO’s necessity, distinguishing it from potential competitors. You should:
Picking your NPO’s name is an important decision. It should align with your values, purpose, and mission. You must:
An effective board of directors is vital for your NPO’s success. You need to:
After evaluating your NPO’s feasibility and need, it’s time to file articles of incorporation. It’s a request made to your state to recognize your company.
Your initiative becomes a legal business once it’s approved. However, your firm still isn’t tax-exempted. For filing your articles of incorporation, first check whether the office in your state is the state’s business filing office. Remember, this office’s name and the steps and documentation to complete the filing differ in every state.
You must also apply for a federal Employer Identification Number (EIN) to operate your firm legally in the state. To apply easily, consider using EIN Assistant. Before filing, download Adobe Acrobat to obtain your confirmation letter online rather than waiting for it to arrive by mail.
The filing for tax-exempt status differs depending on the type of 501(c) organization you desire to establish. For instance, the most common type of non-profit organization is usually 501(c)(3), as it includes all religious, charitable, literary, and scientific organizations. You must file Form 1023, or Form 1023-EZ, to apply for 501(c)(3) tax-exempt status.
Your bylaws, records, and state and federal filing laws are significant in maintaining your tax-exempt status.
Here are some things to consider for your long-term tax-exempt status maintenance plan:
Following these steps will enable you to keep your tax-exempt status on a state level and solicit the funds for running your NPO.
Launching your own non-profit financial management business is a bold step towards becoming a force for positive impact. Following the above mentioned steps, you can establish your NPO and achieve your mission effectively.
Want to know more about NPOs? Escalon has helped over 5,000 companies across various industries improve their compliance regarding internal controls and streamline processes. Talk to an expert today.
Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.
Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.
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