Nonprofits are charitable organizations that have the function of benefiting or improving society, rather than the private interests of individuals, shareholders, or board members. So long as they meet specific criteria based on religious, educational, scientific, or other mandates, they can qualify as tax-exempt for donated income under Section 501(c)(3) of the Internal Revenue Code. They also confer tax benefits to those who contribute to the organization. There are several basic components necessary to establishing and building a successful nonprofit that accrues these benefits.
One essential consideration is that the majority of income should come through public donations, whether from grants, individuals, or corporations. In addition, nonprofits should provide the public with low-cost (or no-cost) services and programs of demonstrated practical value.
A critical factor in ensuring nonprofit success is garnering community buy-in and support in the form of material contributions. Ideally, this entails a research process that begins with taking a look at unmet community needs. If the aim is to build youth literacy through an afterschool program, it helps if there is not already a similar program in the local area that already fulfills this function. Not only will competition eat into the donor base, it will make it difficult to enroll a sizable number of participants.
It is also important to identify deficiencies in programs designed to meet public needs. Often, there are programs that look impactful on paper but are simply not delivering the results they should. In such cases, it may make sense to create a survey that identifies weak points in existing services provided, as well as unmet needs, and create a roadmap of ways of adding extra value to the community.
A nonprofit plan of action should span three years and encompass milestones, projected budget, and impact goals. The document should be rooted in research and include items such as program overview and analysis of similar organizations. This makes it much easier to approach institutional and individual donors and make a compelling case as to why funds are necessary and could not be better distributed elsewhere.
Funders desire a measurable and demonstrable impact analysis, along with the assurance that money is being allocated in the most effective way possible. This requires accurately estimated program-related costs and human resources, as well as an understanding of the fundraising necessary to achieve one’s mission. In addition, donors want assurance that a nonprofit has a long-term commitment to its mission and plans in place for continuity and succession. If these elements are not fully in place, it may make sense to consider working in tandem with an existing organization to meet community needs.
Those ready to launch a nonprofit should allocate at least a few months to organize and incorporate, apply for tax-exempt status, and assemble a board. A good place to start is by securing an Employer Identification Number online and applying through the IRS for 501(c)(3) status. It can take three to 12 months to receive a decision on 501(c)(3) status, depending on the scale and complexity of the organization. For those nonprofits that expect to take in less than $50,000 each year, Form 1023-EZ provides an expedited application that takes two to four weeks to process.
A final essential is setting in place a knowledgeable and committed board of directors. While simply seeking out wealthy patrons and prestigious figures to populate the board may seem like a viable strategy, in the long run this may not benefit the organization. Prospective board members should have a passion for the organizational mission and combine enthusiasm and idealism with practical skills that enable judicious financial decisions to be made. With these basic elements in place, launching a viable nonprofit is realistic and achievable for many.
One essential consideration is that the majority of income should come through public donations, whether from grants, individuals, or corporations. In addition, nonprofits should provide the public with low-cost (or no-cost) services and programs of demonstrated practical value.
A critical factor in ensuring nonprofit success is garnering community buy-in and support in the form of material contributions. Ideally, this entails a research process that begins with taking a look at unmet community needs. If the aim is to build youth literacy through an afterschool program, it helps if there is not already a similar program in the local area that already fulfills this function. Not only will competition eat into the donor base, it will make it difficult to enroll a sizable number of participants.
It is also important to identify deficiencies in programs designed to meet public needs. Often, there are programs that look impactful on paper but are simply not delivering the results they should. In such cases, it may make sense to create a survey that identifies weak points in existing services provided, as well as unmet needs, and create a roadmap of ways of adding extra value to the community.
A nonprofit plan of action should span three years and encompass milestones, projected budget, and impact goals. The document should be rooted in research and include items such as program overview and analysis of similar organizations. This makes it much easier to approach institutional and individual donors and make a compelling case as to why funds are necessary and could not be better distributed elsewhere.
Funders desire a measurable and demonstrable impact analysis, along with the assurance that money is being allocated in the most effective way possible. This requires accurately estimated program-related costs and human resources, as well as an understanding of the fundraising necessary to achieve one’s mission. In addition, donors want assurance that a nonprofit has a long-term commitment to its mission and plans in place for continuity and succession. If these elements are not fully in place, it may make sense to consider working in tandem with an existing organization to meet community needs.
Those ready to launch a nonprofit should allocate at least a few months to organize and incorporate, apply for tax-exempt status, and assemble a board. A good place to start is by securing an Employer Identification Number online and applying through the IRS for 501(c)(3) status. It can take three to 12 months to receive a decision on 501(c)(3) status, depending on the scale and complexity of the organization. For those nonprofits that expect to take in less than $50,000 each year, Form 1023-EZ provides an expedited application that takes two to four weeks to process.
A final essential is setting in place a knowledgeable and committed board of directors. While simply seeking out wealthy patrons and prestigious figures to populate the board may seem like a viable strategy, in the long run this may not benefit the organization. Prospective board members should have a passion for the organizational mission and combine enthusiasm and idealism with practical skills that enable judicious financial decisions to be made. With these basic elements in place, launching a viable nonprofit is realistic and achievable for many.