is still in operation and financially stable and that it has created a reserve bank account for rainy days ahead. You may not need to go without a paycheck for months or years, like I did, in order to get your nonprofit off the ground, but it’s important to consider salaries when you’re planning your first-year operating budget with the board of directors.
Putting together a budget can help you determine whether the start-up expenses are manageable for you. You’ll create lots of budgets sooner or later, so you may as well get an early start. Flip to Chapter 12 for details on budgeting and other financial issues.
If you can’t fund the operation by yourself in the early months, you need to make a compelling case that your new organization will provide an important service to the community and then convince donors that you have the knowledge and experience to provide it. You can solicit contributions from individuals before the IRS grants the organization tax-exempt status, as long as you reveal that your exemption is pending (and will be deductible to the donor if the exemption is granted) and you have met state charitable solicitation registration requirements. These contributions become deductible to the donor if you file for your tax exemption within 27 months of the date you incorporated and receive tax-exempt status.
If your exemption is denied, the contributions aren’t deductible, and you may be liable for income tax on the money you’ve received. Start-up grants from foundations or corporations are rare and next-to-impossible to obtain before the IRS recognizes your organization’s tax-exempt status, so don’t plan to receive any grants from outside organizations.
You also can try out your program on a small scale before filing for tax-exempt status by partnering with an existing nonprofit organization to test the success and need of your idea. For example, if you want to start a summer arts program for low-income children, talk to a local church or community center that serves that population and ask whether you can teach an art class one day a week for a month. Then you can try out your idea, demonstrate the need, and set up benchmarks for success.
Acknowledging the reality of what’s ahead
Ask yourself whether you’re the right person to start a nonprofit organization — and try to answer honestly. Undertaking this endeavor requires both a heart (for helping) and a head (for helping efficiently and effectively). If your organization offers a service, especially in the health and social-service fields, do you have the educational background, qualifications, or license necessary to provide those services? In addition to being professionally qualified, you need to consider whether you feel confident about your management, fundraising, and communication skills.
When starting and working in a new nonprofit organization, you need to be able to stretch yourself across many different skill areas. You may be dressed to the nines one day to pitch your project to the mayor or to a corporate executive, and the next day you may be sweeping the floor of your office or unplugging a clogged toilet. In other words, you need to be versatile and willing to take on just about any task that needs to be done. Nonprofit founders work from the boiler room to the boardroom. Visionaries do whatever it takes to start and manage a nonprofit organization.
Planning, plotting, and projecting
If there was ever a time to plan, this is it. Planning is what turns your initial idea into a doable project. Planning is also a good way to find potential holes in your thinking. For example, you may believe that your community lacks adequate animal rescue services. You may be right, but when you begin to break down the idea of starting an animal shelter, you may find that the project costs more money or requires more staff or facilities than you first imagined. When armed with that knowledge, you can adjust your plan as necessary or scrap the idea altogether.
To begin planning, write a 1- or 2-page synopsis of your nonprofit idea. In your synopsis, include
Why your organization should exist
What you’re trying to do
How you plan to do it
Outline both short-term and long-term goals and the resources needed to meet those goals. The list of resources should include money, volunteers, and an appropriate space to carry out your activities. After you’ve prepared your synopsis and list of resources, talk to as many people as you can about your idea, asking for help and honest feedback about your project. The purpose of this strategic planning process is to think through your nonprofit idea step-by-step. (If you need help in the planning process, take a look at Chapter 8.) The planning process involves thinking strategically, plotting ideas on paper, and projecting the needed ingredients for operational success and sustainability.
Understanding Nonprofit Ownership
We (Stan and Frances) once received a telephone call from a man who was shopping for a nonprofit to purchase. “Do you know if there are any nonprofits for sale in New Hampshire?” he asked. Although this question doesn’t come to us often, it illustrates a misconception about the status of nonprofit organizations. No single person or group of people can own a nonprofit organization. You don’t see nonprofit shares traded on stock exchanges, and any “equity” in a nonprofit organization belongs to the organization itself, not to the board of directors or the staff. IRS regulations allow the assets of nonprofits to be sold, but the proceeds of the sale must benefit the organization, not private parties.
If you start a nonprofit and decide at some point that you no longer want to manage it, you have to walk away and leave the running of the organization to someone else. Or, if the time has come to close the doors for good, any assets the organization owns must be distributed to other nonprofits fulfilling a similar mission. You need to follow the laws of the IRS and your state to close the nonprofit organization, including selection of an appropriate and, in some cases, approved nonprofit that will receive the assets.
Benefiting the public for the greater good
People form nonprofit organizations to create a public benefit for the greater good of all. In fact, nonprofit corporations are sometimes referred to as public benefit corporations. A nonprofit organization can’t be created to help a particular individual or family, for example. If that were possible,
