An Attorney Shares 4 Things To Know Before Attempting To Start A Nonprofit

March 15, 2019  |  

Portrait smiling, confident young female volunteer loading donations into car in parking lot

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Looking to give back to your community by launching a not-for-profit organization? It sounds like an admirable thing, and it certainly is, but it can also be difficult. According to some experts, it’s estimated that less than half of nonprofit startups make it past five years, and those that do reach past the five-year mark, it’s not uncommon for them to end up struggling to make ends meet.

Desiree L. Talley, Esq, a private attorney at the Talley Law Group in NYC, believes that the key to creating a thriving startup is to be determined, and also, to not be naive about the fact that you might not be looking to rake in the dough, but you need money and a business mentality to really make it. We asked her to share some insight on things people interested in getting into the nonprofit space should know before diving in headfirst. Here’s what she had to say, in her own words.

Entrepreneurship is on the rise. While many new business owners are creating for-profit companies, some are breaking free from corporate restraints by entering the nonprofit organization space. Although nonprofit organizations are known as non-business entities, there is still a business aspect to creating these social cause organizations.

When starting your own nonprofit, there are several things that aspiring organizers should know:

1. Research and understand your market. Ask yourself what problem it is you are trying to solve and if there is truly a need for your nonprofit organization.

2. Understand that you still need a business plan. A business plan is still necessary, even with a nonprofit, because organizers may be asked to see copies of the business plan by potential investors, donors and board members.

3. Determine your sources of income and establish different pitches for each source. The most common sources of income for nonprofit organizations are: (i) private contributions, (ii) government grants, (iii) fees for services and goods from the private sector, and (iv) fees for services and goods from the government.

4. Incorporate the nonprofit for tax exempt status. There are approximately 29 types of nonprofit organizations that can file for tax exemption status. Review the IRS website to determine which category your nonprofit organization falls under.

After completing the initial steps to set up your nonprofit organization, organizers must then start the application process immediately. It can take the IRS anywhere from three to 12 months to improve the organization tax exempt status.

According to the National Center for Charitable Statistics, from 2005 to 2015, there was a surge of registered nonprofit organizations, rising more than 10 percent from 1.41 million to 1.56 million. Since then, more people are attempting to make a difference by starting their own. There are certainly hurdles to overcome, which comes with the creation of just about anything. But whether you’re looking to start a private foundation, a human service nonprofit org, an arts organization, education, mental health, civil right or any of the many other categories of nonprofits, with proper planning and research, it can certainly be done — and be a success.

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