Starting a Nonprofit Series: The Paper Trail Begins
This is the second in a series of posts describing the process of becoming a tax-exempt organization. You can find the first post here.
So you’ve taken some time to really think about founding a nonprofit and have come the conclusion that your organization can fill a place that is not being served. What do you do now? Start by laying a solid foundation for the future work of getting your tax-exempt status.
Recruit a Board of Directors – They are one of your first and best resources. Be sure to select people who believe in the vision, bring useful experience, expertise, and a big network to the table. They need to be willing to help do the heavy lifting to get the organization off the ground. This process is a lot of work and you’re going to need all the help you can get. The IRS wants a minimum of 5 to ensure that 2 or 3 individuals won’t be able dominate the rest of the organization. Seven is an optimal number.
Finalize your name and articulate your mission – Once you have everyone around the table, take a little time to make sure you’re all on the same page. Being able to say what you’re going to do, how you’re going to do it, and who you will be serving will come up over and over again so you need to be absolutely clear and all on the same page. Yes, you can refine and tweak throughout the life of your organization, but if you start out with a clear vision of what you want to accomplish, you’ll find it easier to communicate it to others and differentiate your position in a crowded marketplace.
Incorporate – In Maryland, the Secretary of State’s office has a division devoted just to nonprofits! This page has great information on the steps you need to take, a link to Maryland Nonprofits and their checklist, and information on becoming sales tax exempt after your IRS recognition. To actually incorporate, visit the State Dept. of Assessments and Taxation (SDAT)and download the “Articles of Incorporation for a Nonstock Corporation”. It costs about $125. If you’re not in Maryland, check your local Secretary of State’s office for incorporation instructions and pricing.
When you get your incorporation papers returned with your registration and state number, be sure to digitize a copy and hang on to them – you’ll have to provide these when you apply to the IRS or seek any funding.
Get your Taxpayer Identification Number Getting an Employer Identification Number (EIN) is like a Social Security number for a business. You can apply online with the IRS and have one in minutes. This number will be the key for all your subsequent business dealings. When you receive your confirmation, be sure to digitize the letter and keep a copy.
Open a Bank Account – with an EIN number and incorporation, you’re a real company! Now you can open a bank account with some seed money.
Make a $100 Investment in Maryland Nonprofits – In the interest of disclosure, I do volunteer with Maryland Nonprofits as a Peer Reviewer for the Standards for Excellence program. I am also a long-time member because of the help I have gotten from them over the years.
As a newly minted nonprofit professional with only a criminal justice degree to prepare me, Maryland Nonprofits information and training truly helped me find my calling in the nonprofit sector. For support, training, and advocacy there’s no better organization. It is great to be able to pick up the phone and call someone with your questions, particularly as you start operations and need guidance on things like human resources. If you’re not in Maryland, you’re in luck because many other states have similar organizations!
If you fully utilize your membership as an “Emerging Nonprofit” you will more than get your money’s worth! They have a “Members Only” section of their website with downloadable forms that members can use as models for their own organizations. Key here are the Bylaws and “Conflict of Interest Policy” documents you need to file your IRS application. “How to Start a Nonprofit Organization in Maryland” book has detailed steps and information on the entire process which is available for purchase. Don’t reinvent the wheel on these policies, look to resources like Maryland Nonprofits and similar organizations for guidance!
Coming next: Writing and Fun with Budgets!