Tips for Nonprofit Organizations
If you are interested in forming a nonprofit corporation in Nevada, here are some helpful hints.
- State and Federal: You MUST register your organization both with the State of Nevada and then file with the IRS. Because your 501(c)3 tax-exempt status comes from the IRS, registering as a nonprofit corporation just with the state doesn’t cut the mustard.
- Registration and Licensing: You MUST register the organization as a nonprofit corporation with the State of Nevada, before filing Form 1023 with the IRS. The filing fees for registering a nonprofit in Nevada are significantly lower than the fees in a for-profit business, but you still have to register. You also have to name a registered agent in Nevada for service of process. You are NOT permitted to claim that donations to your organization are tax-deductible unless you’ve received tax-exempt status from the IRS, which comes in the form of a letter months after you’ve filed your 1023, assuming there are no issues with your application.. Finally, you should check with the jurisdiction in which your organization will be located to see if you are required to hold a local business license as well.
- IRS Filing: Form 1023 is the application form for a 501(c)3 nonprofit or tax-exempt organization and is no small task to complete. The IRS is concerned primarily with how you will raise money, how it will be spent, and by whom, so the application requires your organization’s purpose, officer information, fundraising plans, financial projections, and proof of governing documents. The Form 1023 often takes months to process and, again, donations made before the approval are not tax-deductible.
- Board of Directors – Commitment: Whether your nonprofit is a high-maintenance startup or a well-oiled machine, be sure that each board member understands that a nonprofit involves a LOT of work. Serving as a board member should never be just a resume-builder. You don’t want a seat-filler, you want a workhorse or at least someone with connections they can leverage to the organization’s benefit. To this end, it helps to have each board member agree in writing to what will be expected of them in terms of meetings, donations, fundraising efforts, length of their term, and commitment to the cause. Don’t be afraid to require a level of financial or in-kind donations from each board member. It’s very common and ensures some level of commitment to the organization.
- Board of Directors – Division of Labor: Many nonprofits almost run themselves, requiring relatively little work from the board. However, a startup nonprofit has to be run like a business, and without funds to pay staff, the board members have to step up and take responsibility for the day-to-day operations. When determining who’s in charge of what, be sure that at least two people have login information for accounts such as domain name registration, online bookkeeping, banking, etc. You don’t want your organization’s important information to disappear when a board member unexpectedly resigns.
- Fundraising: Clearly I can’t say this enough, but you cannot claim that donations to your organization are tax-deductible until you’ve received the approval letter from the IRS. This means it will be the most difficult to make ends meet in the early days of your organization. Plan to run on fumes for at least nine months while you wait for your tax exempt status. Putting a business plan or fundraising plan together is a great idea, as it provides a reality check for where you’ll find funds to run the organization and how frugal you’ll have to be.
- Strategic Planning: I can say from personal experience that nonprofit strategic planning processes are crucial to the success of the organization. Nonprofit boards of directors are almost always comprised of people from different industries, backgrounds, skill sets, and levels of nonprofit experience. Therefore, it’s very common that you could ask twelve board members what the organization’s purpose is and get twelve different answers. A strategic planning retreat (usually an all-day or half-day meeting) gets everyone on the same page, making fundraising efforts far more effective. There are consultants who provide nonprofit strategic planning services, but they aren’t cheap. Be sure to check their references for honest feedback about their services. The last thing you want to do is spend a lot of money and hours of board members’ scarce time in a strategic planning meeting that goes nowhere.