Stepping Stones: How To Start A New Non-Profit

 

 

By Mary E. Costello © January 2007

Independent Consultant

Grant Writing & Program Development

Creative Edge Consulting

www.CreativeEdgeConsulting.org

 

 

 

Congratulations on making the leap! 

 

In celebration of my first complimentary article for the Boys Project/University of Alaska-Fairbanks national online resource center, I’ve decided to do some preliminary pieces to help our newcomers benefit from the information that will soon follow.  You’ll be pros in no time!  But, you need to set some action items in motion so that you can join the rest of us in actually DOING the work.

 

Entering the realm of non-profits, if you have yet to experience the specific joys and the frustrations, is an interesting journey.  We’ve all been there at one time or another, with so much to learn.  Hopefully, while we take this walk together on paper as my articles continue, I can help you find your way without utilizing the “trial and error” approach.  It is my honor to assist you—teaching or warning you about what I have come to learn through mistakes and successes, time and experience, past naiveté, or simple necessity that was due to limited resources in this regard, forcing me to figure it out and learn “as I go.”  It will save you time, money, disappointment, and …perhaps, keep you from giving up out of pure discouragement.  With so many people in crisis in both the U.S. and abroad, we need you.  So, let’s work together to improve this world.  What do you say?

 

For the purposes of this article, I will assume that you are only starting out and, like many before you, have no idea where to begin.  It is likely that you have, for argument’s sake, solely an idea or rough plan at this point.  So, that is where we will focus for now—our first set of stepping stones.

 

You are probably already wondering how you will fund your program, and I bet you think the logical place to start is with grants.  Hold your horses, my friend!  Let’s check first to see if you are ready for the grants process.  You need to apply for—and officially RECEIVE APPROVAL of—your 501(c) 3 IRS tax-exempt status before you will qualify for most, if any, grant funding.  But, let’s back up a moment.

 

 

In order to establish your tax-exempt non-profit organization, here is a list of what needs to occur, in the order in which you should proceed:

 

 

  1. While a “business plan,” in the traditional sense of the word, is not necessary for setting up a non-profit, it is not a bad idea to put down all your programmatic, fiscal, and operational components on paper.  My personal belief is that your program does not exist—or, at very least, is not a functional program but just a preliminary idea—until you hash out all the minute details.

 

I suggest you start with an outline.  It is probably easiest to do this on a computer since you can add subsections so easily, but if free-form handwriting is your more creative place—by all means, do it that way!  Find what works for you—lists, flowcharts, index cards, “Post-its,” whatever.  Be creative and let your mind wander wherever it may.  Some of the best ideas come about that way. 

 

Think of your program development ideas as a triangle or pyramid.  At the very top is your main idea, and, as you break it down, the details become more complex and greater in number.  Remember, as with the pyramids, more blocks build the foundation than the absolute top.  Without it, the entire structure crumbles.  Be kind to yourself during this exercise.  Rome wasn’t built in a day…nor was, in this particular example reference, Egypt.  At this stage of the game, you only need the basics to get started and this part of the process, in full, will take you quite a bit of thought and time.  It will evolve.

 

The outline should begin with your overall purpose, then broken down into program goals.  Program goals are then divided into program or project objectives.  Next, list the activities that need to take place under each of the objectives.  Once you get to this stage, both for development of the program and the operational phase itself, you have…  “a program.”  At least, that is, for our starting point.

 

Utilizing this plan, you can then better understand what costs may be attached to its implementation.  We’ll discuss budget preparation in a later article, but I cannot emphasize enough the importance of determining all your needs and realistic fiscal requirements early on.  You will not have any luck in funding awards until you lay out all the particulars.   Do your homework.  Yet, much of this can be done after filing the non-profit legal and tax paperwork that will only require a more sketchy explanation for now.

 

 

  1. Formulate your Board of Directors, keeping in mind your need for a diverse group of people in both backgrounds and talents.  At a minimum, you will need 3 people for this, although most non-profits have Boards consisting of 12 members and up. 

 

I strongly urge you not to have your Executive Director as your Board President or even a sitting member of the Board of Directors.  Even if that person is the founder, no one owns a non-profit.  An Executive Director REPORTS to the Board of Directors and is charged with daily operations and management of the organization.  I additionally caution you leaders about nepotism and filling Board seats with your relatives.  It looks poorly from an organizational standpoint and minimizes the Board’s positive affect on grantmakers.  It is a MISTAKE.  Instead, find people in the community who can contribute something unique to your program.  Find people who will actively offer the “Three Ts” —time, talent, or treasury.  Look for balance in the group you invite to join you, including people with different backgrounds—both professionally and personally.  Diversity.

 

Once you have identified your team, you need to plan a formal first meeting to hold elections for the leadership roles of President, Vice President, Treasurer, and Secretary, OR, as some organizations prefer, Chairman/person, Vice-Chairman/person, Treasurer, and Secretary—and receive approval of your By-laws and Articles of Incorporation (see below).  Maintain minutes of every meeting you hold.

 

 

 

  1. Create your By-laws and Articles of Incorporation.  There are books and resources on the web that can help you do this, but you can also turn to an attorney to handle these documents in addition to filing them in your state.  (This needs to occur while your formulate your Board.  They need to vote on these prior to submitting them for legal incorporation.)

 

 

  1. Apply for your federal EIN (Employee Identification Number).  This can be done either online or over the phone.  http://www.irs.gov/businesses/small/article/0,,id=97860,00.html.

 

 

  1. Once you are officially a corporation (based on steps 3 & 4), it is time to prepare your form 1023 IRS 501(c) 3 application for Recognition of Exemption.  You can access the application at irs.gov.    A 28-page document, this paperwork contains questions that YOU can complete largely on your own.  Other sections, however, may require you to consult with an attorney or accountant who specializes in non-profits.  PLEASE hear that.  I have seen new organizations choose to stick with their for-profit consultants to experience disastrous and costly outcomes.  There is a difference between the for-profit and non-profit world.  Choose your consultants wisely.  Everyone has his or her areas of specialty.

 

At very least, if you prepare the application yourself, I recommend you have an attorney or accountant look over your document before you submit.  Oh, and … a heads up —The application fee is currently $500.  You should also know that there is a backlog with IRS 501(c) 3 approvals.  At present, most organizations are waiting a minimum of 6-9 months before they receive final approval.  And, you cannot submit grants until you receive your letter of determination.

 

NOTE: There are a few ways around this, which shall be discussed in a future article.  In particular, partnering with an established non-profit with them acting as your fiscal agent.  More on that later.

 

 

  1. File your Charitable Registration application with your state’s Office of the Secretary of State.  More information, which can vary by state, should be easily accessed on your state’s governmental website.  Some states may direct their applications to a different office than that of the Secretary of State.

 

 

7.      While you wait, there is work to be done!!! LOTS of it.  Keep in mind that establishing any program does not happen overnight and when you are ready to apply for grants—which you cannot do until you receive your tax-exempt letter—much of what will be needed can be prepared during this agonizing period of wait.

 

Prepare or gather the following materials:  (A few of these are already done because they are included in your Articles of Incorporation or By-laws)

 

·         Mission Statement

·         Program Description

·         Purpose of Program

·         Measurable Goals & Objectives

·         List of all the tasks/activities involved to create and implement services

·         Organizational Chart

·         Job Descriptions

·         Resumes of key staff (if known)

·         Policies & Procedures (both personnel and program)

·         Expected Outcomes

·         Detailed organizational budget and project-specific budgets, if any

·         Research or statistics that demonstrate a need for your program

·         Marketing plan

·         1-3 year strategic plan

·         Research grant/sponsorship opportunities and develop your funding plan

 

 

8.      After you receive your IRS 501(c) 3 approval, get cracking on grants, corporate contributions and sponsorships, and personal donations!

 

 

 

As someone who specializes in guiding new non-profit start-ups, I would say that at least half of these do-gooders realize at some point in the development phase that forming a new organization is biting off more than they can chew.  It, without doubt, requires time, tenacity, passion, and money.  First things first…let’s open your eyes fully to what is in store for you! 

 

The path to establishing a solid non-profit is long, indeed.  But it is surely worth it.  For now, place your foot upon the next rock, and I will do my best to hold your hand, encourage you, and prevent you from falling. 

 

It most certainly will be a rollercoaster. That just comes with the territory.  It will be exciting, frightening at times, and both an up and down adventure.  Just hold on, especially when you hit the curves, and don’t forget to occasionally throw your hands up in the air and yell, “wheeeeeeeeeeeeeeeeeeeeeeeeeeeeeee!”

 

Till next time… Enjoy the ride!

 

 

 

 

About The Author:  Mary E. Costello holds a BA degree in Social Work from The Catholic University of America in Washington, DC.  She is a former Social Work Administrator who specialized in the management of complex human services programs and leading new projects creation.  Forming Creative Edge Consulting in February of 2005, she now is the “resident expert” on grant writing and non-profit program development issues on the Boys Project website, a sponsored project of the University of Alaska/Fairbanks.  She serves clients throughout the United States, including both community based programs and those of national scope, such as the Boys Project, the Aaron Meyer Foundation, and the Chris Farley Foundation.   Programmatic and grant related questions or inquiries regarding her professional line of services may be directed to MaryCostello@CreativeEdgeConsulting.org.  Mary will attempt to answer all general questions to the public but cannot guarantee a personal response, dependent on volume of requests at any given time. 

 

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