Is one of your New Year’s Resolutions is to start a nonprofit organization? Maybe you have an idea, or see a need that isn’t being fulfilled in your community. The US has the most advanced system in the world for starting a nonprofit.
You may be familiar with the well-known “tax-free status,” but there is a lot more to creating and running this kind of organization than just not paying sales tax. This is where a nonprofit lawyer can help you get your idea up and running.
Why Go Nonprofit?
Many nonprofits are basic, grassroots organizations started by someone with a vision or a purpose. Some of the many types of 501(c)(3)s organizations include:
- Animal rescues groups
- Community health organizations
- Disaster relief
- Services for mothers, children and the elderly
- Homeless shelters
- Religious organizations of all denominations
- Museums and other cultural attractions
- Conservation groups
Nonprofits like these work to fill a need that isn’t being filled elsewhere.
One of the best-known and well-funded organizations is the Susan G. Komen Foundation, founded in 1982 by a woman whose sister was dying from breast cancer. Every October, their Race For The Cure draws thousands of people who are interested in raising more money for the cause of breast cancer. Komen is now the largest nonprofit organization dedicated to research and treatments for breast cancer but started with a promise and a small number of people.
What Is A Nonprofit?
Nonprofits are organizations that come together for a specific purpose, usually charitable. Churches, food banks, awareness groups, and other groups form to fulfill a need that isn’t being met by either governmental agencies or corporate entities.
They’re officially known as a 501(c)(3)s. That’s the IRS tax code that describes this type of entity.
Nonprofit organizations operate a little differently than corporations, LLCs, and other for-profit companies. There are specific laws that govern how they can and can’t work, and what they can spend on.
Nonprofits Can Make Money
“Nonprofit” doesn’t mean the organization can’t make a profit, but it does mean that profit isn’t the point of the organization. It’s what happens to the money that makes a difference.
While many nonprofits utilize volunteers, there are some that pay reasonable salaries to employees once they get bigger. But any revenues brought into the organization will be used to continue the organization’s work. Monies aren’t paid to shareholders or boards of directors as dividends like they would be in a corporation.
Should the day come where you no longer wish to have your nonprofit, it cannot be sold like a company can. The directors must decide to dissolve the nonprofit, pay all debts and obligations and distribute any remaining funds to another nonprofit.
It’s not enough just to have an idea. Even if you’re not an incorporated entity, you’ll still need to follow some of the same rules as a corporation. You won’t be distributing money to officers, contributing to political causes or engaging in lobbying.
Even if you have adequate funding and volunteer staffing, you still need to write and institute bylaws, keep track of meetings, corporate records, money, bank accounts, and other necessary administrative tasks.
You’ll need to establish a board of directors (also called “trustees”) to set policies and oversee planning, hiring, finances, and strategic planning.
To collect money, you’ll need to register your nonprofit in the state where you’ll be operating, as well as any state where you’ll be soliciting for donations.
All these are essential to starting and running a nonprofit organization. A nonprofit lawyer who understands the laws and regulations will help you through the process and make sure your organization is running properly.
Keeping Your Nonprofit Legal
Don’t know where to start? James C. Provenza is a leading Illinois non-profit attorney with years of experience navigating the complex legal landscape surrounding nonprofit organizations and the issues they face. Call our firm today at (847) 729-3939, or contact us via our website. We can help you start your nonprofit and run it well for many years to come.