Starting a Nonprofit Tool Kit - Montana Nonprofit Association

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Starting a Nonprofit ToolkitWelcome to the Starting a Nonprofit Toolkit! This practical toolkit will provide youspecific steps you need to start your own nonprofit organization as well as resourcesand links to help you during this process.In developing this kit, I compiled resources and tips that I use consulting to manystart-up nonprofits.This toolkit will cover the steps to starting a nonprofit organization in any stateincluding.1. Fiscal Sponsorship2. Steps to Incorporationa. Create Business Planb. Draft Mission Statementc. Recruit Board Membersd. Get a Lawyere. Draft Articles of Incorporationf. Draft Bylawsg. Apply for Business Nameh. Apply for Federal EIN#i. File Incorporation with Statej. Apply for Federal Tax-Exempt Statusk. Apply for Right to Solicit Donations3. Response from the IRSa. Advanced Rulingb. Public Support TestFollowing these steps and utilizing these resources will help you through a smoothincorporation process.Sincerely,Heather CarpenterM.M. Nonprofit Administrationheathercarpenter@nonprofitalternatives.orghttp://www.nonprofitalternatives.orghttp://www.nonprofitleadership601.blogspot.com1
Nonprofits are tax exempt under the 501c status of the Internal Revenue Service.There are two types of nonprofits that fall under the 501c3 status--Public Charitiesand Private Foundations. The majority of people who start their own nonprofit applyfor 501c3 tax status which allows their nonprofit to receive tax deductible donationsand not pay taxes. There are two options to start your own nonprofit organization.One option is try to find another 501c3 nonprofit to fiscally sponsor your organizationor just take the steps to apply for 501c3 status.1. Fiscal SponsorshipFiscal Sponsorship is an option an organization can choose to follow before becomingan official 501c3 nonprofit. Fiscal sponsorship is good for individuals or groups in ahurry to begin operations and accept tax-deductible donations. However, manyfunding sources-foundation will not fund brand new groups.Fiscal sponsorship usually involves a contractual agreement between a sponsoringorganization and the organization being fiscally sponsored also known as the fiscalproject. Fiscal Sponsorship gives the fiscal project’s donors an opportunity to receivetax deductions for the donations that they provide for program support. In manycases the fiscal sponsor organization makes specific requirements for an organizationto be fiscally sponsored. Some of these requirements involve the fiscal project toengage in strategic planning, fiscal reporting, and accountability activities. There aremany ways an organization can be fiscally sponsored, for example one organizationcan be a project of another organization, or the fiscal project is separate entity witha Board of Directors. “Fiscal Sponsorship: 6 Ways To Do It Right,” by Gregory L.Colvin, goes into more details about the different types of fiscal sponsorship.It is helpful if new organizations that are looking for a fiscal sponsor do a littleresearch before they jump into a fiscal sponsorship relationship. This really helpsduring the contract negotiation. Since the IRS is really particular about how fiscalsponsor relationships are set up there are a lot of rules about ownership of funds, forexample in most cases the new organization doesn’t have any control over themoney that the donors give to the fiscal sponsor. So, it is challenging when neworganizations add clauses in the contract to try to control their funds. It is helpful ifnew organizations not only learn about the benefits of being fiscally sponsored butalso the limitations to being fiscally sponsored. However, once a new organization isfiscally sponsored they can generate donations and funds until they are ready toseparate from their fiscal sponsor and apply for 501c3 nonprofit status.The Foundation Center has a great fiscal sponsorship tutorial for anyone interested inlearning more about fiscal sponsorship and the Community Resource Center inColorado also has a great step-by-step explanation about fiscal sponsorship and thedifference between the term "fiscal agent" and "fiscal sponsor." www.Capaciteria.orgprovides a list of organizations that provide fiscal sponsorship.2
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