How to Start a Non-Profit Organization
Over the past year, I have had a lot of people come to me to ask for advice on how to start a non-profit organization. When I began Aahana, I really had no idea what I was doing. In hindsight, there is so much I would do differently if I was to do it again. I learned as I went. I was barely in college when I started Aahana and didn’t know what I was stepping into. As a young(er), motivated change maker, I wanted to do something about the suffering I saw in the world. Through the process, I learned to shift from seeing suffering in the world to seeing the immense kindness, love, and strength that we have as a collective. As Rumi says, “The answers are in the questions”. Although my experiences and experiments felt like failures at times, they not only gave me clarity on where the organization is headed, but also where I am going with my life.
I had a vision of the type of world I wanted to create for myself and those who would be in my life in the future. The intention and passion was there, but there was a certain type of structure I wish I had thought about when starting out. When I think about my experience, I feel lucky to have experienced as much as I did while just beginning university.
The Beginning
Although the process can be long and tedious, it can also be a really good time to get other aspects of the organization together. Don’t let not having the ‘name’ of the nonprofit status deter you from getting to work right away. Sometimes creating relationships and getting grants require you to have 501(c)3 status, but there is so much that can be done during the waiting process.
In the summer of 2011 I decided to begin the organization. In early fall, our family accountant started helping out with the processing. He pointed me in the direction of the necessary paperwork. Having people who can walk you through the process aside from the accountants and lawyers is essential. I consulted with a business professor and also a mentor who had recently started his own organization.
Processing & Services
Initially, our family accountant looked over the paperwork as I filled it out. I also had a lawyer look it over too. Eventually, everything became a mess so I turned it over to the lawyer. I would suggest creating a relationship with a lawyer or two. Many will be willing to get on calls, provide advice, and look over the paperwork all without charging a dime. If you are busy and are afraid you won’t be able to commit the time to creating a well drafted letter, I would suggest finding a lawyer to do it. Before choosing the one I went with, I made a list of about 20 in the Philadelphia area and called up each of them. I also reached out to lawyers in my family to see if they could provide any advice, even if it wasn’t their particular law of interest.
It is possible to go to nonprofit lawyer workshops and seminars. Many law firms will also provide discounted services. Philly VIP is the organization I went to in the beginning stages. They offered workshops that allowed me to understand what I needed and didn’t need to get started. Depending on your organization, it is important to have as much knowledge as you can so you don’t have to worry about something 10 years down the line.
Filing & Paperwork Necessary
Many get confused between establishing a non-profit corporation and receiving 501c (3) status. They are not the same. Establishing a nonprofit corporation is a state level process that establishes your organization as a corporate entity. For this part, you will need to fill out the Articles of Incorporation, establish key individuals for the organization (directors, board members, offers). This part also requires you to obtain the Federal Tax ID Number and also establishing bylaws and governance rules for the board.
So, to break it down:
Step 1: Prepare Articles of Incorporation for the State
Step 2: Create Board of Directors
Step 3: Create Non-profit Corporate Bylaws
Step 4: Create Non-Profit Conflict of Interest Policy
Step 5: Apply for the Employee Identification Number (EIN)
For the Federal Tax ID number or also known as the Employer Identification number, you will need to fill out the SS-4 application
For a more detailed explanation on how to apply for your EIN, click here.
In order to register your organization as a 501(c)3 (tax exemption status), you will need to fill out the 1023 application.
The IRS.gov website is a wealth of information. You can read more about the process here.
Domestic vs International Non-Profit Organization
Our application took longer to process since our mission is based in Gujarat, India. International organizations can be used as fronts for illegal activities, so to ensure we were an honest organization, the IRS required us to provide additional information. This isn’t the case for everyone, but it does happen. Due to the additional information needed in combination with some confusion from our side, we ended up received our status a year and three months after beginning the process.
Receiving Funds
While going through the process, we still collected funds. We were just beginning to support our partnership and school for disabled children in India and needed to get funds over there. In that case, we took the chance and wired the money from our bank account. The rule is that if your organization is rejected as an official organization under the IRS, then you will need to return all the funds collected to the donors. Around 5 months after beginning the process, we were confident we would receive status, so we took the chance and continued our operations.
As long as you have your EIN number, Bylaws, Articles of Incorporation, and personal ID, you should be able to open a bank account. I would also double check with your bank of choice before going. I opened an account with TD Bank because they don’t charge fees for non-profit organization.
There are many, many other resources available online. Hopefully I included everything, but in case I left anything out, please feel free to let me know here!
For me, the most important part was not getting overwhelmed with the process. It’s easy to forget the mission as you develop and grow as an organization. Don’t forget the reason why you decided to begin the organization in the first place! Just remember, we don’t need to do big, earth shifting things to make a difference in the world. As Mother Teresa says, “It’s not how much we give, but how much love we put into giving”.