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How To Become A Non-Profit Organization
This guide cannot adequately cover all of the details of creating a non-profit organization. You will have to refer to a publication or specialist dedicated to that topic. But we can provide an overview. Ultimately, to complete the process the group needs to consult an attorney who specializes in registering non-profit organizations and be comfortable with the responsibilities outlined above. Many attorneys are willing to work pro bono for groups whose ideals they share. It will not only save you money, but spare you plenty of headaches to seek competent pro bono legal help.
The first thing to realize is that a non-profit organization is not just a com-pany, it is an association that is organized and operated as a corporation. Unlike companies that can be owned and managed by an individual, corporations (and non-profits) are managed by a group of people, or a Board of Directors with a minimum of three members (President, Secretary, and Treasurer).
There are lots of different kinds of non-profits. A non-profit may be a corporation, a trust, or an unincorporated association. Non-profit organizations are often referred to by their section code. Corporations are known as 501c1, a company formed to hold the assets of a defunct company is a 501c2, charitable organizations such as churches, animal rights organizations, youth sports leagues, and skatepark advocacy groups, are all 501c3. There are over 30 different types of 501c designations, but the term “501c3” is most commonly used to indicate a typical non-profit organization.
Establishing a corporation is very simple and can cost as little as $50. The paperwork is not complicated, but requires some work to fill out. Each state requires a different set of forms to be filed, so the exact paperwork will depend on where your organization will be headquartered. Your Secretary Of State’s Web site should have all of the necessary information and paperwork available for download. Applicants will likely need two additional individuals to serve as trustees in the organization. It’s important to note that everyone legally named in the Articles Of Incorporation are legally bound to manage the organization—in other words, if the organization fails to operate ethically or breaks the law in any way, all of the named trustees are individually liable.
Once the organization is registered as a legal corporation, only then can it apply for non-profit status. This second step requires Form 1023 to be filed with the IRS. The form is very technical and should at very least be reviewed by an attorney before being submitted.
ROCKSTAR FUNDRAISER
Organizing and hosting a big fundraiser can deliver a big step toward your financial goal. Read about one group that raised $25,000 in one evening.
The business-license application will require a written charter. This document describes the purpose of the organization, where its money will go, what will happen to the money if the organization dissolves, and so on. A similar document, the Articles Of Organization, describes how the organization will be operated. This is important if conflicts over the direction of the group’s efforts emerge and disagreements escalate to the point of legal action. While this seems unlikely in the context of a skatepark organization, these are essentially the same documents that guide such groups as the United Way, Greenpeace, and other large non-profit organizations.
Every community will have attorneys familiar with or specializing in the creation of non-profits to assist the advocacy group, most likely for a fee.
The various applications are highly technical and the fees are not reimbursed if the application is rejected. For an experienced lawyer, crafting the applications for a non-profit is a simple matter. On balance, it is highly recommended that the advocacy group that is seriously considering becoming a non-profit organization retain an attorney.
RECRUITING FUNDRAISERS
A good way to seek support for the project is to seek assistance in
creating solid fundraising programs. The very people you are seeking
approvals from may be able to help.
If you can recruit one to join your effort and donate services, all the better. The American Bar Association publishes a directory online of attorneys willing to assist non-profit organizations pro bono. Consult www.abanet.org/probono/ for more details. Attorneys donating their time and expertise to the skatepark project should be treated with the appropriate degree of graciousness. The attorney may or may not have time to assist with the creation of the group’s Bylaws or the filing of annual income reports such as Form 1023, and so on. The answers to these questions should reveal themselves during negotiations. If the advocacy group is very inexperienced, it is necessary to reveal this right away before a formal relationship begins. Like anyone else, an attorney’s time is valuable and they should be made aware what kind of expectations exist before they commit.
Another option, if an attorney is not available, is to request assistance from paralegals and associates. They may have more available time and could very well be more enthusiastic about helping the cause. Their legal contribution reflects well on the firms they work for, the organization still receives experienced legal counsel, and everyone is happy.
More information about the creation of non-profit organizations can be found at the Internal Revenue Service.
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