Cheat Sheet

Nonprofit Kit For Dummies

From Nonprofit Kit For Dummies, 4th Edition by Stan Hutton, Frances Phillips

Creating and running a nonprofit organization can be a gratifying and worthwhile endeavor. Success depends upon developing a good idea that meets a real need, testing that idea, planning (and planning some more), and inspiring others. The work is demanding but also deeply rewarding.

Securing Nonprofit Status in 12 Steps

Before you can begin operating as the kind of nonprofit organization that receives tax-deductible gifts from donors, you need to secure 501(c)(3) nonprofit status in the eyes of the Internal Revenue Service (IRS) and your state. Take the following steps to gain that nonprofit status for your organization:

  1. Choose a name for your nonprofit. (While you're at it, select and reserve a web domain name.)

  2. Form your incorporating board of directors (often only three people are needed).

  3. Write articles of incorporation including a statement of your purpose and submit them to the appropriate office in your state government with the required fee.

  4. Wait for a response from your state. (In some states you can expedite the process by paying a surcharge.)

  5. Obtain a Federal Employer Identification Number, submitting IRS Form SS-4.

  6. Develop organizational bylaws — the rules by which you will operate.

  7. Hold your first board meeting.

  8. Review IRS Publication 557, instructions for filing for tax exemption.

  9. File IRS Form 1023 if you're applying to become a 501(c)(3) tax exempt organization (preferably within 15 months of the date of incorporation). Other kinds of nonprofit organizations may file Form 1024.

  10. File IRS Form 8718 and pay filing fees of $850 if you anticipate having revenue of more than $10,000 per year or $400 if you anticipate having revenue of less than $10,000 per year.

  11. Sit back and relax. Celebrate when your letter of determination arrives!

  12. Register as a charity within your state. While you're at it, check your state's laws: Some require you to apply for a separate (in addition to federal) tax exemption.

Roles and Responsibilities of a Nonprofit's Board of Directors

Every nonprofit organization is overseen by a group of people called the board of directors. These generous board members agree to accept responsibility for making sure the nonprofit organization remains true to its mission and purpose.

A board's primary governance responsibility is fiduciary, or to uphold the public trust, meaning:

  • Paying close attention to what's going on and making decisions based on good information

  • Putting the welfare of the organization above other interests when making decisions

  • Acting in accordance with the nonprofit's mission and goals

Active governance as a board member involves:

  • Reviewing the mission statement and goals of the organization on a regular basis

  • Participating in planning

  • If the organization has paid staff, hiring the executive director and reviewing his or her job performance

  • Reviewing the organization's budget and keeping well informed of its financial situation

  • Raising money for the organization

  • Setting, evaluating, and — if necessary — revising policies

  • Serving as an ambassador for the organization — making more people aware of its work

  • Recruiting additional board members and volunteers

12 Ways to Raise Money for Your Nonprofit Organization

Every nonprofit organization needs to raise money. Whether applying for grants, searching for individual donors, or throwing fundraising events, you're always going to be looking for new ways to bring in funds. These tips can help your nonprofit successfully raise money:

  • Set clear, reasonable, yet ambitious fundraising goals based on a clear assessment of your organization's likeliest supporters.

  • Don't plan to depend on one grant, one event, one donor, or one approach. Balance your resources among multiple sources.

  • It costs money to raise money, and some approaches cost more than others. Make a fundraising budget.

  • Remember that individual donors represent the largest total source for private contributions.

  • Write a strong case statement for your organization, telling its story in terms of how it benefits the people (or trees or salamanders) it's designed to serve.

  • Ask. If you don't ask for a contribution, you won't get one.

  • Make it easy to respond to your request. That includes providing self-addressed envelopes and an easy-to-use "donate now" feature on your website.

  • Begin by asking for support among those closest to your nonprofit — its board, volunteers, constituents, and staff. Work outward from that core group, building a network of supporters through your first donors' personal connections and those benefitting from your nonprofit's work.

  • Include some fun in your fundraising. Special events can win friends and inspire new supporters.

  • The most important step in grantwriting is research. Examine each potential grant maker's interests, focus, limitations, and policies.

  • The key to a compelling grant proposal is demonstrating the needs of the constituents your nonprofit wants to serve and presenting a clear, detailed plan for addressing those needs. Acknowledge the work of others in your field and represent your organization's distinct mission and approach.

  • Organizations need capital — annual funds, buildings, endowments, cash reserves — to offer strong programs. Fundraising for capital campaigns and fund drives involves both large and small contributions. A standard campaign depends on one lead gift totaling at least 10 percent to 20 percent of the total money to be raised, and on 80 percent of the money being raised from 15 percent to 20 percent of the donors.

  • If "ask" is the number one rule of fundraising, "thank" is number two. Acknowledge your donors' support and work to deepen their involvement in your organization.

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