There are a lot of issues to consider when you’re thinking about starting a new non-profit organization to run your community or charitable activities. One of the first is, are you prepared to run a business? When you start a new organization, keep in mind there are lots of filing and compliance requirements, both with the IRS and with your state, that will apply no matter how small you are, and that last for the life of the organization. To avoid trouble, you’ll need to take your new organization seriously, and run it like a small business.
Speaking of small business, also keep in mind that your non-profit status is a tax election. Successful non-profits are still run like a business. And they make money, too! A non-profit organization simply can’t distribute its proceeds to individuals such as shareholders or partners. All of a non-profit’s proceeds must to be used for its charitable purposes.
The form of your non-profit business organization matters, too. While the IRS does allow various forms of organizations, such as partnerships or LLC’s, to achieve non-profit status, choosing this type of form will create lots of complications and add lots of time to the process of achieving your tax exempt status with the federal government. So when you form your organization at the start, choose the basic corporate form in your state. It will save time and aggravation, and allow you to run and grow your charitable business over time.
