Are you itching to start a nonprofit organization?
What is your driving motivation to go the nonprofit route?
- I want to start a new nonprofit, so I can qualify for grants!
- I can’t do this on my own and need board members and staff to help me run things
- I have been doing this for free and could get paid for my work if I become the Director of my own organization.
- I am passionate about my cause and want to dedicate my life to this “mission.”
If any of the “motives” above ring true…then this blog is for you!
Funding for Good hosts a workshop called “Bootcamp Basics for Beginner Nonprofits” that attracts a variety of participants. While board members, staff, and volunteers from established tax-exempt organizations benefit from the workshop, we also see a fair share of individuals who are on the fence.
If you are thinking about filing to launch a new nonprofit, I encourage you to consider the following norms in the nonprofit world:
1. The moment you receive tax-exempt status, your program/mission is no longer YOURS!
That is important to understand when you start a new nonprofit. The government grants tax-exempt status to organizations not to individuals. When you file, you are expected to list founding board members to demonstrate that there is a valid governing body. Board members are “fiduciaries” which means that they assume legal responsibility for the organization. The board is legally obligated to exercise their three fiduciary duties- duty of care, duty of loyalty, and duty of obedience as they govern the organization. That means they establish the direction of the organization, are responsible for ensuring the organization has the resources it needs to accomplish its mission, and they have the power to hire, evaluate, and fire an Executive Director. Best practices dictate that board members should rotate off after their specified terms. If you are the founder, you might serve for years, but eventually, for the long-term health of the organization, you would be expected and/or required to step aside to make way for new leaders.
2. What will be your new role in the new organization? (Board member, staff member, or volunteer?)
After tax-exempt status is confirmed, you will be faced with a crucial decision. Do you want to serve as a board member so that you can help define the organization’s future? Remember, even if you are the founder when you start a new nonprofit, you do have a voice, but you do not have unilateral authority to make decisions. A board member can only exercise decision making power as a collective body when a quorum is present.
If you prefer to be “on the front line” serving clients and working in the community, perhaps you have entertained the idea of becoming the organization’s Executive Director. While this is a great way to make sure the organization’s mission is being implemented and that the day to day operations are running smoothly, it is important to remember that the Executive Director works at the will of the board. Founders might find it challenging to “report” to the board especially if the board is making requests that the founder does not align with the original “vision” for the organization.
Serving the nonprofit you helped “birth” as a volunteer might seem like an ideal option for a founder who is confident in the organization’s new leadership. Quite honestly, we rarely see “founders” who are content to sit on the sidelines and leave the decision making to others!
3. How are you going to raise the money to launch the organization?
More often than not, individuals who are dreaming of opening the doors to the new nonprofit imagine grant dollars and love offerings rolling in the door! The truth of the matter is that founders almost always end up paying start-up costs from their own pocket.
- While grant dollars are certainly a great way to raise new program/project dollars, how do you plan to raise the dollars needed to get started?
- Will you need to hire a development coach, fundraising expert, or event planner to generate income?
- Will you need to pay rent or will you secure a space in-kind?
- How will you cover “fixed” costs such as phone, internet, donor software, accounting services, utilities?
In order to fundraise, most states require that tax-exempt organizations file for a charitable solicitation license. Most nonprofit organizations are not prepared to submit competitive grant proposals immediately after opening their doors, and even if proposals are submitted, it can take months to get those dollars in hand.
The intent of this blog is NOT to discourage you from launching a nonprofit, but rather to encourage you to complete your due diligence prior to filing for tax-exempt status with the IRS. Because nonprofit is a tax status, not a business model.
If you are currently managing a program that you would like to see grow, consider partnering with a local nonprofit or church. If you share a common vision, it might make more sense to collaborate and build a program within an existing nonprofit than to create a new organization.
This is just food for thought for those of you who are wondering if you are ready to become a founder of a new nonprofit organization. Here are some related articles and videos:
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