3 Tips You Can Use to Start, Fund and Run a Nonprofit

Article taken from Entrepreneur Magazine online.
https://www.entrepreneur.com/article/314045

Serial entrepreneur Concetta Mantinan breaks down a few important business strategies.NEXT ARTICLE

Candace SjogrenVIP CONTRIBUTORHead of Alternative Lending at Marqeta June 1, 2018 5 min readOpinions expressed by Entrepreneur contributors are their own.

Knife Skills, an Oscar-nominated documentary, describes the opening of a unique restaurant. Edwins, a fine French dining establishment, launched in 2017 with a twist — the restaurant doubles as a culinary arts school that only employs ex-felons. This film illustrates how so few organizations focus on teaching true marketable skills to our “fallen citizens.” And just as I was inspired by this film, I met Concetta Mantinan.

Mantinan’s story began with learning disabilities. When she was 17, Mantinan was diagnosed with an eating disorder, ADD and other learning impairments. As she struggled in school to learn and understand, Mantinan felt ashamed and drowned it first with sugar, then with drugs and alcohol.

“I was always in the worst in my class and had extremely low self-worth growing up, so I started cheating and lying through school, creating more shame,” Mantinan says in an interview. “My anxiety reached its peak when my friends went on to college, and my drinking took off. I then graduated to meth and was an addict for 10 years. None of this was about drugs, but rather about the underlying shame tied to low self-worth and self-esteem.”

Once Mantinan got sober, she started her first company, It’s Perfect Malibu, a sober living facility. After getting a chemical dependence counseling degree, Mantinan then moved to San Diego to focus on building a recovery program for college students, San Diego Student Recovery. She sold that company in 2016 and now Mantinan is now building some Knife Skills of her own. She recently launched the Holistic Learning Sanctuary Foundation, a nonprofit trade school focused on providing life skills and work training for veterans, people dealing with mental illness and those recovering from addiction.

The Holistic Learning Sanctuary will provide job training for six trades, including construction, culinary arts, media, filmmaking/photography, agriculture and computer science. By the time students graduate, they will have the skills they need to pass any trade test, and if they pass, will be able to get a job.

As Mantinan built her first two businesses, she learned a number of lessons about how to start, fund and run a nonprofit. As she builds Holistic Learning Sanctuary and works to raise $150,000 in seed funding through the company’s GoFundMe, she recommends these three tips toward early success.

1. Find a niche and fill it

First, Mantinan recommends finding your place in this world.

“As I’ve continued to build one business after the next,” Mantinan says in an interview, “I’ve learned that I have the most success when I find a way to serve in a space no one else wants to serve.”

While there is a large and growing addiction recovery industry, there may be fewer opportunities for people to find work during recovery. A study published by the Open Journal of Psychiatry reports that longer treatment breeds higher success rates in recovery, but Mantinan has learned from experience that a person needs something to do and to look forward to when they’re in recovery.

“Traditional colleges are difficult for many in recovery because they don’t feel that they can keep up, pushing them back into their hole and back into treatment a year later. This is why we teach people at their speed, according to where they are in recovery.”

Related: How to Win on ‘Shark Tank’

2. Find your tribe first

Before building an empire, a founder first needs to find a good group they can trust and turn to for help. As Mantinan explains, “Mentors are a must. I was a drug addict for so many years that I never had business mentors. I felt very lonely in my first companies, with a constant fear that someone was going to steal my idea. But, then I joined a mastermind group, the Ascension Leadership Academy, and I’ve gotten not only a ton of guidance from my peers as to how to run a successful company, but coaching as to how I can show up a bigger and better leader as well.”

Related: Do These 50 Things Regularly and You’ll Become a Better Entrepreneur

3. Start somewhere strong

Mantinan is a big believer in capturing minnows, then fish, then whales. While she intends to build a global organization to impact education around the world, she recognizes the importance of doing the first project well. “We have started with two trade lines, agriculture and culinary arts. We’ve gotten the land donated and are on our way to make these first trades a success.”

Joshua Berglan, Chairperson of Mantinan’s fundraising effort and CEO of Live Mana Worldwide, is committed to building out the Holistic Learning Sanctuary because he is a recovered addict himself. In an interview, Berglan says, “Addicts have a superhuman ability to work and a chip on their shoulder. When we give them something to care about, something to work toward, we can stop the cycle. The Holistic Learning Center is doing just that. Mantinan is building the new world’s education.”

What are the advantages/disadvantages of becoming a nonprofit organization?

Advantages

Article taken from grantspace.org
https://grantspace.org/resources/knowledge-base/pros-and-cons/

Tax exemption/deduction: Organizations that qualify as public charities under Internal Revenue Code 501(c)(3) are eligible for federal exemption from payment of corporate income tax. Once exempt from this tax, the nonprofit will usually be exempt from similar state and local taxes. If an organization has obtained 501(c)(3) tax exempt status, an individual’s or company’s charitable contributions to this entity are tax-deductible. Learn more about starting a nonprofit.

Eligibility for public and private grants: Many foundations and government agencies limit their grants to public charities. Nonprofit organizations also can offer tax deductions to individuals or businesses that give charitable contributions. Learn more about how nonprofits are funded.

Formal structure: A nonprofit organization exists as a legal entity in its own right and separately from its founder(s). Incorporation puts the nonprofit’s mission and structure above the personal interests of individuals associated with it. Learn more about nonprofit boards.

Limited liability: Under the law, creditors and courts are limited to the assets of the nonprofit organization. The founders, directors, members, and employees are not personally liable for the nonprofit’s debts. However, there are exceptions. A person cannot use the corporation to shield illegal or irresponsible acts on his/her part. Also, directors have a fiduciary responsibility; if they do not perform their jobs in the nonprofit’s best interests, and the nonprofit is harmed, they can be held liable. Learn more about accountability.

Given these advantages, why would you not want to incorporate as a nonprofit?

Disadvantages

Cost: Creating a nonprofit organization takes time, effort, and money. Fees are required to apply for incorporation and tax exemption. The use of an attorney, accountant, or other consultant may also be necessary.

Paperwork: As an exempt corporation, a nonprofit must keep detailed records and submit annual filings to the state and IRS by stated deadlines in order to keep its active and exempt status.

Shared control: Although the people who create nonprofits like to shape and control their creations, personal control is limited. A nonprofit organization is subject to laws and regulations, including its own articles of incorporation and bylaws. In some states, a nonprofit is required to have several directors, who in turn are the only people allowed to elect or appoint the officers who determine policy.

Scrutiny by the public: A nonprofit is dedicated to the public interest; therefore, its finances are open to public inspection. The public may obtain copies of a nonprofit organization’s state and Federal filings to learn about salaries and other expenditure

What activities can jeopardize a nonprofit organization’s tax-exempt status?

Article taken from grantsspace.org
https://grantspace.org/resources/knowledge-base/tax-exempt-revocation/h

IRS regulations prohibit 501(c)(3) public charities from specific types of activities and require certain levels of reporting and public disclosure. An organization that fails to abide by these rules may be placed under sanction or have its tax-exempt status revoked by the IRS. These regulations include:

  • Private benefit/inurement –-“ An organization may not permit an insider (someone with a personal or private interest in the organization) to benefit substantially from the activities of the organization.
  • Lobbying –“ While 501(c)(3) organizations are permitted to engage in lobbying on some level, the amount of lobbying activities must be limited so that it’s not a substantial portion of the organization’s activities.
  • Political campaign activity/electioneering –“ 501(c)(3) organizations and their representatives (while acting in an official capacity) may not campaign for or against candidates for elected office.
  • Unrelated business income (UBI) — “ An organization may lose its exempt status if it generates excessive income from a regularly-carried-on trade or business that is not substantially related to the organization’s exempt purpose.
  • Annual reporting obligation — “ With the exception of churches and subordinate organizations, all 501(c)(3) public charities are required to file some version of the Form 990 with the IRS on an annual basis. While smaller organizations with gross receipts under $50,000 were previously exempt from this requirement, these charities must now file the Form 990-N (e-Postcard) each year in order to stay compliant.
  • Operation in accord with stated exempt purpose — An exempt organization is expected to operate in accordance with the charitable purpose or purposes outlined in its application for recognition of tax-exempt status (Form 1023 or 1023-EZ). An organization must notify the IRS of any substantial changes to its operating purpose.

How do I start a nonprofit organization?

Article taken from grantspace.org
https://grantspace.org/resources/knowledge-base/starting-a-nonprofit/

Starting a nonprofit organization can be an inspiring way to give back to your community and help those in need. However, it is important to understand all of the steps involved in this process before moving forward. Growing and sustaining a nonprofit may take years of effort and a great deal of determination.

The information provided here is intended to offer general guidance on how to form a nonprofit organization. Please note that specific steps may vary for each state, and we recommend consulting with a legal or tax professional for detailed assistance.

Step 1: Do Your Homework

Conduct a needs analysis

Find out if organizations (nonprofit, for-profit, or government) are already doing the same or similar work in your community. It will be harder to get support if you are just duplicating existing services rather than improving or adding to them. Also find demographic or population data that shows a need for your services, and explain how that need is not being met. Where can I find demographic information about my community?

Is a nonprofit right for you?

Public charities must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3) of the Internal Revenue Code. If you want to start a nonprofit so you can get grants to pay yourself a salary, stop now and find another option. Realistically, many new nonprofits aren’t even ready or eligible to get grants. Learn more about whether a nonprofit is right for you:

Know the alternatives

Forming a new nonprofit might be the most complicated way to act on your passion to serve your community. The biggest challenge for most new nonprofits is to develop and maintain reliable income streams. Estimates vary, but most experts agree that less than half of nonprofit startups survive beyond five years. Of those that survive, perhaps one-third are in financial distress.

Consider alternatives that can let you essentially operate as a nonprofit but with far less effort and cost. Thus, you can focus your efforts on serving your community right now while you develop experience and support that will serve you well if you eventually decide to form a separate organization.

Step 2: Build a Solid Foundation

Draft your mission statement

Developing your mission statement is a critical first step. It communicates your nonprofit’s purpose, what groups it serves, and how it will serve them. Every decision and action in your organization should support and further your mission. Where can I learn about nonprofit mission statements?

Write a business plan

Just as with a for-profit business, a business plan can help a nonprofit describe how it intends to achieve its mission in more specific details. It also can be used to outline a new project or venture. How do I write a business plan for a nonprofit organization?

Develop your board

As your nonprofit’s governing body, your board fulfills a variety of roles and legal responsibilities. In order to carry out these duties effectively, the board will change as your organization grows and matures. While recruitment is an important step in this process, a systematic approach to board development, including orientation, training, evaluation, and the cultivation of prospective board members, is critical to ensuring its long-term success.

Step 3: Incorporate Your Nonprofit

Now that you have reached this step, it’s time to find resources that are specific to your location. The best place to start is by clicking on our Nonprofit Startup Resources by State.

Why should you incorporate?

  • Having a formal structure will give credibility to your programs and services.
  • The corporate structure limits the liability of the organization’s officers and directors.
  • The IRS requires organizing documents and governance policies and procedures that are usually associated with corporations.

Learn more about how to incorporate your nonprofit. Filings and fees will vary by state. Also note, incorporation registers your nonprofit, but it does not make it 501(c)(3) exempt.

Step 4: File for 501(c)(3) Tax-Exempt Status

Apply for exempt status with the Internal Revenue Service (IRS). Be aware, the user fee will be $275 or $600, depending on your application method. It also can take 3-12 months for the IRS to return its decision, depending on how many questions the IRS has about your application. Where can I get help filling out my incorporation and tax-exempt 501(c)(3) paperwork?

Step 5: Ongoing Compliance

Register with your state’s agency

Each state has an office charged with the oversight of charitable organizations and charitable solicitations (usually the Attorney General). If you plan to solicit contributions in other states, you may need to register there, too.

Prepare for annual reporting requirements

In most cases, an exempt organization must file some version of Form 990 with IRS, depending on its financial activity. Form 990 shows your finances, activities, governance processes, directors, and key staff, and it is open to public inspection. States have their own reporting and renewal requirements, too, and these will vary with each state. Thus, consider tracking your organization’s finances and activities in a such a way that will help these annual reporting requirements occur smoothly.

Follow the rules

What activities can jeopardize a nonprofit organization’s tax-exempt status?