3 Steps To Setting Up a Nonprofit Organization (Starting and Running Nonprofit)

- Hi, my name is Toby Mathis. I'm one of the partners at Anderson Business Advisors, and today we're going to talk about how you can set up your own non profit. Now when I say non profit, we're really talking about charitable organizations. There's about 30 of them underneath the United States code that you're able to get exemption for. But I'm going to zero in like a laser beam on one of them. And that's one that we all know and love. It's called the 501c3. And a 501c3 is set up for charitable,

religious, or educational purposes. There's a few other things like amateur sports and things like that, but the big ones are charitable, education, and religious. If you're doing something that's benefiting society, chances are, it's going to fit underneath this category. You're providing assistance to veterans, boom. If you're advancing a religion, boom. If you're a school or you're educating, whatever does things are, boom. You're under a 501c3. And the reason this is important is because so

mebody gives you money, they can write it off as a charitable donation. It's the only one where you can do that. So the 501c3 is where we tend to focus. You can set up your own. There's literally over 1.7 million of these in the United States, and they're probably one of the most underutilized entities that exists. Now to set one up, there's only three steps. It's actually very very simple when you break it down into pieces. And the easiest way to look at this is we always have three categories

that entities fall into. No matter whether you're for profit or not for profit. And that is we have to deal with the states, we have to deal with third parties like judges, or any third party, a bank, whatever, and then we have to deal with the feds, and you know them as the IRS. What we care about is that all three are happy with what we set up to recognize it as a 501c3. So the first thing we do is we say what form should it take. Do not listen to any of the bad information out there. There's

only one form you're going to want to use to make this as easy as possible, and that's because 501c3 starts off with the word, and that word is corporations. So that's what we're going to be. We're going to be a non profit corporation in whatever state we decide to be in. Now if you can't pick a state, it's real easy. We look and say how many directors do you have to have in that state. If it's just you, we may pick a state that's got one. If you're doing everything in one state, we're probably

picking that one. These things, it's not going to be rocket science. We're probably going to be right in your backyard unless there's a good reason not to be. So we pick the state. Now the third parties, they want to know that this organization has a body. So you're going to need bylaws, which are the rules, by which the company is governed. Now here's the biggest difference between a for profit, and a not for profit. In a for profit, it is for the profit of an individual or shareholders. Easies

t way to look at it is for owners. It is set up to give its profits to owners. In a not for profit, there are no owners. You're set up to benefit society, so there's no shareholders in a not for profit. That means that we have to have some governing body. And I'm going to tell you the easiest way. And you're talking to a group that's approved over 3,000 of these, the simplest way so you don't get guff, is to have a board of directors. And you're going to have people say, you can be a board of tr

ustees, you can be regions, you can be all this. Uh huh, but if you want to get approved with the least amount of trouble and you want your own 501c3, this is how you do it. Now the last step is to deal with the feds. Now we use something called the check the box regs in this country. Which means we tell the IRS what we're going to file. Here's what this entity is. So we have a corporation, and we're going to tell the feds that it is a non profit, 501c3. We're literally putting that on there. Th

is is a 501c3, what section? It's a non profit, it's a 501c3. So now they know. And they're going to issue you a tax identification number. We have one other little piece of this, and that is we have to apply for the exemption and that's done on an application called a 1023. This is the one that takes the most time. This is the one where we're applying for exemption. Now here's the really cool part. This exemption relates back to the date that you set up. So date of, date of formation. Excuse my

handwriting, see if you can read that. Whatever date you set the corporation up. It relates back. And that's it. You go through those steps, you will have an operating non profit set up for your purpose. Now the hardest part is figuring out what your purpose is and what you're going to do with it, but there's so many cool things I've seen clients do. Whether you're trying to end homelessness, whether you're trying to help veterans, when you try to help single moms, whether you're trying to educ

ate society, whether you're trying to provide housing to low to moderate income households, which isn't what you think. There's folks down in the Bay area that are families making over 100,000 dollars that qualify. You're providing housing for them, even rental properties, or assisting them in any way, that qualifies. So there's so many things that we think are not non profits that are. Setting it up, very easy. Last little step, once you have this puppy set up, you get your EIN, you go down to

the bank and you say I want to set up a bank account for my non profit. What you'll find is that everybody reduces their fees for the non profits. In fact, most of the states, the filing fees might be 10 bucks. And then of course is exempt from taxation, so you can grow it. Now it's really cool once you have one set up, 'cause you have your own 501c3, they are not owned by anybody, but you control it, so nobody can take it away from you, and they do not die. So they become a very very effective

tool when you're talking about working with a family, of having people get together and actually have a common purpose, they're just amazing tools because you realistically unless you overtly decide you're going to exit it, it's going to keep on going on forever and ever and ever. If you want to case in point, read up on the Hershey non profits that set up in Rand, the Hershey school, museum, the hospital and everything. Milton Hershey and his wife passed with no children, and they passed in the

early 1900's. That charity is worth over 12 billion dollars today, with no family. These things are really tough to get rid of once you start going, and they tend to just keep growing and growing and growing. So they're very very powerful and effective tool. Anything we can do to help you set it up. Again, we've done thousands of these. We love working with non profits. If you're somebody who wants to set up a 501c3, just give us a call. We can have you up and running and actually start that pr

ocess within a matter of days. It's not nearly as hard as you think. Thanks for listening. (peaceful music)