Registering Your Company As A Nonprofit? Consider These 5 Things First

Ross Sanner - VolunteeringThere are many reasons to start a nonprofit. For one, you’ll be making a difference. Additionally, nonprofit organizations are eligible for a number of perks that for-profit businesses do not receive. If you have a startup that you want to register as a nonprofit, you probably already have a business idea that can be seen by the IRS and consumers as a charitable organization. But before you incorporate as a nonprofit, it is a good idea to think over the pros and cons of doing so. Here are some things you’ll want to consider before registering your business as a nonprofit:

1) IRS qualifications

Since nonprofits receive tax exemptions that other business types don’t, they must meet the IRS’s definition of a 501(c)(3) organization. The IRS considers a nonprofit to be charitable, educational, literary, religious, scientific, fostering amateur sports, testing for public safety, or preventing cruelty to children or animals. You’ll probably qualify as a nonprofit in the IRS’s eyes if your startup exists solely to help others. But you should remember that if your company is a nonprofit, you cannot give any of your business’s earning to a private shareholder or individual. You can pay a salary to yourself and your employees, but you cannot make a profit from your successes.

2) Shared leadership

Many founders of startups get excited to run their own businesses. In a nonprofit, founders are typically expected to share leadership with at least one other person. This is often in the form of an advisory council or a board of directors. This will give a nonprofit more credibility. The consumers will be more likely to donate funds and volunteer to help due to increased trust. The advisors will also give new nonprofit founders the support they need to make difficult decisions early on in the process.You should have your board lined up before you file your papers.

3) Transparency requirements

One of the hardest parts of running a nonprofit is that you are required to be transparent at all times. Even if you don’t have anything to hide, you may be concerned by the possibility of scrutiny. A nonprofit’s books may be subject to audits from the IRS and board members. Some organizations require nonprofits, especially those that accept funding from government agencies, to have their books reviewed by independent auditors. For this reason, a nonprofit owner may want to hire an accounting professional to maintain the business’s books.

4) Perks

When you file as a nonprofit, you can enjoy a number of benefits. A nonprofit will often be granted tax-exempt status, so that any incoming money can be used for meeting the nonprofit’s goals. A nonprofit also pays special prices for postage so that it can launch large mailing at affordable prices. Other perks include significant discounts on tools that other businesses use for daily operations. Nonprofits may also receive special invitations to local events and receive discounts on local marketing efforts like booth fees at community fairs.

5) Emotional rewards

When you run an organization that makes a positive impact, the biggest benefit is the rewarding nature of the work itself. People who work for nonprofits often find gratification beyond the salaries they are paid when they see the fruits of their labor. When you work at a company that changes lives, seeing that you make a difference in the world is an incredible feeling.
If you are considering starting a nonprofit, it’s a good idea to speak with other 501(c)(3) founders in order to learn about the benefits and complications of running this type of organization. This way, you will be prepared to push through any obstacles that may come in your way.

Ross Sanner

Ross Sanner is an educational professional who serves as the Director of Institutional Advancement at the Orme School of Arizona. He is also involved in charitable initiatives, and loves exploring the outdoors!

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