Steps to Take When Starting Your Own Charity
Courtney Stewart, who was in foster care, set up a non-profit group to help kids in his old Washington neighborhood. Here he's helping Jason Hickson, 8, with his homework
Wendy Knoch | USAToday
You see a need and want to do something about it. You want to start a charity.
Thousands of people, passionate to help the less fortunate or to do something for the planet, launch charities every year, but many stumble or fail.
“You need absolute, passionate commitment to whatever the issue is,” says Melissa Brown at the Center on Philanthropy at Indiana University. Also vital, she says, are research and planning.
What’s the first step?
“Make sure someone’s not doing (your idea) next door,” says Tom Pollak, program director of the Urban Institute’s National Center for Charitable Statistics. If they are, he says, it may be more effective to help them by volunteering than to set up a rival charity.
An easy resource to find out whether a particular type of charity exists in an area is GuideStar.org, a non-profit group that offers free basic searches of its database.
If the charity doesn’t already exist, what’s next?
Make sure your idea is clear and focused. You should be able to describe the charity’s purpose and mission in a single sentence, says Gary Grobman, author of The Nonprofit Handbook.
Should you incorporate?
“Definitely,” Grobman says, especially if you envision a large organization.
By creating a separate legal entity, those who run a charity are not — in most cases — personally liable for its debts or lawsuit judgments, he says.
File forms with the state office that handles incorporation, usually the secretary of state’s office. Your charity will need a name that is unique in the state. You’ll have to write bylaws, or rules for how the charity should be run, such as the number of board members, their term, their duties and the election process.
What else is there to do?
•Prepare a business plan — a statement of your group’s goals and how you intend to achieve them — if substantial start-up funds are needed. A federal government website, business.gov/start/non-profits, has information on business plans and possible funding sources.
•Pick an Internet domain name (the part of a Web address after the www.) and register it with Network Solutions (networksolutions.com) or another company that serves as a domain registrar.
•Develop a Web page.
•Obtain business insurance and open a bank account.
Should a charity seek 501©(3) tax-exempt status from the IRS?
Yes. “The advantages outweigh the disadvantages,” Brown says, noting that the status allows donors to deduct contributions. Charities are eligible if they are incorporated and do not substantially engage in lobbying or partisan political activities.
Tax-exempt status requires record keeping and annual reports. If yearly gross receipts exceed $25,000, a charity must file an annual information return form. One with smaller receipts must file an annual electronic notice.
How does fundraising start?
Probably close to home.
“The initial gifts are always the hardest,” because a start-up has no track record, says Michelle Nunn, co-founder of HandsOn Network, which helps people find volunteer projects.
Nunn says a group’s core members often use their own money or ask friends and relatives for donations.
Before charities can begin fundraising, most states require them to file registration forms. Many accept the Unified Registration Statement, available online (multistatefiling.org).
How many charities fail?
“The odds are less than 50-50 that a non-profit will make it,” Pollak says. He says 23% of public charities registered in 1995 failed by 2005, and 24% more were shrinking or stagnant.
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