How to start a non profit organization

As a CPA who has been cleaning up many of the accounting functions in non-profits I can tell you that how you start your non-profit will dictate how easily it will grow into a auditable entity.

Too many non-profits start out in someone's basement because they want to help a sector of society whether it's people or animals. This basic approach is wonderful when you only take into consideration the motivation in starting the non-profit. However, this basic approach can become a nightmare when the non-profit grows out of the basement and into a warehouse. Now the accounting, operational and logistical structure is not in line with what the industry and governmental rules and regulations require. As far as the accounting structure is concerned, many small non-profits don't understand the value of keeping their accounting records in order. So, with that experience in mind here's how I would start a non-profit and how I plan to start a non-profit.

Before I fill out Form 1023 and/or 1024, I would form my board of directors. I would try to make sure I bring together people with different strengths including some that are my opposites. I believe the ideal board would include a CPA or accountant, marketer, business entrepreneur and salesman. Each would bring a unique part of regular business to the non-profit.

After the Board was determined and everyone was willing to volunteer their time, I would write the business plan for the non-profit as well as name the non-profit. The business plan would include what kind of donations/grants the non-profit would collect, whether or not there would be any fundraisers or if the non-profit would sell anything. The business plan would also include who the non-profit would be helping and how the non-profit would help. For example a non-profit that collects donations to assist low income single mother's with daycare scholarships'. The business plan would also include where the operations of the non-profit would take place. In someone's basement, a warehouse, local church, etc.

Finally, after all that was done, I would start the process of applying for exempt status. This might be the longest wait of all since the IRS is not in the business of being speedy.

As I wait for the approval of my exempt status, I would begin setting up the accounting policies, and if the non-profit had any employees, I would also setup the payroll policies and create the employee handbook. The employee handbook will have to coincide with all the federal and state regulations for the handling of employees which may require a CPA to look over the document.

Finally, after receiving the exempt status from the IRS and state in which the non-profit is located, I would open the doors and start operating the non-profit.

Learn more about this author, Jennifer Bonner.
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