Published by Gbaf News
Posted on February 5, 2018
4 min readLast updated: January 21, 2026
When it comes to the contemporary business structure, have you ever considered about scoping your venture as a nonprofit? In contrast to for-profit businesses, a nonprofit business confers you with specific benefits such as income tax exemptions, sales and property at the state level. While the IRS makes it clear that most of the federal tax-exempt undertakings fall under the category of nonprofit organizations, modeling a nonprofit at the state level however does not instantly provides you an exemption from the federal tax structure. If you are wondering how to start a nonprofit corporation from the scratch, here is a how-to guide that will help you in marching towards the right direction:
How Nonprofit Differs From a Traditional Business?
One of the major differences that determine the uniqueness of nonprofit business compared to the likes of profit corporations is the treatment of profits. The shareholders and owners receive and enjoy the profits when they deal with a for-profit business. On the other hand, with a nonprofit business, if there is any resource left after settling the bills, it has to be put back into the organization. The basic guideline that every nonprofit need to adhere to is providing some contribution to the public. Some of the nonprofits often receive tax-deductible contributions where the individual owns it after contributing to the establishment.
Partnerships – The Building Block for a Successful Nonprofit
Partnerships offer nonprofit organizations an opportunity to broaden the spectrum of their influence beyond their current and existing domains. This implicates working with companies in various parts and regions with a noble intention of solving the modern-day problems for earlier ignored populations. With the growth of these kinds of partnerships, new and fresh entrepreneurial opportunities will begin surfacing in the targeted sectors. Work in a new domain will result in bracing a robust community infrastructure, providing the region’s residents with an opportunity to address the issues that bother their citizens. Whether it is physical aid or cutting-edge technology, sustained nonprofit partnerships can help in designing entrepreneur-friendly societies.
Nonprofit Laws That You Need to Abide By
In order to start your own nonprofit business, you should have a clear understanding of the legalities that deals with the framework of a nonprofit corporation. Nonprofits are categorized under the laws of the state where they are formed. For receiving the federal tax-exempt status, an organization must register with the IRS. You are required to fill out two applications when it comes to registering with the IRS. Here is the paperwork in brief to help you understand the legalities associated with a nonprofit business:
Registering With the State: Nonprofits are required to register with their state for legally practicing their business aspects and deal like a nonprofit organization. You will have to form articles of incorporation as the state generally offers references to work from. Create the articles and ensure filing them with your organization. Follow up with the department of licensing office or the secretary of the state for forms.
Getting the Nonprofit Status: As mentioned above, in order to achieve nonprofit status, you will have to apply to the IRS and it is crucial to the clearance from their end for using their contribution as a form of tax deduction. According to the reports, most of the nonprofits seek the 501 (c) status that allows them tax write-off for the contributors. During the inception of the business, a non-profit must highlight its broad-based public support to the IRS. This can be done within the initial five-year of the business venture. Experts recommend being sprucely honest in describing the working structure of your charitable organization to the IRS, as they have reinforced the scrutinizing policy of the nonprofit applications.
Apply as a Charitable Solicitor: Not only this is crucial in raising money, but also it is important to register as a charitable representative in many states that will help you in getting more contribution in the form of donations. This can be easily done by attaining forms for the secretary of state, the attorney general or other related agency.
Create a Board of Stakeholders: Convene a board of stakeholders will not only aid you in qualifying as a non-profit, but it will also help you in hiring a workforce, raising money, making group decisions and meeting your business objectives. Make sure that the board does not consist of people with whom you have personal relations or with individuals that the corporation does business with.
Finally, make sure that you are writing bylaws to describe the operating procedures of your nonprofit corporation. Hopefully, the aforementioned guide will help you in comprehending the basics of starting a nonprofit and deal with the incorporated challenges with ease.
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