How to Start a Non-Profit Business Organization

Museums are nonprofit organizations.

"Nonprofit" is used to describe an organization whose primary mission is to serve the public interest or to improve the general welfare and common good of people. The organization may be incorporated (a corporation) or unincorporated (an association). The Internal Revenue Service (IRS) tax code describes seven organization types:
1. Educational, scientific, literary, charitable or religious (501(c)(3))
2. Social welfare organizations (501(c)(4))
3. Labor unions (501(c)(5))
4. Business and trade associations (501(c)(6))
5. Social Clubs (501(c)(7))
6. Voluntary employee beneficiary associations (501(c)(9))
7. Veterans organizations (501(c)(19)/(501(c)(23))
While the mission of a nonprofit is not to make a profit, nonprofit does not mean unprofitable. Nonprofit organizations are expected to be fiscally responsible and generate a financial reserve (unspent revenue that is set aside/saved).

Instructions

Getting Started

1. Identify your charitable purpose and verify that your organization will qualify as a 501(c) organization under federal laws. Research the pros and cons of forming a nonprofit to be sure that this structure is the most effective way to accomplish your mission. Know the competition/organizations in your area serving the need or population you intend to support. Assess if there is unmet need that warrants establishing another provider in your area.

2. Select your initial Board of Trustees, choosing people who are committed to your purpose and can also help you to accomplish it. Effective board members support your organization either by helping to raise money, by bringing critical knowledge/specialization to your organization or by extending your outreach through introductions to new contacts. The Board will be a vital resource as you move forward.

3. Write your mission statement, which is a detailed, actionable description of what your organization intends to accomplish. A good mission statement will describe the nature of the work, why the work is necessary and the constituency to be served. It is the beginning of the planning process.

4. Draft your bylaws, which establish the internal operating rules of the organization. They define the rules for board meetings, elections, compensation, nominating procedures and officer positions. While you can draft the bylaws without legal assistance, a lawyer can help you complete this process.

5. 

   A good business plan is essential.

   Develop a strategic business plan. A business plan works through the details of how the organizational mission will be accomplished. A good strategic plan delineates the goals and objectives of the organization as well as the activities that it will engage in to accomplish them. It also includes a review of the current and projected financial profile of the organization, the funding structure (contributions, fees or member dues) and an analysis of the environmental conditions that will impact the organization.

6. Research and follow the procedural requirements for state and federal filing. The guidelines for a creating a nonprofit are established by state law. Legal assistance can be invaluable in this process.

7. Begin to raise money. After you receive the appropriate approval of your organizational filings, begin to implement the fund-raising activities and strategies defined in the strategic plan.

References

• "Nonprofit Kit for Dummies 2nd Edition"; Stan Hutton and Frances Phillips; 2006
• "The Nonprofit Handbook: Everything you need to know to start and run your nonprofit organization, 4th edition"; Gary, M. Grobman; 2005
• "Starting & Building a Nonprofit: A practical guide"; Peri H. Pakroo, JD. ; 2005