How to Open a Charity

Open a charity to help others.

Individuals who wish to serve the community frequently consider opening a charity to fund a project or cause that they believe in. While their heart may be in the right place, if the individual does not adhere to federal, state and municipal laws that regulate charities they may actually end up harming the very cause that they set out to help. Setting up a charity also involves an ability to fundraise, to work with staff, to relate to clients and donors and to develop networks and professional connections with other charities.

Instructions

1. Write out a five-sentence mission statement that clearly sets out the goals and objectives of the charity.

2. File Articles of Incorporation for the charity which include the charity's name, purpose, type, duration of operation, structure and other details. Obtain an online form from the state's Secretary of State office. The charity's representatives must sign the articles. File the document with the Secretary of State when registering as a non-profit corporation charity.

3. Create a governing structure for the charity. A charity must have a board of directors. The board chair oversees the board's activities and directs the board. The board should meet at regular intervals. The board and board chair will instruct the professional (salaried) workers of the charity in their duties and guide the charity's activities.

4. Write the bylaws of the charity. Each charity's board must write the bylaws as they pertain to the charity. Templates for writing charity bylaws can assist a charity board and staff to write these bylaws in a manner that meets state and Internal Revenue Service guidelines (mncn.org/info/template_start.htm).

5. Choose a registered agent for the charity who holds responsibility for receiving all official government communication for the charity. A registered agent may serve as a charity board or staff member. Professional registered agent services exist for charities, providing a registered agent for the charity and filing the annual report and fee for the organization. Retaining the services of a Registered Agent's services involves a yearly fee.

6. Register as a non-profit corporation charity with the Secretary of State. Obtain an application package from the Corporations Division of the state's Secretary of State office. File the application for registration as a non-profit corporation. "Non-profit corporation" refers to a charity which does not distribute any part of its income to board members or charity officers. Include the Articles of Corporation when registering as a non-profit charity as well as the charity's bylaws and the name of the charity's registered agent.

7. Establish an operating budget for the charity as well as an accounting and record-keeping system for the charity. A registered certified public accountant or tax attorney can assist a charity to establish these systems. The budget should include income line items including expected income sources such as grants, government grants and contracts and donations. The budget balance sheet should include expected expenses such as staff salaries and benefits, insurance and taxes, utilities and rent, equipment and telephone and postage costs. Accounting and record-keeping systems must include a spreadsheet to account for each donation or grant to the charity, receipts to the donors, and an expense sheet to track the charity's payments for its expenses.

8. Apply for a mailing permit with the post office to enable bulk mailings for the charity at a reduced rate. The United States Postal Service has a bulk mailing rate which charities can use to enable them to send mailings to donors and potential donors at a reduced rate. (pe.usps.com/businessmail101/postage/mailingPermit.htm)

9. Request a tax exemption from the local municipality to receive an exemption from property taxes or any business taxes. File an application for tax-exempt status with the city clerk's office of the local municipality.

10. File for 501(c)(3) status with the Internal Revenue Service (IRS) to receive tax exempt status. This status will exempt the charity from business, income and property taxes. Prepare to provide the financial records of the charity to the IRS to demonstrate that the charity does not distribute any profits to any individuals or groups, making the charity eligible to receive 501(c)(3) status. Submit Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code to the IRS to apply for 501(c)(3) status. The charity can call the IRS at [phone] to obtain the 1023 form.

11. Obtain an Employer Identification Number (IRS Form SS-4) for the charity from the IRS if the charity employees staff members. The charity can call the IRS at [phone] to obtain the SS-4 form.

12. Let people know about the charity's existence to both identify those who want to donate or help and those who need assistance. Put up fliers, place advertisements in local newspapers, and provide information on social network sites and on Internet forums that relate to the target population. Donors will contribute more when they see evidence of the charity's works and activities.

Tips & Warnings

• Prepare to fulfill all charitable solicitation law requirements. Represent the charity honestly to potential donors. Make sure that donors receive receipts. Do not pressure or harass potential donors.

References

• National Consumer Reporter Technical Assistance Center: How to Establish a 501c3
• Small Business: Articles of Incorporation for 50 States
• Faith Works: How to Start a Charity

Resources

• MNCN: Template for Writing Bylaws
• IRS: Charities