How to Start a nonprofit organization

One can start a Nonprofit Organization in 4 diferent possible ways -

If one wants to operate on a very small scale he/she can start an Unincorporated NPO.

If one wants to manage the assets as a trustee he/she can start a Trust.

If one wants to start an intermdiate size, mututal benefit organization an Association is the best option.

If one wants to starta full fledged Nonprofit organization he/she must start a Corporation.

These options are further elaborated below -

1) Unincorporated organizations - A great way to start small or test waters before taking the plunge. Benefits include - easy to start, no legal formalitites to be completed, no compliances required. The best way to raise funds for an unincorporated NPO is through the fiscal sponsorship route.

2)Trust - Forming a NPO as a Trust is a very popular in the United Kingdom, they are however rarely used in the United States.A Trust is suitable if a non profit is established solely for the purpose of adminstering the property of the settlor' which is to be managed by trustee (s).

3)Associations - Associations are suitable for starting a mutual benfeit organization like -

employee associations, home owner associations etc.

4) Corporation - Starting a nonprofit organization as a Corporation is the most popular method as it offers several advantages like -

It Protects and separates personal liabilities of directors/members of the organization from the liabilities of the organization.

It is a formal method of and it has a legal acceptance as a separate entity.

It increases the credibility of the organization and increases credibility in the eyes of

funding agencies.

It is easier to be recognised as a tax exempt organization for corporations as compared to unincorporated entitites.

Laws governing starting of Nonprofit organizations

Having first decided the structure -the next step is to appraise oneself of the laws that govern that particular structure.

Starting a nonprofit in the U.S.A is governed by:State acts for issues like incorporation, hiring employeesandFederal (IRS) code for obtaining tax exemmption recognition.Choosing a nameNext comes the issue of deciding a name. There are state specific rules to be followed when choosing a name.For e.g some states will require use of corporate designators like 'NFP', 'Corp.', 'Co.', 'Inc.' etc with the name while other states do not allow for such corporate designators. One also needs to ensure that there are no other entities operating with same or even similar sounding names in the state by conducting name search. Trademark infringement and many other issues need to be considered when choosing a name. Visit www.startnonprofitorganization.com for more information on this. How to Start a nonprofit organizationBy: Bhaskar Chaudhary

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