Advice | Nonprofits | Working for a Good Cause has its Benefits. Working in a nonprofit organization brings both material and nonmaterial rewards. Although some nonprofit organizations do not pay (or are unable to pay) market wages, the benefits of working in a nonprofit often outweigh the drawbacks for many employees. In the United States, nonprofit or charitable organizations such as foundations, churches, arts organizations, universities, and even some hospitals, are exempt from federal income taxes. Although the range of their services is rather broad, these groups have in common a mission to provide a benefit to a constituency that is more important than bottom-line profits. Therefore, endowments and annual giving, rather than the sale of stock or debt, typically support their operating budgets. Even though their tax status may suggest otherwise, nonprofit organizations can be financially successful.
Types of tax-exempt organizations Section 501 of the Internal Revenue Code details the types of organizations that are exempt from tax. How to Form a Nonprofit Corporation in California. How to Start a Nonprofit. One of the most common questions we hear at the Council of Nonprofits is "How do I start my own nonprofit? " By following the steps below, we hope that many of your questions will be answered.
These resources are certainly no substitute for legal advice from an attorney familiar with the law of tax-exempt organizations in your state. Many state associations of nonprofits offer workshops on this topic or have published guidance either on their website or in booklet form to help founders of nonprofit organizations with basic start-up issues. While we offer the resources here for informational purposes, we highly recommend also consulting with legal counsel to ensure that you are in compliance with all federal, state, and local regulations governing the establishment and operations of a nonprofit, tax-exempt organization.
Step 1: Research Before starting a nonprofit, it is critical to examine the need for another nonprofit. Step 2: Key Questions to Ask Before Getting Started. How To Start Non-Profit Organization in California. How to Start a Nonprofit Corporation in California. How to Start a Non Profit Association. California Association of Nonprofits. Fiscal Sponsors. What is Fiscal Sponsorship? Fiscal sponsorship refers to a relationship in which one organization that is tax-exempt serves as the official recipient of charitable donations for another organization that is not yet recognized as tax-exempt. In this relationship the organization that has tax-exempt status is the "fiscal sponsor" and the organization that (usually) does not have tax-exempt status (and may not even by incorporated) is the sponsored organization. Typically the sponsored organization seeks out a fiscal sponsor that has a similar or consistent mission.
There are some charitable nonprofits that actually have as part of their mission to serve as fiscal sponsors -- they may even refer to themselves as "incubators" of other nonprofit programs. What Does the Fiscal Sponsor Do? Why Choose Fiscal Sponsorship? Fiscal sponsorship is often used by newly formed nonprofits that need to raise money during the start-up phase, before they are recognized as tax-exempt by the IRS. Practice Tips.