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What does it take to form a non-profit organization?

You have an altruistic dream that you genuinely believe could benefit humanity, solve a local crisis or address a global challenge -- and you want to raise money, get grants, and put your dream in action! A non-profit organization may be the way to go.

So, where do you begin when it comes to the legalities of creating a non-profit entity?

Non-profit entities are like any other business structure in that there are certain rules that you have to follow to create them. Once done correctly, the benefits of a non-profit are unique, especially when it comes to taxation. (For example, most churches are non-profit entities, which allows them to collect untaxed donations from their members.)

Here are the basics you need to keep in mind about non-profit formation:

  • You need a mission statement. Your mission statement should reflect the goal you have and the societal need you intend to address.
  • Have a plan on how you intend to raise funds for your non-profit. If your 501(c)(3) status (the Internal Revenue Service code for non-profit entities) is granted, the money people donate to your organization will be tax-deductible as charity. That's important to keep in mind.
  • Choose a name for your business. Make this decision carefully. You want to reflect your organization's goals and avoid confusion with other entities with similar names.
  • Establish a board of directors. This may require some serious thought and a consultation with your business attorney before you make a final decision.

Finally, you can write and file your articles of incorporation. Once accepted as a 501(c)(3) organization, you will also have to maintain appropriate records and continue meeting the requirements by the Internal Revenue Service to maintain your status. Many non-profits choose to engage a business attorney as their regular "out-of-house" counsel in order to avoid problems.

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