Six more things you must know before starting a nonprofit. Part 2: A Nonprofit Organization is Complex

​Part one of the “Must Read Series for Nonprofit Founder” talked about the governing structure of a charity and the Board of Directors.   Now we’ll look at ways that charities are different from for-profit businesses and how starting a charity is more complex.

• It is expected charities will supersede the originating founder and Board of Directors.  If there is not a long-term need for an organization, then the proposed services should be taken up by an existing charity.
• The Board of Directors is legally responsible to make decisions in the best interest in the long-term sustainability of the organization.  

• Part of the requirements for 501(c)(3) tax exempt status is that excess income is reinvested into the mission of the charity.  As there are no owners, excess income is not distributed at the end of a fiscal period.
• In fact, the concept of “profit” is misunderstood relative to charitable organizations.  Nonprofit directors should understand fund accounting.  Charities should base their success and financial health on concepts that have nothing to do with “profit.”
• While the internet will lead you to believe that you can “start a nonprofit in nine easy steps,” they will only have helped start a business entity.  Ask yourself, “Do I want to start a business, or do I want to make an impact?”
• Starting a charity includes several phases with many steps in each phase.  Any person, advisor, or website that doesn’t include steps beyond legal start-up is misinformed and may not understand all the factors needed for start-up success.

Anyone can fill out the papers to set up a charity or any other business entity.  Anyone can create a mission statement and even ask people to be on a board.  You can change a life today by offering a kind word to a stranger.  But if you want to impact more lives through a charity, there are many specific things to take note of, before and after you manage the legal paperwork. 

You may be starting to get the idea that there is a lot to know about starting a charity.  Subscribe to find out more.  Or, if you have questions, feel free to send an email or go to our Q&A and consultation page!