What you must know before starting a nonprofit- Part 1: Structure

I have spent my career in nonprofit planning and administration.  I’ve been involved in the early start-up of five charities and now specialize in helping nonprofit start-ups succeed. There are many urban myths about the nonprofit sector.  It’s almost as bad as losing weight or having a baby.  Everyone may be entitled to their opinion, but wouldn’t you rather be operating from facts?

We at Thrive South have no desire to deter anyone wanting to serve their community.  But, much like the medical field, there is a lot at stake when caring people try to help others.  Well-meaning but knowledgeable people offer poor advice and founders often put too little effort into planning before filing legal paperwork.  Then, they are not prepared to be fiscally responsible, legally compliant, and mission focused.      

Read on to see some big misconceptions about how a 501(c)(3) charity is formed.  You’ll find that some charities don’t follow these guidelines. Sometimes, leadership may be breaking the law.  In others, they may not know better, or they just don’t care. ​

1. A nonprofit’s founder is not its owner.  No one owns a nonprofit. 
2. A nonprofit must have a board of directors.  After the board is established, it is the legal governing entity of the organization.
3. The founder of a charity can be a volunteer Board Member, they may serve as a volunteer or paid executive director, or they may step away and have no role.
4. If a founder serves as the Executive Director, they still report to and are governed by the Board of Directors.  Yes, the Board of Directors can fire the founder and hire a new ED.
5. The Board of Directors has legal obligations in their oversight of a nonprofit organization.  One obligation is to act in the best interest of the organization and to serve without conflict of interest.
6. Many new founders start their charity with friends and family on their Board.  This is not recommended and there are many reasons why this is actively discouraged.

Here is some bad advice new founders often hear:

• You don’t need a Board of Directors, or you can just ask anybody to serve.
• The Board doesn’t have to do anything but come to some meetings
• When you are forming your legal documents, just copy some stuff off the internet.  You can change it later.

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