NONPROFITS
John R. Hocker
SCORE Chapter 1
Nonprofit Mentor
Washington, DC area
OUTLINE
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Types of Nonprofits
Why Nonprofits?
Myths & Realities about Nonprofits
The Nonprofit - 501(c)3
A Nonprofit Checklist
The Nonprofit Board
Nonprofit Websites
Nonprofit Marketing (ABC)
Potential Pitfalls
Code
501(c)1
501(c)2
501(c)3
501(c)4
501(c)5
501(c)6
501(c)7
501(c)8
501(c)9
501(c)10
501(c)11
501(c)12
501(c)13
501(c)14
501(c)15
501(c)16
501(c)17
501(c)1-17
Description
Deductible
Act of Congress - e.g. Federal Credit Union
Title Holding for Exempt Organization
Religious, Educational, Charitable, Scientific, etc, etc
Civic Leagues, Social Welfare Orgs, Local Employees
Labor, Agricultural/Horticultural Orgs
Business Leagues, Chambers of Commerce, etc
Social & Recreational Clubs
Fraternal Beneficiary Societies & Associations
Voluntary Employees Beneficiary Associations
Domestic Fraternal Societies & Associations
Teachers’ Retirement Fund Associations
No
Benev. Life Ins. Assns, Ditch Cos, Mutual Phone Cos.
Cemetery Companies
State Chartered Credit Union, Mutual Reserve Funds
Mutual Insurance Companies/Associations
Cooperative Orgs. To Finance Crop Operations
Supplemental Unemployment Benefit Trusts
No
Yes/Maybe
No
Yes
No
No
No
No
Maybe
No
Maybe
No
Yes
No
No
No
501(c)18-28 & 501(d)-527
Code
501(c)18
501(c)19
501(c)21
501(c)22
501(c)23
501(c)25
501(c)26
501(c)27
501(c)28
501(d)
501(e)
501(f)
501(k)
501(n)
501(q)
521(a)
527
Description
Deductible
Employee Funded Pension Trust (before 1959)
Org. Of Past or Present Members of Armed Forces
Black Lung Benefit Trusts
Withdrawal Liability Payment Fund
Veterans Organization (created before 1880)
Title Holding Cos or Trusts w/Multiple Parents
State Org. Providing Health Coverage (Hi Risk)
State Workers’ Compensation Reinsurance Org.
National Railroad Retirement Investment Trust
Religious & Apostolic Associations
Cooperative Hospital Service Organizations
Coop. Svc. Orgs. Of Operating Educational Orgs
Child Care Organizations
Charitable Risk Pools
Credit Counseling Organization
Farmers Cooperative Associations
Political Organizations
No
No
No
No
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
No
No
Why Nonprofits
• To provide services that governments cannot
• For the public good, without profit objective
• Leverage public, corporate and philanthropic
assets
• Connect people to each other and resources
• Improve quality of life
• Engage people on civic issues
• Stimulate reform
Myths & Realities About Nonprofits
Myth 1: Nonprofits only employ volunteer
labor
Reality: Nonprofits employ 13.7 million
Americans – 10% of entire workforce
261,000 in MD (43,700 in Montgomery Co)
365,000 in VA
213,000 in DC
Myths & Realities About Nonprofits
Myth 2: Nonprofits do good but contribute little
to the economy
Reality: The nonprofit economy is so big that if it
were a separate country, it would have the 7th
largest economy in the world
Total purchasing power of Nonprofits in
Montgomery Co. MD is $4 billion.
VA Nonprofits generate $39.2 billion revenue
Myths & Realities About Nonprofits
Myth 3: All Nonprofits are the same.
Reality: Nonprofits come in all shapes and
sizes.
While there many large, national nonprofits
headquartered in the Greater Washington, DC
area, most nonprofits are smaller and focused
on the concerns of their communities.
Myths & Realities About Nonprofits
Myth 4: Nonprofits not business minded.
Reality: Nonprofit sector employment
weathered the recent recession better than
other industries.
National Employment 2000-2010:
Gov. +8%, Business -6%, Nonprofit +17%
Myths & Realities About Nonprofits
Myth 5: Nonprofit jobs are for people who
could not make it in the business world.
Reality: The nonprofit workforce is as well
educated and skilled as its for-profit
counterpart.
Myths & Realities About Nonprofits
Myth 6: Nonprofits are only in the United States
Reality: Non-Governmental Organizations
(NGOs) are in almost every country. US has over
1.5 million nonprofits, Russia has over 277,000
NGOs, China has 460,000, and India has over 3.3
million, and the list goes on.
501(c)3
Religious, Educational, Charitable,
Scientific, Literary, Testing for Public
Safety, Foster National or International
Amateur Sports Competition, or
Prevention of Cruelty to Children or
Animals Organizations
Donations are tax deductible
Good Example of Nonprofit Logo
So Others Might Eat
Nonprofit Checklist 1
• Select a Name, Mark & Logo (register Logo & domain)
• Draft Mission Statement (who, what, where, when)
• Write Strategic Plan (goals, objectives, strategy, initial
budget) (Attend SCORE Workshop)
• Begin Recruiting Board Members
• Get a Lawyer (on Board if possible)
• Select a Bank, open account as Nonprofit
• Hire an Accountant (CPA – Form 990)
• Buy Insurance (liability, property, D&O)
• Draft Articles of Incorporation (w/Dissolution Clause)
Nonprofit Checklist 2
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Prepare Draft Bylaws
(1) File with State as Nonprofit
(2) File for tax-exemption with IRS: Form 1023
(3) Re-file with State for Tax exemption (letter)
Get City Property and other Tax exemptions
Apply for Solicitation License (local if necessary)
Get Mail Permit (if needed)
Get Federal Employee Number (SS-4 or online)
Unemployment Insurance (employees)
The Board
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Minimum Number Depends on State (1-3)
Board Directs Activities on behalf of Public
Defines Mission
Approves Strategic Plan, Bylaws, Articles
Unpaid
Bylaws govern (Meetings, minimum – 1/year)
Initial Meeting Minutes – Very Important
Sets salary of employees (Fair & Reasonable)
Principal Fund-Raisers: {Give, Get, (Get Off)}
Should not run Nonprofit’s day-to-day activities
Nonprofit Websites (http:www.)
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Irs.gov/charities
Citmedialaw.org/legal-gui-de/districtcolumbia/forming-nonprofit-districtcolumbia
Citmedialaw.org/legalguide/virginia/forming-nonprofitcorporation-virginia
Sos.state.md.us/charity/nonprofit.aspx
Nolo.com
Managementhelp.org/strt_np.htm
Nonprofitmanagement.suite101.com
Legalzoom.com/sem/nonprofitpage
Nonprofitissues.com/public/indices/by
feature/point.html
Charitynetusa.com
Foundationsearch.com
Bigdatabase.com
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Nonprofitroundtable.org
Nptimes.com
Box.net/shared/tgft7ujmsp
Snpo.org/index.php
Wikihow.com/start-a-501c3-nonprofitorganization
Nonprofit.about.com/od/nonprofitbasi
cs/a/classifications.html
Nonprofit.alltop.com
Clickandinc.com/business=formation/n
on-profit
2.guidestar.org
501c3.org
Idealist.org/if/i/en/gaqcat/62-42
Taxesq.com/nonprofitcorporations.asp
Intuit.com/free-website-builder
Nonprofit.about.com
Nonprofit Marketing
Aggressive
Bold
Communicative
Potential Pitfalls
Loss of 501(c)3 Status
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Family Board Members (Self Dealing)
Excessive Executive Compensation
Failure to file annual 990 (990N or 990EZ) form
Failure to meet income rule (public funding is
equal to or greater than 1/3 total)
• No Government EIN
• UBIT (Unrelated Business Income Tax)
• Failure to maintain Corporate Documents
(Articles of Incorporation, Bylaws, Minutes of all
board meetings (especially 1st), membership lists)