Starting a New Nonprofit

With more than 3,200 registered nonprofits in Lucas County alone, starting your own nonprofit can be a difficult proposition. Carefully consider your options before making a final decision. The term "nonprofit organization" is a tax designation; it's not about how little profit you make. In truth, you can't be sustainable unless you raise more money than you spend. 

The term "nonprofit" defined:  When you start a nonprofit, you're creating a company you will never own. Because nonprofits are often started by individuals who have great passion for their mission, it is important to understand that a nonprofit belongs to your community and is governed by your board. It isn't yours to buy or sell. If it goes out of business, its assets will be distributed to other nonprofits. Under the IRS rules that govern nonprofits, no individual can benefit from a nonprofit's activities in any way except through his or her salary. 

For information and assistance starting a business in the Toledo-area, visit Toledo Regional Chamber of Commerce. Low cost workshops on starting a business are available through the Chamber at http://www.toledochamber.com/events. There are currently no specific trainings locally available for those wishing to open a nonprofit. Check http://grantspace.org/training for nearby workshops in Ohio.
*The Center for Nonprofit Resources cannot help you file your forms or start your nonprofit.

Some things to consider: Some articles to read to help you decide the best course of action:
1. All nonprofits must register with the IRS to obtain 501(c)(3)status. This may take 12-18 months. If your organization’s projected annual revenue averages $10,000 or more during the next four years, then your user fee is $850. A recent change in IRS policy has resulted in the Form 1023 EZ . You must complete the Form 1023-EZ Eligibility Worksheet to determine if you are eligible to file this form. The filing fee for the EZ form is $275.

2. CPA’s and attorneys who specialize in nonprofit organizations can charge from $2,500 – $5,000+ for preparation of IRS Form 1023 applications for even small organizations. Online template-based services, like Legal Zoom, will quote users a fee between $500-$600 but can end up costing more. CPA's and attorneys may charge less to file a 1023 EZ form on your behalf. 

3. The filing fee with your Secretary of State office for Articles of Incorporation is around $125. Ohio Charitable Registration costs are between $50 - $200.

4. Nonprofits are not all (c)(3)s. Thinking of starting a 501(c)(2), (4), (5), (6), (7), (8), (9), (10), (12), (13), (15), (17), (19), or (25)? Click here to view Form 1024  from the IRS.

 

From Nonprofit Quarterly: The Challenges of Starting a New Nonprofit

From Idealist.org: Starting an NPO — Five tips and a warning

From GrantSpace.org: What are the advantages/disadvantages of becoming a nonprofit organization?

From The Nonprofit Quarterly: To 501(c)(3) or Not to 501(c)(3): Is That the Question?

From AboutMoney.com - 6 Realities of Foundation Grants for Nonprofits

From the Council on Foundations - Grants to Religious Institutions (Do I need a 501(c)(3))?

From the Wall Street Journal - The dos and don'ts of founding a new nonprofit 

 


Alternatives ways to accomplish the work you are passionate about...

  • Join an existing 501(c)(3) organization. Study the list of nonprofits already active in the same subject and geographic area and join their efforts. You may find a current tax-exempt organization willing to act as a fiscal sponsor for the program you want to start. How does this work? A newly formed nonprofit finds another nonprofit (one that is already tax-exempt and generally has a similar mission) that agrees to accept the administrative responsibility of receiving charitable gifts on behalf of the sponsored organization - see more at: http://www.councilofnonprofits.org/fiscal-sponsorship
  • Research similar organizations in your area that are doing the work you would like to do. Consider becoming a volunteer, a board member or even a staff member and find out what it takes to run a program and/or a nonprofit organization. Visit C4NPR's Job Center for opportunities. 
  • Create a special program at an existing organization. Meet with area nonprofits to explore creating a special project or initiative and negotiate your involvement. They may even be able to write your project into a grant and get funds to help it become a reality.
  • Open a donor-advised fund at a Foundation like Toledo Community Foundation, so that you can make tax deductible donations to the fund and direct those funds to nonprofits that are doing good work in the sectors you are most passionate about. A donor-advised fund offers the opportunity to create an easy-to-establish, flexible vehicle for directed charitable giving, as an alternative to starting your own foundation or organization.
  • Start a local chapter of a national or regional organization, where the headquarters acts as the nonprofit fiscal agent.
  • Perhaps a 501(c)(3) isn't the right tax designation for you. Check out this page on the IRS website to read more about other types of tax-exempt organizations.

If you are ready to start your nonprofit, here are resources for further research:

Ohio's Nonprofit Incorporation Advice

1. Prepare your statement of purpose. Click here for information on writing mission and vision statements.
2. Choose the initial board of directors for your nonprofit. Need Information? Visit our Boards page.
3. Choose a name for your Ohio nonprofit corporation - See ORC 1702-05 for more information on name restrictions for nonprofits.
4. Prepare bylaws for your Ohio nonprofit corporation. Visit our By-laws section under Boards. 
5. Prepare and file your nonprofit articles of organization - Make sure you include both the state and federal tax-exempt required language in the articles you create.
6. Hold a meeting of your board of directors.
7. Set up a corporate records binder.

To Obtain Federal Tax Exempt Status

There are a number of tax exempt organizations as designated by the Internal Revenue Service. To review a list of Subsection Codes for Tax-Exempt Organizations, click here.

The most common request we receive at The Center is applying for a 501(c)(3). You are required by the IRS to file a Form 1023 or Form 1023 EZ to request 501(c)(3) status. The Center cannot help you file your forms or start your nonprofit. Consider hiring a professional, an attorney or an accountant, with expertise in filing Form 1023. The process may take from 12-18 months to obtain your 501(c)(3) letter from the IRS. Errors on the form could keep your paperwork from flowing through the process.

  1. Read Frequently asked questions about the Form 1023 and application process.
  2. File your IRS Form 1023 federal tax exemption application.

Information on Starting a Nonprofit in Ohio

Information on Starting a Nonprofit in Michigan

 

 


 

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The Center For Nonprofit Resources is a Partnership between United Way Toledo Community Foundation