4 cr., non-liberal
Non- profit Incorporation and what it means
When determining the structure of your business, it is essential to understand the various
models and what it is that you are trying to achieve before selecting and choosing the appropriate
business structure. I knew that my goal with the organization was to build a company that we
would provide charitable services and educate families/children on the importance of caring for
their mental health and wellbeing. The organization was created in memory of a loved one lost to
suicide. I learned that this would be an appropriate model for the type of organization I wanted to
build. The other options would have been sole proprietorship which means owned and operated
by one person assets, and liabilities are not under a separate entity. The individual is solely
responsible for liabilities, debt and loses. Another option would have been a general partnership
which means that two or more people own it. They assume responsibilities for the partners’ debt.
These allow partners to work as co-workers. Also, the limited partnership would have been an
option whereby you need at least one general and one limited partner to start a limited
partnership. The limited partner serves as an investor in the business.
Legal Rights and Duties of incorporators, directors, officers, employees and members
To file incorporation, the IRS requires a president/chair, treasurer and secretary. The
incorporator can become a promoter by law. A promoter must act with the corporations based
interests in mind. The board of directors must ratify the promoters’ actions. For example, if the
organization were to take on a loan, the board would need to improve. Otherwise, the promoter
will be stuck with the liability if the board does not approve. Selecting directors and ensuring the
members are committed to the non-profit purpose. The directors should have knowledge and
expertise such as fundraising, experiencing managing money, using practical skills, avoiding
conflicts of interest. As the founder, I had to develop realistic job descriptions, train the directors
on the mission, ensuring guideline and regulations are met should I decide to pay the board, later
on, setting terms, creating quorums and voting rules as well as creating executive committees to
fulfil other functions of the organization, such as an ethics committee.
Requirements for Section 501(c) (3) Tax exemption
When forming a non-profit organization, a company must file a 1023 application to be
considered a tax-exempt organization. To be approved by IRS, the 501c3 has to be for a valid
purpose: Charitable, Religious, Scientific, Literary Purposes, Educational Purposes.
Other Tax Benefits and Reporting Requirements
With a nonprofit, some specific rules and regulations must be adhered to. These include
understanding what a donor can and cannot deduct on their taxes, federal Estates and Gift Tax
Exemptions can be accepted by 501c3s. Specific guidelines must be adhered to. Other rules are
reporting requirements for Federal unrelated business income, understanding the differences
between federal and state tax exemptions, understanding other state taxes and understanding
state solicitation regulations.
Setting up the non-profit
Setting up a non-profit organization requires a series of steps. These are; choosing a name
and filing articles of corporation, forming a board and preparing by-laws and applying for tax-
exempt status and receiving IRS approval.
Steps to take after the corporation is organized
Once the organization is set up maintenance is required such as filing annual reports with
IRS – Federal and State, employee income tax returns, sales tax forms licenses and Permits,
worker’s compensations for employees, private insurance coverage, managing the board
effectively and managing employees effectively.
The topics that were challenging for me to learn were managing people effectively. I
found the overall process of starting a non-profit to be reasonably simple. We are not yet at the
point of hiring staff, but once we are, I realize this will be quite a process. I am a hands-on 100%
and am excited to learn every step of the way. The challenges I faced with managing people
came with just ensuring I was effectively communicating, building an active board (a team),
ensuring all members of the group are on the same page and receiving transparent messaging. I
used as many resources as I possibly could to learn how to manage a team and be a great leader.
I went online, went to the library and checked out books, purchased some courses, talked to other
non-profit leaders etc. All of these things combined helped me to be a better manager for the
non-profit and a better leader.
I have learned that everything can be done. If you put your mind to something, you are
going to learn. I approached it this way because really at the end of the day, you are only going
to get what you put out in your learning. Also, because I decided to run this non-profit, I cannot
escape this responsibility. If faced with this challenge again, I would not do it any differently. I
feel that I have taken the necessary steps to be a good manager and leader. Also, I do have some
real-life experience from previous jobs.
The topics most challenging was learning the legal responsibilities of running a non-
profit and managing people effectively. I discussed this a bit more in-depth in the above section
however the things that helped me overcome these challenges were writing all expected of me
for each area, create learning plans for myself, creating binders with essential documents and
resources that I can reference back to, and the best teacher of all is action. Just diving in and
immersing myself in learning. I did this through learning all I needed to legal aspects of a non-
profit and as much as possible through managing a board of directors. I have learned again from
these challenges that everything can be done, and we can do anything we put our minds to.
My Experience in working management
Everything I learned through starting a non-profit organization has enhanced my overall
understanding of business and managing people. I have started a business in the past for my
brother and run various projects at work of which I am required to control people. Learning these
skills so that I can better manage my board, as well as volunteers (and soon employees), has been
invaluable, I know I can take these skills anywhere I go. I have set rules for myself as a leader
for this organization. These rules include always understanding the latest when it comes to being
an efficient leader, ensuring I am still in a complaint with laws and regulations and consistently
learning and educating myself so that I can always be the best that I can be.
According to an article written by community-wealth.org, Approximately 1.44 million
nonprofits were registered with the Internal Revenue Service (IRS) in 2012, an increase of 8.6
percent from 2002. I think there is growth in this field as our world continues to demonstrate the
needs of more acts of service to humanity.