Non-profits are lifelines to many communities.

Nonprofit organizations tend to fill gaps in services and goods that aren’t being provided by local governments. But although these organizations seek to do good for communities, they are also lucrative business ventures. After all, it is estimated, that non-profits contribute $1 trillion to the national economy in the United States (according to Cause IQ).

Given how popular nonprofits are many community leaders turn to them as a way to stimulate economic growth for themselves and their cities. If you’re thinking of starting a non-profit, continue to read below where we’ve outlined the three key insights to consider before setting one up.

1. Non-profit Vs. Not-for-profit

Although non-profit and not-for-profit are terms that sound alike, the IRS has clear designations for each. In the eyes of the IRS, a non-profit organization provides some kind of public good. A non-profit will also qualify for tax-exempt status. Non-profits are things like foundations, local charities, arts organizations, etc. and these corporations will be incorporated under the 501(c)(3) tax designation.

A not-for-profit organization differs from a non-profit since it does not need to provide a good or service to better the community. Rather, it can be any group or institution that focuses solely on bettering the community with things like dinner clubs, hobby groups, or alumni associations. These organizations are similar to non-profits in the sense that they are also set up to be tax-exempt and will likely fall under the same 501(c)(3) tax designations.

2. Startup Costs

Whether it’s incorporation fees, payroll charges, or office rentals there are bound to be costs associated with starting a non-profit. Oftentimes, these costs are overlooked or undervalued which can cause some non-profit owners to fail before they even begin.

To prevent any poor financial planning from impacting your dreams of forming a non-profit it’s critical to consider the initial costs you’ll have and how they these would be. Some fees you may want to consider are incorporation fees which can vary based on the state you live in, obtaining 501(c)(3) status (this can range from $275 to $600), office space, software, equipment, and staff.

Of course, we’d recommend speaking with a financial professional like one of us at A.P. Accounting and Tax Services who would be able to analyze your business plan and financial records to ensure your vision is a success.

3. Wait Times

It can take months for non-profit paperwork and certifications to come in. These wait times also tend to vary by state, so ‘standard’ wait times might be longer in your area. For example, getting an incorporation status ranges anywhere from a few days to several weeks depending on where you live.

Other time-consuming tasks like developing bylaws and electing a board of directors can take months. Applying for 501(c)(3) status can take anywhere from several months to a year depending on the complexity of the non-profit.

So, if you are eager to get things started, begin gathering the correct paperwork sooner rather than later.

Ultimately, it should go with stating that starting a business is hard. This is especially true for those looking to form a non-profit given the regulations, processes, and variations that potential owners run into.

But, with an in-depth financial plan, determination, and a willingness to learn you can form a truly impressive non-profit organization that betters the community.

For advice on your non-profit idea, or a free consultation, consider calling us today at 407-328-5001. 

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