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Starting a Non Profit

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Joined: 15 Aug 2008
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Schools: NYU Stern Class of 2012
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Starting a Non Profit [#permalink] New post 08 Dec 2008, 11:58
Well, after writing the CFA Level I this weekend I'm faced with one of those rare and wonderful things - free time. I'm planning to pursue a long-time interest of mine and start a small non-profit teaching finance/money management basics to youth. Due to work constraints, I plan to keep it to a weekend based camp. I know there's a ton of experienced, worldly individuals on this board - figured it'd be a great place to draw some insight and advice before I start down this path. So, does anyone have anything they'd like to throw out there - personal experiences, potential problems, success stories?

Thanks in advance, this board is such a wonderful resource...
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Re: Starting a Non Profit [#permalink] New post 09 Dec 2008, 12:38
Early last year, my roommate wanted to donate some of his year end bonus to good cause and started a micro-financing foundation for third world countries.

He personally started it last year with $1000 seed money and funded about 40 different business ventures in India, and other developing countries.

This year he wanted my advice on how to expand the operation, especially with increasing the size of seed money. He wanted a plan to gather people to donate money but wasn't sure how since his foundation isn't well known.

this is what we did based on my tax expertise from my taxation days.

First, we registered his foundation with IRS. This way, whoever donates money to his foundation can legally deduct this contribution from their federal taxes.

Secondly, now that he was registered with IRS, we were able to take advantage of Corporate foundation matching gifts. For example, if my roommate decided to donate $1000 again....rather than donating it himself, he would separate $1000 to forty distinct payments of $25. He would give this $25 sum to a friend/family who works at a company with matching gift program and donate in their name. In turn, each individual would report to their company that they donated $25 so the company can match the donation to the charity. Therefore, each $25 donation of his own money) becomes $50....GENERATING 100 PERCENT return.

Thirdly, to prep for next year's donation campaign...we decided to add list of all companies (that made matching companies) in promo materials for publicity. This way, it legitimizes the charity to people who aren't familiar with the charity (potential new donors).

Also, every time someone sends hima thank you note etc, he would save it so he can publish them on his website (which is still currently under construction).
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Re: Starting a Non Profit [#permalink] New post 09 Dec 2008, 12:56
As someone with experience in international development/microfinance, I'd add that while the above poster's roommate's intentions are totally awesome, you should think pretty carefully before starting your own gig. This is cross-applicable to many non-profits, really... there are big economies of scale at work, and larger, more established organizations can often leverage your money much more effectively by spreading out overhead costs.

Things to think about: is there a particular niche I'm trying to target with my own organization? Something no one else is doing that I think is really important? Why would starting your own fund/organization/whatever be more efficient and effective than donating that money to an existing one?
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Re: Starting a Non Profit [#permalink] New post 09 Dec 2008, 13:27
Thanks for the replies guys, both make some great points.

There are several reasons I decided starting my own would be beneficial, but feel free to point out any major flaws in my thinking:

First - programs similar to those that I plan to start (Junior Achievement being the major player) do not fit with my work schedule at all. I get no lunchbreak on the desk, so leaving for 2-3 hours is out of the question.

Second - My father's an entrepreneur and it's something that's appealed to me since childhood. The chance to start my own venture from scratch with little to no capital at risk is very appealing. I've got atleast two friends who would be interested in joining me

Third - The overhead costs/economies of scale is something I'm still trying to figure out. I was hoping some connections in the community would be able to net me a school room on the weekends or something to hold a type of "day-camp" at no- to minimal-cost. My spouse is a nurse and would be attending, which helps a little. Insurance is something I still need to look in to. Would definitely appreciate some more insight there.

The funding idea is solid, nice ROI there. How much did registering with the IRS cost you?
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Re: Starting a Non Profit [#permalink] New post 10 Dec 2008, 10:50
It depends on the type of non-profit org. For example, congregation/church and few other types are done slightly differently.

Most of the charitable orgs are considered non-profit corporation and one must register the non-profit corp with the state the org is located in. Therefore, expenses related to this registration varies by state. (Some states are easier, others are more complicated)

Corporation should be a non-profit corp created under the specific laws of your state. There are various services that will create a corporation for a minimal expense, but it is far too easy in some states to simply do it yourself. Your best source of information for this is your Secretary of State. (Search for your state's Non-Profit Articles of Incorporation)

If your final goal is to become a charitable organization recognized by the IRS then you will want to be certain that the language on your Articles of Incorporation meet all of the requirements. (IRS Publication 1828 http://www.irs.gov/pub/irs-pdf/p1828.pdf)

You will generally need three individuals that reside in the state to be the Incorporators and/or initial Directors for your corporation. The same three used to create your initial congregation are normally used, but not necessary.

Although the Secretary of State may assist you with this you cannot be certain that all is necessary and proper for future use with the IRS. You should really consider using an attorney to at least look over your forms before you file them.

Finally, you will need to get a tax ID number, commonly called an Employers Identification Number, EIN, or Taxpayers ID Number. For this you will need IRS form SS-4.

Again, details of registration might be slightly different depending on where you are. I am a CPA licensed in NY State only. Also, I only practiced taxation (specialized in real Estate) for only about 1.5 years.
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Re: Starting a Non Profit   [#permalink] 10 Dec 2008, 10:50
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