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Is Starting a Nonprofit Right For You?

Is Starting a Nonprofit Right For You?


Hello everyone and welcome to today’s
webinar: is starting a non-profit right for you? For those of you who are
returning GrantSpace webinar participants a warm welcome back and to
those of you here for the first time I’m so glad that you’re joining us today my
name is Elizabeth Zevada and I’m a program associate here at Candid, based
in New York City and I’ll be supporting today’s webinar by managing polls as
well as collecting questions that you ask along the way and posing them
during our Q&A. For those of you that are joining us for the first time we want to
share with you that we’ve joined forces with GuideStar to form a new single
organization called Candid. Together we have over 88 years of experience in the
nonprofit sector. Every year millions of nonprofits spend trillions of dollars
around the world. Candid finds out where that money comes from, where it goes, and
why it matters. We believe that an effective social sector is critical for
a thriving society and we believe in the importance of solutions for the sector
by the sector. With Candid nonprofits, foundations, donors, and the public can
all be on the same page. Through research, collaboration, and training Candid
connects people who want to change the world with the resources they need to do
it. With candid you can find funding with Foundation Directory Online and search
140,000 funders and 12 million grants and you can increase your visibility
with the funder community by maintaining your GuideStar nonprofit profile. You can
also continue to strengthen your nonprofit by participating in GrantSpace trainings to move your fundraising skills to the next level. To learn more
about our capacity-building training programs you can visit grantspace.org We
offer courses across the country at a location near you. I would now like to
turn the controls over to our presenter for today, Dave Holmes and as I do so I’d
like to go ahead and introduce him. Dave Holmes is Cleveland Lead here at Candid
and where he coordinates training reference and research services for the
Midwest region. He returned to Candid in 2015 from a position as senior
consultant at Grant Plus writing and doing research for a
variety of large and small nonprofit clients. In his initial tenure Dave
served in various roles including regional training specialist, interim
director of Foundation Center Cleveland, and director of capacity and leadership
development. So without further ado I’ll turn it over to Dave. All right. Thank You
Elizabeth and welcome everybody this is our “is starting a non-profit right for
you?” class and even before we get started I want to know a little bit more about
all of you so we have a poll that I’m gonna ask Elizabeth to share with you
right now thanks Dave so as we said we want to get
to know you a little bit better so which best describes you? we really, what
brought you here? I’ve already started a non-profit, perhaps you’re thinking about
starting a non-profit, or perhaps you’re already involved in the process, and
maybe you’re just curious about what it takes to start a non-profit or just
curious about the social sector in general. So Dave it looks like 42% of the
room are thinking about starting a nonprofit, 34% are actually just
interested in learning more and we have a couple folks who’ve already started or
they’re in the process as well. Any initial thoughts? Well that is great
actually this is for all of you really this this particular class because it’s
going to go into detail about all the different levels of what you need to
know and even after you’ve started even after you’ve become a legal nonprofit
there are things that you should check on to make sure that you are doing
effectively so we’re gonna make sure we go over all of those different things
and show you where to go to find more information all right so we’re gonna go
back to the slides now. Thank You Elizabeth. We’re gonna talk about what
we’re gonna learn today so by the end of the training you should be able to do a
few things and I’m gonna show them off to you as we go on so one of the things
you should be able to do is you should be able to outline the steps required to
start a non-profit you should be able to tell what are the things that you need
to do to make sure that you’re an effective nonprofit that can sustain
itself we will also give you an opportunity to
understand that it’s not for everybody so if you’re still thinking about it you
should be able to assess the alternatives to starting a non-profit
some of the things that you could do instead is some of the ways that you
could work and still be effective in the community there is a resource that we’re
gonna show off today called the nonprofit start up assessment tool it’s
a neutral that we’ve recently developed with assistance from the Kauffman
Foundation we’re going to be showing you how to use that. It’s a free tool that
any of you can log into and use to determine where you are in the startup
process, if you’re not sure and the next steps that you should take if you want
to move forward. And finally we’re gonna show you where you can access additional
resources to help you as you go through all of this. And there are handouts that
you can download for this in addition to the slides. There’s a nice resource
handout you should take advantage and download before we get any further
though I want to say that I’m not a lawyer. I’m not an accountant. So I can’t
really interpret the legality of anything that you’re gonna do. I want to
have make sure that you get a chance to ask any questions that you have but you
should know that certain things are the purview of a lawyer or an accountant. I
am going to answer the questions as best I can related to my experience in working with nonprofits. So let’s get started. First
thing I want to talk about is what a nonprofit organization is and this is
the official legal definition as the IRS holds it out to IRS defines nonprofit
organizations in their code and the section of the code they define it in is
501 C 3 which you should be familiar with because that’s often shorthand for
referring to a nonprofit organization as a 501 C 3 according to the IRS when you
form a public charity which is another word for nonprofits it should focus on
its exempt purposes by which we mean you have to be set up to benefit others
rather than yourself you have to be organized to focus on something
educational or something charitable and it had to be, you have to
be operated as that is your your main mission and your main focus. Also you
can’t really do anything to benefit private individuals. You can’t start a
charity just with the idea to get rich it would be difficult to do that anyway
shareholders or private interests it’s really about making sure that the people
that you’re set up to benefit get most of the benefit you can get paid
certainly most people that I know that work for nonprofits get paid but that
can’t be the number one reason why the nonprofit exists and finally you can’t
be solely linked to a political organization. You can advocate for
policies and political issues and there’s clear laws set out that’ll tell
you how to do that but you can’t say something like vote for this person. That
cannot be the way that you do it. If you’re not sure about this or you’re not sure
about any of the other things related to this the IRS website which is one of the
links on your resource page IRS.gov has a wonderful section on charities and
nonprofits that takes you through a lot of the legal details. We’re gonna try and
go past a lot of those because we don’t want to get in depth with it but we want
to make sure that you know where do you find it so IRs.gov there’s a little
button at the top that says charities and nonprofits and take advantage of
that. Speaking of the IRS this is what most people think of when they think
about starting a non-profit they think about the legal steps. They think about
having to establish a board of directors who are going to run the organization so and depending on what state you are in that can be three people it can be more people
that are going to be in charge of managing the organization. You put
together bylaws and board policies and incorporate within your state so the
first step is really incorporating with the Secretary of State’s office for your
state in that you will get an EIN an employee identification number from the
IRS so that you can be an official business and there’s a form that you
submit and then once you’re incorporated in your state you file for federal tax
exemption 501c3 status and the form there’s a couple of different varieties of the form but its form 1023 and this is
where you go through the process and get the official status. When we talk about
these steps we always make sure to recommend that you don’t do this alone
by the way because it is difficult sometimes. It’s easier than it used to be
to understand the forms but even so the form 1023 has a lot of specific
questions that need to be answered in a certain way in order to make sure that
you are representing yourself in the most effective way. So we recommend that
you get help from somebody with legal experience particularly non-profit legal
experience. Lawyers aren’t cheap but I would suggest to reach out to your local
bar association in the city or location where you are and look to see if they
have any assistance, any nonprofit assistance they can recommend or any pro
bono free assistance they can recommend remember though that this is not the
only place where you can find this information you can go to irs.gov to get
more information there’s also a lot of publishers that specialize in step by
step guides to starting a non-profit NOLO, N-O-L-O, is a is one that publishes
a lot of books that take you step-by-step through the forms so with
that and some legal advice and a little bit of patience and a little bit of
money you can become a legal nonprofit but this makes you only legally a
non-profit most people think well that’s enough you know all the rest of the
stuff I’ll just you know I’ll get to it this is what I have to do right now and
this is what I’ll do that’s not really the best way to think about it. This is
the legal stuff and it enables you to move forward legally and get grants and
things like that but it doesn’t really talk about what makes a real non-profit.
So that’s what I’m going to go into now. You should always put a plan together.
All of you are in slightly different places when it comes to your plans.
That’s okay because each of these sections is something that you should
consider throughout the lifetime of your nonprofit and make sure in making
yourself as clear as possible when you do this. At Candid
we tend to look at nonprofits in a lot of different ways but a lot of the times
we look at them in one specific way: is it something that anybody else would fund?
Would anyone like to invest in this plan? Every item you see here on the list is
something you should consider and make sure that you continue to consider
throughout the lifetime of your organization. We’re going to take them in
this order and in the order that you should probably think about them as
you’re creating from beginning to reality and to going out and being a
nonprofit in the work. The first thing you think about and the first thing that
we always start about is talking about the mission. The mission is
the most important part of what you do and I’m gonna put up an official
definition of a mission here and this is coming from our own website
grantspace.org you can read this but basically the mission is what you’re
gonna be doing on a day to day basis if you had to explain what you do: who
you’re helping, what you do, and why you do it, that’s your mission. That explains anybody from the IRS to somebody on a elevator asking you what
you do to somebody wanting to fund you what your organization stands for that’s
what a mission is and sometimes this takes the longest to put together for
any organization because it should summarize everything it should be able
to state all of the different things that you do on a day to day basis. One
thing that we warn against that comes up again and again is mission creep or
mission drift. When you start an organization people are going to judge
what you do based on what you say your mission is and if you suddenly slide
towards doing one thing and then you stop that you do another thing and
neither of them really fit with your overall mission you can cause a lot of
trouble for yourself. You can cause funders to not want to invest in you
because they don’t believe that you believe in your mission strongly enough
so the mission communicates what you do The vision is another part of thinking
about what you do and it goes further. It goes to the point where you think about
okay if we are successful, if we do day-to-day what we are
set out to do, in the long distance future what is the world going to look
like when we’re successful? Is it going to be a world where every child can read
by age three or a world where clean water is available to everyone? This is
not something that happens every day or tomorrow or any of those kind of things. This is the vision that you have for the future. You’re not going to accomplish it
tomorrow but if you keep doing your mission this is what you hope to achieve
in the very long run. Both of these the mission and the vision are rooted in
values and the reason we bring up values is that this is how you connect with the
people that are going to invest in you and by investors I mean people who want
to join your board of directors, people who want to donate to you, people who
want to be a part of your organization maybe be an employee people who want to
keep supporting your organization for the future you are connecting with them
through your mission and vision and connecting with their values, the beliefs
that you hold. It’s very important to know about these because they come into
play when you start to seek for future support. For example Bill Gates has been
very clear about his foundation’s values. He and his wife, the Bill and Melinda
Gates Foundation, they value international health, they value the use
of technology, they value a lot of different things that they fund and they
fund nonprofits to carry out the actions related to those values. So if you have a
mission that fits within the values scheme of the Gates Foundation and
carries it out where they they have those specific beliefs you are gonna do
their work for them and that’s essentially what you’re going for.
Just because by the way that you’re interested in the same things, youth or
seniors or clean water or clean air, doesn’t mean that you share the values
of every different organization. You yourself might know of an organization
that’s similar to yours but maybe has a different value. Well we we like youth to
be an integral part of everything we do as opposed to that other
organization who wants youth to kind of be seen and not heard maybe in a more of a
of a very rigid structure. Just because they’re working with the same people who
are doing the same kind of things doesn’t mean they share your values. It’s
important to know about this because as you get into this further and further
you are looking to try and find a fit between all the people that could share
your values, who can help you carry out your mission, help you achieve your
vision, so you have to be very careful when you read and learn about different
organizations that you are connecting and making those values clear we have a
little exercise usually at this time I’m not going to do it in this webinar but
if you haven’t laid your mission vision and values for your organization I
recommend that you take some time and do that too. Even on a spare sheet of paper
just make sure if you’re starting and thinking about what you’re going to do.
Make it clear to yourself because that’s going to make everything else that you
do with your nonprofit a lot easier. Okay so we’re gonna move on here and we’re
going to talk about what’s called an environmental scan. An environmental scan is kind of a scary phrase but in essence what it means is that now that I’m clear
on what I want to do is there anyone else that it’s doing this work? Is there
anybody else I can work with or anybody else that I need to know about before I
move forward? Some people just kind of don’t kind of willfully don’t want to do
this because they’re like well I don’t want anybody else to get confused with
me. I don’t want anybody to steal my ideas. I want to be completely
independent. And I have to say that there is no real way to be completely
independent when you’re running a non-profit. You have to think about the
other people that are doing the work. You have to think: who else in your community
is doing something similar to what you’re doing? How do you differentiate
yourself from them? Why would somebody want to fund you rather than somebody
else? So you know what’s going on in your community you need to be able to say
what is it that makes me distinct? Maybe you’re modeling what you do on somebody
else. The important thing to know is how does
what you do how did, why is it necessary for you to
start your organization? Are you being innovative? Are you doing something that
nobody else has done? Or are you duplicating somebody but not copying
somebody who’s doing exactly the same thing in exactly the same neighborhood?
The important point is you want people to know why should they support you? What would happen if you didn’t exist? What bad things are gonna go on? Now it’s
important to know where to find this information. You can just look around and
say well you know I’ve never seen, I did some Google searches and I’ve never
really seen anybody who does what I do. But I have to talk to a lot of different
nonprofits and remember that the funders you’re gonna go to also know about a lot
of different nonprofits so I would take care to do some pretty extensive
research. Google is one thing GuideStar which is now part of our organization, Candid is another place to go where you can find lots of key information about
nonprofits and how they function guidestar.org is the website. It’s easy
to search to find out information about different nonprofits in your area. If
you’re not even sure who else is around you you might want to try connecting
with the 211 service. 211 is a national nationwide information
service usually coordinated by the United Ways in your area. So it’s
usually 2 1 1 as a phone number but you might want to look online to see if
there’s a 211 for your city or your area online that’s a place where I
usually go to find out who else is doing something similar so you call 2-1-1 and
you say is anybody else doing after-school programs with a focus on
equestrian in my region and they’ll look it up and see if they can find anybody
to connect you with. Two reasons why you do this: you find out how you’re distinct
from them, how you would be distinct from them in the future. You also make connections for collaboration and for sharing the work
in the future. Not giving the work to somebody else but showing where you fit.
What’s your niche with them? So doing that research if you don’t do
it early on you may find yourself being asked why are we giving you money isn’t
X just like you? You want to find out about X as soon as possible and find out
how they’re not like you All right so I’m going to move on a little bit
and talk more about the plans and the next part of the plan is an important
one. it’s about board members. Now board members are the essential working parts
of a non-profit. Most nonprofits don’t begin with a big
staff, even one employee. They begin without a staff. They rely on board
members and volunteers as their expertise, as their donors, as the people
who are actually working to do work. The roles that board members do tend to be
everything that makes the public charity public. They represent the community
that you’re serving, they’re legally essential because if you want to start a
non-profit you have to have a board of directors and then people that are
officially in charge of the organization There’s a lot of people that are
starting nonprofits who don’t know this that are thinking well you know I I have
this idea I came up with, this vision and mission. I’m gonna do this. Well in the
United States when you start a nonprofit organization you actually have to have a
couple other people at least who are really gonna be in charge of that who
could fire you if they decide to do that not that they would because you they
probably share your values they probably come from people who are equally excited
about what you’re doing but they are going to be the ones responsible for
upholding that mission upholding the organization’s mission and making sure
it keeps going. Now I don’t know any organization who’s completely and
utterly satisfied from the beginning with their board of directors. A lot of
the times early on organizations are trying to build that board and then
later on they’re trying to expand it and they’re trying to find a representative
that gives the things that they need and those things tend to be remembered
easily with little little nmeonic devices like “time, talent, and treasure”
I’m sure you’ve heard about that Somebody who’s willing to give the time
it’s necessary to do the work, who has a talent that they bring in fundraising or
management skills or any kind of talent that you need a legal acumen, and then
treasure, that are able to give and get money for you. Finding board members is
often what a lot of nonprofits never really give up. One place I’m gonna refer
you to is an organization called Board Source and their website is boardsource.org Board Source is the national authority on nonprofit
boards. When I have a question about how a board should be organized or how
should I recruit board members how should I encourage board members to
donate to my organization, which they all should do by the way, I go to Board
Source because Board Source has a wonderful website, a lot of great
publications that talk about this and they’re where you can find out more
details. You can get guides for the roles of your board members, you can find out
more information about the best ways to educate your board. They also can help
you get stimulated about finding board members in your area. Another place that
I tend to go for finding board members is to a volunteer organization or a
volunteer matching organization which a lot of cities have that match people who
wants a volunteer with volunteer opportunities a lot of times they will
help you find board members oftentimes there are organizations that might
specialize in that. United Ways often do it. find out who it is that that you are
doing that. Sorry just got handed a message from one of my co-workers. Board members are the start. Staff members are what most people want. They want to be
able to say I’ve got a staff I can pay myself and I can pay the people that are
doing the work. One of the troubles that we run into is that you don’t have the
money when you first start to pay for staff members so if you’re gonna do this understand that staff members don’t come right away.
They come as you get structured and they come as your organizations grow. But if
you don’t have the finances and fundraising you’re not going to have
that. Think about all the people who can help you out though in keeping your
organization going. Not everybody can be a board member, not everybody has the
time, not everybody has the talent or the treasure, not everybody has the skills to
help you. That doesn’t mean that they can’t help you unless you they become
your paid staff. A lot of organizations have an advisory committee: people that
can bring different points of view even if they don’t have the time to spend on
your board and become part of that. There’s some great resources on our
grantspace website grantspace.org is the website and there’s a section in
there called the knowledge base which I’ll show you in just a little while the
Knowledge Base has detailed information and answers to questions and one of the
ones is how can I find board members for my nonprofit? So you might want to
take a look there if you’re learning more about that as you go on. Okay so
let’s imagine that you started to build your board, you started to get your
organization together, what else is part of your plan? Well a key part of it is
understanding the need in the community. This is not your need by the way. This is
not I need a lot of cash to keep my organization going. The number one
concern you should have is being able to talk about the need that you are
responding to in the community. You have to be able to talk about it. You have to
be able to document it. So it’s one thing to say well I think that my neighborhood
has a lot of people that should be doing something else. There’s a lot of people
that seem to not have jobs, they don’t have a lot of things. t’s one thing to
think that and to be able to talk about it. It’s another thing to know it based
on talking to people based on statistics based on gathering the information that
proves the need because as you start putting a case for support together a
case for funding for your organization you have to be able to say here’s why I
know this is necessary. Here’s why I know this
is a need government agencies like the Census Bureau or the city or county that
you’re in probably have statistics that you can use to document specific need. If
you want to provide services to single parents they probably have statistics on
single-parent families. Maybe you’re documenting lead levels and the
people that live in your area a lot of places have statistics on that kind of
information but you can get statistics from a lot of different places. You can
get them from newspaper studies and research articles from universities that
have taken a look at different communities you can get them from
organizations that already provide support you want to know about the
seniors living in a particular area the senior centers that are there probably
have some detail about that this need statement that you put together the need
that you have identified is one part of making a case a case for supporting your
organization and this is essential as part of your story that you’re telling.
So when you identify the need the first part is making sure that that’s clear to
everybody who’s going to be working with you. The second part of this is really
how are you as a nonprofit with your programs going to address this specific
need? And if you’ve ever put together a grant proposal or worked on a grant
proposal you know that what I’m going to talk about here looks very similar to that when you talk about your programs and what you’re
doing you should lay them out in a way that shows what are the goals and
objectives that are you that your project needs to have briefly what are
the broad goals, the broad things you want to achieve to address the need in
your community and what are the specific objectives? And we say these are
sometimes called SMART things what are the specific measurable achievable
realistic and time limited things you’re going to do this year and in the future
to address this need? The reason why you should lay this out as clearly as possible and by the way this is sort of based on the idea of a logic
model meaning if I have these things in I’m gonna do these things and outcomes
the things that happen are going to be measurable after I do them. That logic of
a program is something you need to think about early on because when you start
your programming you may not have thought well okay we’re gonna be feeding
these kids after school and we didn’t remember to count them every time like
we should count them every day to make sure we know how many people we’re
coding we should find out are these the same kids each day or they’re different kids
each day? The more information you gather about the services you provide, the
easier you can put together: what are your specific goals? If you know you’ve
had 20 kids coming regularly and they’re the same twenty kids what’s your goal
for next year? What’s your objective? Are you gonna provide particular services or
you’re gonna make sure that you work with the food bank to provide nutrition
and how are you gonna know whether you’re successful or not? What did you
set out to do? Well if your objective was to feed twenty kids with a hundred good
meals you can count that and measure that. But if your real goal, your overall
goal is to make sure that they’re healthier how do you measure that? How do you keep track of it? This is tricky and it is definitely part of program design
and program understanding. The benefit of thinking of it as a logical thing, we do
teach a class specifically on logic models called our outcomes class, is that it
helps understand what other people look at. They want to invest in you, they want
to know that they put some money in that is what’s going to come out is a
specific success, a specific outcome, an impact that they want to make. So it’s
important to keep track of that early on and not just kind of keep doing things.
Well we have this much money let’s do a few things here and until our
money runs out. That’s a dangerous situation to get into because people
don’t want to invest in things that only happen when the money shows up.
I have another poll for you I’m just gonna go to this and I’m gonna ask
Elizabeth to bring up this on the screen True or false: once I get my 501c3 status I will get foundation grants. I think Elizabeth has
this open. Right I do and it looks like just about 30 percent of the room have
participated thus far. So there’s definitely a clear leader but we’ll see
if we can get a couple more folks participating and see if that lead
diminishes at all. And we have 75 percent of the room participating in our poll
thus far so I’m gonna go ahead and close it and share those results and Dave I
think you’ve been doing a good job because everyone here said false. well
that’s good yeah I didn’t mean it was not to tease you to do this by the way
and thank you for sharing. Yeah a good 85% of you’re saying false once you get
501c3 status you might get foundation grants but you might not and that is the
the truth of it all. It doesn’t guarantee you anything. Doesn’t guarantee you
donations, doesn’t guarantee you foundation grants. It makes it possible
legally for foundations to give you grants but they don’t have to. all right
so we’re gonna go back and explain this. Thank you very much for sharing
Absolutely. And we’re gonna talk about finances and fundraising because we were
known as the Foundation Center for so long a lot of people came in to us and
said oh yeah I’ve got a nonprofit show me where to get the foundations to pay
for all the different things that we do. And it’s lovely when they do but
generally before that happens you have to be very clear about what’s going to
happen with your organization. First of all you have to have a simple idea of
what is the proposed budget for your organization. The budget should be the
numerical representation of everything you’ve planned. When you have that goals
and objectives and measurement. In order to get there you have to know: what is it
going to cost to get you there? So far if you make the case you’ve justified it
but you haven’t said where is the money gonna go and I’ll tell you people with
money who want to invest in you really want to know what
that money is going to be spent on. So thinking about your proposed budget is
an important thing to consider. Also important to consider is where is your
money gonna come from. If you think a foundation is gonna pay for ninety or a
hundred percent of what you do that’s very unlikely. Private foundations like
to support what you do they don’t always like to support it every year they don’t
always like to support general operating which is the cost of doing business.
Oftentimes foundations want to support you and get you to a place and then they
want to kind of hold back and they don’t want to keep funding you year after year.
The places that do best are the ones that understand you should diversify the
different sources of funding. You should think about all the other different
places and by the way if you want to learn about diversifying your
fundraising you should take our free class Introduction of Fundraising
Planning. But the basic idea is individuals, your board members, your
volunteers, people that you connect. They tend to be the people to give the most
readily and the most regularly to a non-profit and oftentimes when you start
up you’re going to be doing individual donation solicitations, you’re going to
be doing event,s maybe you’re doing a crowdfunding kind of thing that enables
you to get money to get started. And when a funder then looks at what you do they
want to make sure that you are getting public support. In fact there’s something
called a public support test which checks to see: is your organization getting all
its money from one place, which makes it a foundation, or is it getting support
from the public? And that can come from donations, it can come from charging for
the different services that you offer, it can come from a lot of different places.
So the important thing is to be clear and to diversify so that if you depend
on one source and that one source goes away you don’t have to find somebody
else who’s going to step up and pay an awful lot. If you get a little bit from
corporations and foundations and individuals and charging and maybe
government and maybe United Way it’ll be a better situation. The other
part of this is understanding how do you keep track of this money because you
can’t just take it and put it all in a shoebox and put it under the bed. You
have to be able to say we are gonna track where the money comes from. If you
want to get people to donate large sums of money to you, you don’t want to just
have one person handle all the checks, keep the accounts, make the financial
decisions, make the accounting, that’s a recipe for disaster. And there are
standard financial procedures that nonprofits should follow that you should
follow if you intend to continue to grow in your fundraising. A good place to find
out about these financial procedures and the places that can help you is to get
connected to your your nonprofit organization assisting organization in
your state most states have an organization, an
association of nonprofits that provides training that also helps with other
kinds of information. They can help you find out who’s offering accounting in
your area specifically for nonprofits who can help you out who can get you
connected so I would encourage you to take a look around and and identify your
local, your statewide association of nonprofits and see if they can connect
you to the right places if you’re not sure. Also of course your board of
directors and the people on there that know finances are going to be invaluable
to you as you go further. So let’s imagine you get all your finances
figured out. There’s still the idea that you have to reach the people that you
are serving and reach the people that need to know about you. No one is gonna
support you if they don’t know you exist and relying on just one way to get the
word out, just we’re just gonna create a website and everybody’s gonna know, or we’re gonna to create a Facebook page… You have to think about who’s interested in what
you do before you assume that you’re going to be able to get to all of them. Like are they kids under 18? Are you trying to reach kids under 18? Where do
they get their information? Do they get it from Facebook? Not all of them not a
lot of them as a matter of fact. Do kids under 18 read a print publication? Maybe you’re trying to reach seniors over 65. Where do they get their
information? Where do they find out what’s going on in the community? Maybe
the population you work with they get their news from their church or from
school or from the doctor’s office from the barbershop. Where did they pick up
information about what’s going on in the community? Think about the ways your
clients might best find out about you and don’t just think in terms of well we
got to hire a marketer that’ll do that Think about how you reach them and do
you track all the people who’ve been interested in the past because the ones
who have come to your events, the ones who have sent you a donation, those are
the people that you want to make sure you track so that you can keep in
communication with them. If you intend to do this all yourself it might be a
problem so think about the other nonprofits the ones that you’ve
researched, the ones that aren’t doing exactly what you’re doing but definitely
serve the same people that you do. They can help you get the word out. You can
share ways of marketing each other, you can share ways of spreading the word.
They can pass something out for you. And libraries and all the different places
where people gather could be ways to do marketing that’s not as sophisticated as
a website or a Twitter account or any of those kind of things that can be just or
as as effective or more effective. All right I haven’t overwhelmed you with too
much to worry about I want to make sure I mention all these other things:
do you have any space to do your work? I hear a number of nonprofits a lot of the
time who could get started if only somebody would buy them a building and I
have to say to them that buying a building is not the first thing that a
lot of funders want to do for a non-profit. So space is often shared. It’s
been a church basement or it’s shared with other nonprofits in a shared
collaborative space. Maybe you do something out of your home for a while
and then it becomes something where you need to find a space you can use. But do
you have enough space to do your work? Do you have enough equipment? Finding
somebody that was just gonna buy you all the equipment you need is difficult.
Maybe you can get computers donated. Maybe you can share equipment with
another organization. Insurance: that’s one thing that your statewide nonprofit
organization can help you identify. Who sells that? Do you need insurance because
if you work with youth you definitely need insurance, background checks. If you
drive it as part of what you’re doing you drive people to different places people
that do that need to get insurance. Even board members will sometimes ask for
liability insurance so that they are not held responsible for any bad decisions
that come on and you can get all different kinds of insurance.
Human Resources, annual reporting, this is basically keeping track of how your
organizations are run. What policies you have, making sure everything is uniform
and organized and making sure that you report to all the places you have to
report to. The IRS requires an annual report from every existing 501 C 3
Doesn’t have to be a long one necessarily but you do have to annually
report to them. States have to have reporting if you fundraise in different
places you have to do a report Who’s gonna do that? Who’s gonna keep
track of all of that stuff? So given all of that what if you don’t want to do a
non-profit? What if you’re like oh geez the more Dave tells me, the less I want
to do this? Well they’re are alternatives you can volunteer with an organization
that does the kind of thing that you’re interested in, you can find out whether
it’s something that you really want to put the work into by volunteering.
Connect with your local volunteer matching organization or find employment
with an organization that does the kind of things that you are interested in to
see if it’s something that maybe they’re living up to what you need to do. You can
also serve on a board. So many organizations as I said are looking for
board members, looking for good people that can help them out and do the work
with them. So maybe the best step is to serve on a board. The last one here
is fiscal sponsorship and this one takes a little bit more of a description. But
before you become a nonprofit organization you can have a legal
arrangement that will help you while you’re doing it and the basic thing
that’s described here legal arrangement between a 501c3 and an individual or
group is simply you can partner with an existing charity and that person, that
organization, will be responsible for your fiscal behavior. They will handle
the money that you get, they will distribute it to you, and they will be
responsible for it. It’s something that new nonprofits, ones that are just getting
started often do so that they can get access to
donations and grants but it’s not a one-step kind of process. There are a
number of pitfalls beyond just setting up a relationship. Many fiscal sponsors
don’t do it for free. Many expect a cut of some of the grants
that you get, maybe there are other things that they expect. So I would
encourage you take a look at our grantspace website, grantspace.org and take a look at a free video we have there and you can just search the title “what you
need to know about fiscal sponsorship” It’s a great way to find out more if you
want to explore this idea. So in summary what are the advantages of this? Well one
of the nice advantages is that if you start a nonprofit organization you are
eligible for public and private grants and people donating to you can take a tax
exemption or a deduction. That law has changed recently so not everybody
does it the same way that they used to do. However you’re not going to be able
to get public or private grants unless you are somehow affiliated or running a
nonprofit organization. You’ll also have the benefit of formal structure by which
I mean there is a structure where the board is in charge of the organization
but the board is not personally responsible. The board supports the
mission and as long as all the board members are doing what they’re supposed
to do following the finances and and they’re making sure everything is is
taken care of. As long as they’re doing their their business, the due diligence, they
have limited liability so the nonprofit goes bankrupt that doesn’t mean a board
member goes bankrupt that means it’s just a nonprofit’s structure. That’s nice
that’s an advantage. There are some disadvantages. It costs money. If you
notice that back when we were talking about starting the nonprofit and filing
with the IRS and finally with the state there are costs involved in that. And a
lot of the costs early on are not paid by grants. Nobody’s gonna give you a
grant to get your 501 C 3 certification from the IRS. There’s cost that is often
paid by the individuals and the board members. There’s also much paperwork the administration to get started, administration to keep going, to balance,
to make sure you keep track of the board and how the organization is run and that
you’re keeping legal and you share that control of the organization. It’s not
just you. It’s your board so two or three other people at least are going to have
control and they may decide that you are the odd person out and you are not the
one they’re gonna agree with and so they’re gonna do something slightly
different than what you thought you were gonna do in the first place. That’s
something that some people don’t like. And then there’s finally scrutiny by the
public. Everything you do as a non-profit is a public thing. You are reporting to
the IRS information on your finances and the highest paid people at your
organization and how much you spend on fundraising versus how much you spend on
programming. That’s public. That’s in the 990 that anyone can get access to through
GrantSpace, Guidestar, you can find it a lot of different places online. So you
get that public scrutiny and anybody who wants to know about how well you run can
take a look and do research on you and find out about that stuff. So a lot of
people don’t want that public scrutiny. So what are you gonna do? Well there’s no
one right answer to this and I know that a lot of you are coming from different
places. So there is no one thing that I’m gonna be able to tell you but the nice
thing I can tell you is that at Candid we have come up with a new resource and
it is called the nonprofit startup assessment tool. This tool is something
that we created with the assistance from the Kauffman Foundation, several other
foundations, we did this with participation from a national authority
on nonprofits. We came up with an assessment of 75 questions that enable
you to understand should you move forward or not? It has three different rankings for the different sections of it: red yellow and
green. Red you need improvement before you move on. Yellow: you need some work.
And green: you’re on track. So what I’m gonna do is bring this up in front of
y’all. So I’m going to open the website here and hopefully you’ll be able to see
this in just a bit. Yeah so now you should see our grantspace website in
front of you, grantspace.org, which I’ve been mentioning. Earlier i mentioned that
we have a lot of different resources on grantspace including the knowledge base
where you would find out about fiscal sponsorship or boards or any of the
different things that you wanted to research. What I’m gonna take you to is
the nonprofit startup resources. These are helpful resources for starting a
nonprofit and the first link there is the nonprofit start-up assessment. Now in
order to get access to this you do have to login. You have to register and create
an account on grantspace. It’s free. It’s merely so that we can track and you can
get back to what you need to get to but once you log in you’re able to go to the
assessment and fill it in at your leisure. You don’t have to sit there and
answer 75 questions in ten different sections all at once. You can see what
we’re looking at here all the different ten sections have a way of getting
started where you can find out information. You
can fill in the different sections. You can say I’m gonna take this section on
volunteers and board and fill out several questions related to this and I’m gonna say no I I’ve not served on a non-profit board and it
would not be very feasible and easy for me to put together a highly skilled
board. I’m pretty sure that that would be difficult for me. And you can say well
I’m not very confident my knowledge of board management. And you can say I don’t know whether nonprofits are necessary whether volunteers are necessary. You can
fill out and answer these questions honestly and you can keep filling them
out or you can take a look at some of the insights that you get. And this is
just one section of insights by the way it’s downloadable, you get a full PDF
document of the downloadable stuff, but you can also find out where are you and
I and you could have guessed by what I was filling out that I wouldn’t score it too
high on this I need significant improvement at least
in the volunteer and board area and for each of the questions you answer it
gives you your answer some insight about the best way to understand nonprofits
for the different elements here and then some resources you can click on as links
to find out more information. This is a totally free resource. Takes about 20
minutes to fill out, 30 minutes maybe if you want to devote some time. But what
you get out of it is a huge amount of detail, a huge guidance for where you
need to go and what you need to learn. This is available for anyone who wants
to get to it. It’s on our grantspace.org website in the resources section under
nonprofit startup resources. One other thing that’s on that page before I move
away from it completely is down at the bottom and you may miss it.
Take the nonprofit start up assessment I really recommend you do that. But down
further is a section on resources by region and that’s important if because
of the different states and the different laws that are there, we have
assembled resources on nonprofits for every state in the United States so you
can click on them find out different information about different States for
example who can provide technical assistance to
you in the state of South Carolina? Who can provide legal assistance to you?
Is there a non-profit association that works together? Together SC works to help
nonprofits in their state. You can find out about the state agencies that handle
what goes on with nonprofits and finally there are specific startup guides to
nonprofits in each state that’s also in the resources also in the nonprofit
startup resources section so I’m hoping that you think about all of these
different things that we talked about today and I’m going to turn this back
over to Elizabeth so we can finish up here but I hope you will take advantage
of the resources that we have talked about I hope you’ll take a look at the
nonprofit start up assessment tool and find out where you really are and then
move forward in the way that makes the most sense for you. So I’m going to ask
Elizabeth to come back and and finish up here. So, Elizabeth? Great thank you so
much Dave! We’ve been getting plenty of questions
and I promise we actually have quite a bit of time to get to most of them so if
you do have any other questions feel free to submit those through the chat
but before we start digging in I did want to share the link to the start up
assessment tool as well as those state-by-state resources. And Dave we
have some folks on the line that have actually already started filling out
that assessment tool and say that it’s a fantastic tool. You know both pointing
out what you’re really really strong at and where you might be needing to put a
little bit more attention to. So thank you to folks who have already started
giving us that feedback. Additionally I also wanted to share with everyone that
we will be having a training on August 15th where you will learn how to make a
compelling case for creating social value within your current organization
so we’ll be joined by a Pyxera Global who’s been working with some of the top
corporations and their social intrapreneurs who have actually been
starting programs that are dedicated toward social change within their
current companies so we’ll share what actionable steps you can take to
convince your organization’s leadership and important stakeholders to invest in
new programs around social change but to get
us started on our Q&A we have a couple folks who I think might want to learn a
little bit more about you know LLC’s particularly again noting that Dave you
are not a lawyer so we’ll take whatever advice you can give us but Emily wants
to know: do you have advice for an existing LLC that is considering
becoming a nonprofit? A lot of the resources that she’s been finding is how
to actually start a non-profit which is similar to our training here but what’s
the difference in what you should be considering if you already have a
business that’s up and running, that’s considering that transition? Well if you
have, not being a lawyer I’m of course not going to go into that detail but I
will say that as you’re considering whether or not it makes sense to switch
from for-profit to a non-profit or to some other in-between some states will
allow you to be a type of organization that is both a little bit non-profit and
both a little bit for-profit, you really should check and see what your state in
particular is supporting in terms of that. But one thing that I tend to talk
about is: what’s most important to you? Is it most important to you that you have
the freedom that having a business enables you to do? You can always donate
from your business and help people that way by making the grants and making the
gifts and providing the assistance that people need outside of your general
opportunities. Or is the mission of your organization really about helping the
people and getting assistance yourself, not worrying about selling, not worrying
about running a business and providing money to the people that have invested
in you but instead depending on grants and other support. You might want to
consider: is what you do something that you would get financial support. You
might talk to a couple of local grant makers, you might talk to someone else
who does something similar in both the for-profit and nonprofit worlds so that you can you can weigh that in the balance. I know people who
have a deep concern for the community who decided to stay for-profit because
they felt that they had, that way they had a steady income to be able to make
donations. And then I’ve had other people who said what doesn’t really enable us
to do enough; we’re gonna change. We’re gonna transfer from being a for-profit
to legally being a nonprofit organization. So it kind of depends on
your situation. Definitely taking the nonprofit startup assessment tool will
help you think through a lot of the concerns that a non-profit would have
and might point you in the right direction. Thank you Dave um we have
another question that came in from Travis and he wants to know how he can
find out if there is already a non-profit doing you know the same work
that he’s interested in doing. So the example he gives is assisting high
school students look for careers and job options. How does he find out if there’s
already someone doing that work? The easiest thing to do for you probably
would be find that finding out if there’s a 2-1-1 service in your area and
you can actually google this. You can just do “211” and then put the
name of the city or state that you’re in and see if there is a service locally if
you contact them and ask them who’s doing this kind of particular work
they’ll tell you whether or not there’s one in your region and they try and help
you out. It’s, a lot of people use it as a call for help so they can get that kind
of assistance but maybe there’s nobody doing that. Maybe you are gonna be that
person for them eventually but the best way to find out is to try and find out
by calling the 211 service. If you don’t know if you have one, if you’re not
able to find it online and you’re having trouble, call your local public library,
call your local United Way and ask them who might be the best place to go to to
find out about this. Thank you Dave the next question that I wanted to pose to
you is gonna be a two-part question from Raphael. The first part is: can you start
fundraising before you’re an official legal nonprofit? If so do you need to document all of your fundraising efforts, your goals, your
outcomes etc.? Hmm the short answer to that is yes, to both of them.
But the longer answer is yes you should you can begin to fundraise even before
you’re a legal nonprofit and the way that the law is drawn is if you’ve been
getting money that’s been specifically devoted to that mission there’s a
certain period of time where you can document that as income towards the
nonprofit as you’re getting the 501c3 however a lot of people don’t want to
donate to you before you’re a non-profit because they can’t get a tax exemption
and in the case of foundations they can’t be legal to give to you if you’re
not a non-profit so what they will ask you to do is to get a fiscal sponsor who
will handle the money legally while you’re in the process of getting a
non-profit. You may want to look at the fiscal sponsorship information to see if
it’s right for you. Regardless, if you are soliciting donations you should keep
track of those donations and solicitations early on and make sure if
it’s money that’s been donated to the specific thing that you’re
starting your nonprofit to do that it’s dedicated to it. You can’t just say well
I wasn’t yet a non-profit so I can have this money, it came to me it’s mine now.
If you were raising it in the name of that nonprofit you need to keep it with
that. By the way I’m not a lawyer, mention that. The other thing that that
you can do as you get started is make sure that you get all the documentation
you need to make the case for support. So as you were putting together your
organization and waiting for the 5- the IRS to okay you you can be putting
together case statements and grant proposals and arguments about why you
should get support so that you’re ready to do the kind of solicitations you need
to do. I’d definitely document the programs that you do and also how you’re gonna
fundraise even before you’re ready to do that. The more you have prepared before
that becomes legal the easier your life is going to be. Thank you Dave. Any more questions? Yeah we have plenty to go through. I actually wanted to revisit the idea of fiscal sponsorship here and I
think it might be relevant to the question that came in from Antonio he
actually is currently working for a non-profit that’s based overseas but you
know he wants to know if it’s worthwhile to establish a U.S. branch and how
should he go about doing that? And I think fiscal sponsorship might be
relevant here but I wanted to know if you have other suggestions. Sure the
fiscal sponsorship is one way you could do that. You could partner with an
organization that is a non-profit in the United States and they can help you
fundraise for the different things that you’re doing. There’s a lot of laws that
are specific specifically important to know about when you’re internationally
based because of the the since 9/11 there’s been a lot of care taken about
where people are incorporated and where the money goes that is raised in one
country and given to another country. We do have in Candid a lot of things
related to international NGOs and non NGO fundraising, nonprofit fundraising
for organizations in other countries, my experience has been it’s always easier
to fundraise in the country that you’re located but that does not mean that you
can’t find funders here that are willing to give internationally where they are
willing to work with you if they believe in the need strongly enough. So I would
explore partnerships. I would also explore whether it’s, you
think it’s worthwhile to start a non-profit in this country, a branch of
your international nonprofit. Elizabeth I know that we have in our trainings a
number of internationally related trainings also in our resources in our
knowledge base for international NGOs so you might want to take a look in there
as well. Thank you Dave I have a really great
two-part question here from Lauren: is there an average startup cost of a
nonprofit? And two: what should be the very first thing that folks should be
thinking about: programming or trying to get funding? Wow that’s great. Those are
great questions. One of those questions is actually one of the questions in the
nonprofit startup assessment tool so maybe I shouldn’t give away the answer
but the first question is is that how much does it cost. It can cost anywhere
from twenty to thirty thousand dollars. It could cost more, it could cost a lot less.
Most of it depends on how much you’re willing to donate yourself and how much
donated time and money you’re getting from other people. The cost does
escalate because generally when you’re first starting and you want to buy
equipment for a particular service, you want to buy sporting goods that are
going to be used in your activities, the money has to come from somewhere and
that becomes a donation that maybe you use your credit card to to make to your
own organization. It can grow astronomically depending on what you
need. So one of the things I would look into is who can you get to donate
specific things if you want to keep those costs down you want to try and
find out other people that can contribute to that. The other part of
that question can you repeat that Elizabeth, the second part of the
question? Yes, in terms of first steps in regards to planning and really visioning
all of this up should the efforts be focused on fundraising or should most of
your efforts really be looking at programming? Most of your efforts should
be looking at programming and making a connection between your programming and what a funder might be able to do. So fundraising and programming go hand in
hand: as you talk about your programming you talk about what you’re doing, you are
making that part of that case to a funder because they care less about the
fact that you need money and lunch more about who you are helping. I know a
lot of grassroots nonprofits that haven’t been officially 501 C 3s but
have been helping the community they’re in for years and that makes a much stronger
case in terms of fundraising than somebody who’s spent a lot of time just
writing a great grant proposal because a great grant proposal with nothing behind
it, no programs, no organizations, no history, is just a great piece of writing.
It’s probably not going to be successful but a nonprofit that has been doing
services and helping people for years even if they’re still working towards
getting that legal status and still working to putting their fundraising
requests together they’re going to be have more people already interested and
willing to wait for you to get things together and to get the argument
together if they know that what you’re doing is is doing the work that they are
passionately concerned about. That’s why sharing those values is such an
important thing to start with. Making sure that you’re communicating the
values that you you believe in and providing a service that people care
about. Thanks, Dave. We have a question here about the
nonprofit assessment tool from Nicomedes and he wants to know if you’re
able to go back in and change and update your answers as you start you know
becoming an expert in areas you previously were not an expert in? Yes you
absolutely can. That’s one of the things, we had an older version of this
that did not allow for that and one of the problems was once you took the tool
and answered it you were stuck with all those answers that a lot of them might
have been wrong. Nope this is a totally flexible document so you can fill it out
now and you can see what your scores are and in six months you can log back in.
That’s why it’s great to register so you can get back to this. You can log back in
and edit your answers and change what you said before and come up with a whole
new series of recommendations, so do that I recommend that you do that. Don’t just
say “well it gave me all these reds that must mean I’m, I shouldn’t be a non-profit
person.” It just may mean you need to do a little bit of learning and in a couple
months you go back and it will be different. Thanks Dave we have a very
practical question coming in from Jeffrey: on average how long does a 501c3
status take if the IRS approves the paperwork the first time around? Oh
that’s really good, that’s a good question because it’s changed. We used to
say 6 to 18 months which is a long time but that was before the IRS began to
speed up some of the processing time of the 1023 and they came up with a form
called the 1023EZ for smaller organizations and by the way if you’re
not sure which one to fill out go to irs.gov it will tell you. It will tell
you the difference between their forms and why you should fill one or the other.
So I have heard of people who have gotten their I their 501c3 status in as
little as 3 months. That doesn’t mean that you will it just means that it’s
possible to get it a lot faster than before. Still you need to take care with
those forms. You can’t assume that it’s going to be express and even sometimes if you filled it out real fast and you got it real fast that doesn’t mean it’s
everything you want it to be. So take care with those forms when you submit it
and give the IRS time to get give feedback to you and maybe ask for a
revision so that you are all on the same page and you’re able to do it legally
without any worries but yeah it’s going faster. And we have a really great
question that came in from Aaron and he wants to know when you’re looking to
know which state to incorporate in, what do you need to consider? Is it best
practice to always incorporate in the state where most of your work will be
taking place or do you want to incorporate in all of the states where
all of your programs will be taking place? That’s a great question. I had that
question asked when I was doing this program with an expert on nonprofit
incorporation, a legal expert, a lawyer, and that answer that he gave was like oh
it’s like about a half an hour but I’m gonna try and summarize and say
the easiest way to do it is to incorporate where you are. There are arguments just like there are arguments for incorporating for starting
a business about the laws in different states but for the most part when you
are providing services in an area and trying to fundraise you’re probably
going to be working locally even if you ideally are going to be a national or
international organization you’re first going to be looking locally for support.
It’s easier to find local support if you were incorporated locally if they can
find you and talk to you and get you on the phone and all that kind of stuff.
Part of the law of fundraising is that if you are going to fundraise in a
particular state you need to register with that state but it’s easier to work
from one state to other states and from the one that you’re in so that’s my
advice it is not necessarily legal advice because depending on your
nonprofits you may get a different opinion from your lawyer but from my
from my experience you find out a lot more about what’s going on
and how and you you get connected to the funders that are most likely to fund you
by starting in the state you’re in. Thanks Dave, and again I’m going to repeat that you are not a lawyer before I ask you this
next question but to your best guess or best advice on where to get more guidance
Phylis wants to know if it is legal to use some of the money that you raised to
actually maintain your organization or individuals such as you know purchasing
t-shirts to sale and paying for a venue to hold an event. Sure yeah I knew
somebody was going to ask me a legal question just to trap me but don’t
worry about it I’m gonna try and answer this question. The IRS actually defined,
defines income and they have what’s called unrelated business income so when
you’re fundraising for your organization if what you are fundraising with
and and the way that you’re doing it is unrelated to your mission meaning your
set let’s say you’re selling t-shirts and I’m just using it as a random
example you’re selling t-shirts the t-shirts don’t have anything to do with
your mission they’re not furthering your mission they’re just t-shirts that
you’re using to make money and they have a cost that’s outside of you know the
cost of other things and that you need to spend money on making the t-shirts
that might be according to the definitions of the IRS unrelated
business income whereas if you’re selling a service so you’re providing
tutoring services and you charge $50 an hour for them and somebody gives you $50
to pay for an hour of tutoring that’s directly related to your mission
so that’s income that is direct for the organization. The reason why they divide
that up is that sometimes you may have to pay taxes on some of the other income
that you get. It’s not treated all the same. It’s important that you work with
your accountant and again I’m not gonna say that I’m not an accountant either
you know that too. But it’s important that you work with your accountant to
understand how is what you’re fundraising for connected to what you’re
doing and how is the money credited? When somebody donates I’m sure you’ve had
that experience when you donated to a nonprofit organization and it tells you
a certain percentage of what you donated is tax deductible that tends to be
related to whether you got something else in that was not related to the
mission, connected to it. Like I donated to you I got this great t-shirt well the
cost of the t-shirt was deducted from your donation. It’s not part of that
tax-deductible donation. It gets really complicated really fast so there is a
publication that the IRS publishes about unrelated business income and I
encourage you to read it or work with a lawyer that has read it before you get
too deeply into that but being clear where the money’s going when you
fundraise and what it was for is vital. I stunned Elizabeth. Okay there she is. No worries. So Tiffany here wants to ask a question she currently is part of a for-profit
business and she wants to know if she’s able to seek a fiscal sponsorship from a
non-profit and can apply for grants on her own to directly benefit her mission
or will all of the funds go through the sponsor. So I think there’s a little
clarification here on you know fiscal sponsor versus fiscal sponsee, and who
can play what role. Right so you’re you’re a for-profit business you can get
a fiscal sponsor who will be handling the money. So the fiscal sponsor is the
organization to whom the money will go and then from them they can give you
this. I’m doing it in very very short form here. Yes most of the people who get
fiscal sponsorship are either individuals, for-profit businesses, or
nonprofits that are in the process of becoming a non-profit. You partner with
the fiscal sponsor because you want a legal way for a foundation or other
people to give that means that their gift is tax-deductible. Some things are
important though if your mission is not a charitable mission and it is not
linked to the mission of that fiscal sponsor you may run into problems. There
has to be a connection between your organization and that fiscal sponsor.
There has to be a way that you share so that they can legally accept a donation
for the kind of thing that you’re doing. There’s there’s a lot of subtlety to
this. There are some great books out there published about fiscal sponsorship
but the stuff that we have on our website in the Knowledge Base takes into
account not only the nice thing about fiscal sponsorship but some of the
pitfalls. If you don’t have a good working agreement with the sponsor
that you find you could run into a lot of trouble. They could take over your
project without you approving that, they could decide to take
more money than you expected. You have to have a good contract agreement with them. So I for anybody getting into fiscal sponsorship
it’s not a good idea to do it all based on a handshake. You need to to do a much
clearer agreement between you and that organization but the short answer for a
for-profit companies yes you can do that. Thanks Dave. We had a really interesting
question come in from Alexandre regarding the planning stages of really
thinking through your nonprofit and what he wants to know: is it more difficult to
develop an innovative plan for your nonprofit or are you more likely to get
funding if you’re replicating what other organizations are already doing? Can you
say that one more time? I’m sorry I didn’t get the first part. Yeah is it
more difficult to get support if you’re developing a new innovative plan and new
approach for how your nonprofit will work, are you more likely to get support
if you’re replicating what other organizations are already doing? That’s a
terrific question. The question about you know one of the things that I hear from
a lot of different funders is there are too many nonprofits. That’s what I hear
for they say you know don’t encourage people to become nonprofits because
there are too many of them they say this in their private moments
not all of them but some of them and the thing is though they want to be able to
support organizations that are helping address a need and if you’re addressing
something innovatively a need that maybe has not been identified, there are gonna
be funders that are gonna be excited by that. They’re gonna hear what you have to
say and say well that’s great I don’t know anybody who’s doing that I would
love to support that. I mean ideally that’s what what they would say. More
often than not what you’re doing is subtly improving or subtly expanding a
model or something that is already in existence. And sometimes it doesn’t you
can’t always tell whether you’re being innovative or not. I, when I started 10 to
15 years ago and I would talk to people who were looking to start a nonprofit I talked to a lot of people who were coming and to
be honest they were coming straight out of prison and they were saying they
couldn’t get jobs they were unable to find and so they wanted to start a
nonprofit that would make it possible for people coming out of prison to learn
trades and to get jobs. At the time that wasn’t a very common thing. Nowadays I
know of a lot of organizations at least three or four here in Cleveland that are
building everything they do on that and are getting tons of support about it. But
at the time it was very innovative to think that way and sometimes you don’t
know when you’re being really innovative. If you focus on the need, if you focus on
addressing the need, chances are a funder is going to be able to tell you number
one if anybody else is doing it and number two, if it’s a real need that they
understand. So I always make sure that I do my homework and then I talk to maybe
a community foundation in your area maybe one of the funders that’s more
approachable, a program officer. It’s a good idea to get their input and they
can help you sometimes they can say well there’s a great model for that but we
don’t have anything like that here. It’s out in San Francisco and you might make
your life a little bit easier and at the same time you know win the attention of
that funder. Don’t do what every funder tells you to do, I mean, but listen. Listen
to hear you know do they know something that might be able to help you?
Just because you’re, you want to be innovative and you want to be radically
new doesn’t mean that somebody else can’t help you with something that
they’ve done somewhere else. The important thing is not to duplicate but
to address the real need in the community, so good luck with that. So we have a great question that came in
from Nora and she wants to know if there can be overlap between board members and staff members and more specifically can board members be paid? Ooh okay first
question is yes there can be there doesn’t have to be and some funders some
people and we again we do look at it a lot of the times from the point of view
of a funder. Some funders will say why why is your staff on your board?
I’ve known board, at least in the state of Ohio the law is that you can have
three board members, as little as three board members and at least two of them
have to not be on the staff which means one of them can be on the staff and that
works fine if you want a really limited kind of thing. That doesn’t bring in as
many points of view as possible I would say in general I’ve heard from funders
that they either don’t want very many people who are staff members on the
board or they don’t want any. Legally it’s possible. Is it something you should do? Not necessarily. And I’ve heard people go either way but not necessarily. The
second thing is you never pay your board members. No! If you’re, I’m sorry I just went out of control there, if you’re a non-profit you don’t get paid as a
board member. If you’re a non-profit your board should donate to your organization.
And ask anybody who has talked to a couple of foundations: how many people, if
you have ten people on your board, how many of them should donate financially
to your organization? It should be ten. They should not be getting paid. Now you
got a staff member that’s also a board member that becomes complicated because
you could pay a staff member they could also be on the board but just because they’re on the board they’re not going to get paid. So, I don’t mean that to be
harsh by the way it’s just that it’s asking for a lot of trouble if your
board members are getting paid. Thanks
and then just coming back to a very simple clarifying question: do you have
to incorporate in order to form a non-profit? No. You can be a non-profit
based on how you’re structured. It depends on who defines the word
nonprofit. If you want it legally defined the IRS the federal government defines
it one way and your state defines it another way you can go and be
incorporated in your state and never get federal designation as a as a public
charity. You don’t have to do that. I know a lot of people who have worked in the
community for years who have talked to me about becoming a non-profit because
they could get grants and because they could do things you know they can do
things the way that other people do it but they like the freedom, they like to
be the ability to to provide a service without worrying about that as a legal
status so yeah nonprofit work goes on all the
time. People volunteer, people do it as a formal way, people become you know they
help out in the community. You pick up litter, you’re doing a nonprofit work in
the community. But if you want it to be a legal thing that enables people to give
you grants, that enables people to take tax deductions, then you have to go
through the process. Thanks Dave. And Maurita is asking for us to kind
of return to the conversation regarding shareholders and corporations so she
wants to know if you can clarify what status the shareholders in a corporation
can have when there’s a non-profit that’s being incorporated. I’m assuming
that we were referring to the board but if you could just provide some
clarification. Yeah, it’s, nonprofits don’t really have shareholders because they’re,
if it’s a for-profit organization you can have shareholders, but nonprofits
don’t have that because the way that the money is handled in nonprofits is
different so I’m not quite sure what you mean by that. I will say that in any
for-profit organization that has a non-profit arm or has a non-profit connection there has to be a distinct difference between how the money is
handled for the nonprofit and charitable work and how the money is handled for
the for-profit work because you can’t raise money for a non-profit and then
pay people who work for you just dividends from that. It can’t be that
kind of, it’s not a shareholder sort of thing. That’s why when you have a
hospital, a hospital is a nonprofit type organization when they fundraise they
have, they raise money for the hospital for charitable work. When a hospital goes
out of business it has to create a separate nonprofit organization. If it
raised money for charitable purposes it can’t just pay off all the people who
still work for the hospital and say ok we’re done now. The money has to go for
charitable purposes so a lot of the times you’ll find hospitals turning into
foundations in fact there’s a name for that called a conversion foundation
because they’ve had to keep that money separate and in the charitable world.
That’s as legally complex as I can get. Yeah yes we got some clarification so if the
nonprofit is started by a corporation that got the tax exemption status
what happens to the corporation shareholders? Again might be out of your
wheelhouse but I wanted to provide the clarification. Oh is it started by a
corporation and and they got a 501 C 3? So as long as that, as I am as I’m
understanding it and again it might be out of my wheelhouse so we’ll see. That
doesn’t mean I won’t answer the question it just means that I’m not legally there.
But yeah if it started by corporation and it is a separate nonprofit
organization a lot of the times the people that are involved in the
corporation might also be people running that nonprofit but it’s still a sep-
completely separate business. So if you go to a funder that is bank for
example and that you go to the bank and the bank has people that run it, you
often see some of the same people that are part of the bank as administrators
of that fund, that nonprofit wing of that Bank
that nonprofit part. It’s a separate thing even though they work for the bank,
their money doesn’t cross over. Once money is given to a non-profit
it stays in the nonprofit. It can’t come back to the bank. So I think as I’m
understanding it what you’re asking is what happens to the shareholders? The
shareholders can be part of the new organization and part of the old
organization but they can’t mix that money or that role. I’m gonna pose our
final question for today and that’s coming in from Deandra and she wants to
know if there is an exact route needed or is it possible to start a nonprofit
that will serve more than one state and I guess what she means is there a
particular way to apply for incorporation when you are serving more
than one state? That’s a good question. I would say that the the important thing
to get nonprofit status on the national level if that’s what you’re going for is
to incorporate in at least one state. You might want to incorporate, there’s a lot
of people that are in cities for example that are on borders, Cincinnati for
example, and you can incorporate in Kentucky or you incorporate in Ohio. It
doesn’t matter so much to the IRS as long as you’re following the directions
in the mission and are clear about who you serve. So just know that you don’t
have to incorporate in both places in order to get your 501c3 but you might
want to choose which it makes the most sense based on the number of people that
you serve and maybe the ease of it or the structure of your organization
most of those NOLO books I mentioned a long time ago that talk about starting a
non-profit also you give you the details of incorporating in each state as does
that map that’s on grantspace in the startup resources. Well thank you so much
Dave. We still have plenty of questions that have come in so I highly highly
highly recommend that all of you folks reach out to our online librarians. Again
if you go to grantspace.org you’ll see that Ask Us tab and if
luck has it you might actually catch Dave as one of our online librarians and
he can offer you way more advice on there. Don’t be surprised that if you
haven’t filled out the nonprofit startup assessments tool yet, don’t be
surprised if the answer to your question is in there because a lot of them are.
Yeah yeah definitely. On behalf of our team here at Candid and Dave thank you
so much for joining us today! If you liked this webinar, we hope that you join us again soon. Have a great rest of your day everyone! Thanks a lot everybody. Talk to
you again.

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