My Knight in Shining Armour...

I recently read someplace that Nonprofits were like the hero in a fairytale.  And who doesn't like a great fairy tale.  I love them.  Once I hear, "Once Upon a Time", I'm hooked.  

When I was in the military, I was stationed in Ansbach, Germany for 3 years. While I was there I went on many trips to the surrounding towns, cities and countries.  On one trip I visited The Neuschwanstein Castle in Bavaria, Germany—the most visited castle in Germany.  The inside of the castle was amazing, however, the experience that stands out the most in my mind is the awe-inspiring walk to the castle.  

I can still hear the gurgling brook nearby.  If I close my eyes and imagine myself walking up the hill to the castle, I can feel the warm sun on my arms. I can hear and feel the soft breeze whispering through the trees...the faint rustle of leaves tumbling along the ground...birds chirping...  

Now that I think about it, I don't think I would have been in the least bit surprised if a knight in shining armour rode up to me on his noble steed and offered me his hand...well, that actually would have been a little weird and kinda scary.  The point is, I truly felt as if I were in a fairy tale; and it felt good. 

Fairy tales are hopeful.  The good guys always win.  The princess is always saved. The bad guys get their comeuppance and everyone lives happily ever after. So what does all this have to do with nonprofits?  

Well, like a fairy tale story, a nonprofit has lots of the same elements. Though we don't typically think like this, a nonprofit is pretty much one of the heroes in the tale of life. There are evil villains around the world with names like poverty, starvation, illiteracy, obesity and child abuse. When someone starts a nonprofit organization, they create the hero to conquer the bad guy.  However, the hero can't do this alone.  He needs allies.  In this case, the ally isn't a quirky, talkative donkey or  an intelligent, no-nonsense horse.  It's the Internal Revenue Service.  
Told you it's like a fairy tale...

Here's how you create your Nonprofit "Hero":

Step One. Draft a mission statement. A mission statement should be the mantra of the group and should be a drafted based on your organizations’ purpose, services and values. A mission statement should be limited to on one or two sentences on who the organization is, what it does, for whom and where. Be conscious to make your mission statement compelling as it will be published on all your printed materials. Keep in mind, a mission statement also serves as a means to distinguish your group from other groups.

Step Two. Form a Board of Directors. When forming a nonprofit organization, most state regulations require you to have a Board of Directors. The standard minimum amount is three board members; however this might differ from state to state. It is up to you and your organization to determine what number of directors is optimum. You can decide how many directors you need based on what you would like to accomplish and what special skills your organization may need to achieve its goals. 

Step Three. Draft and File Articles of Incorporation. Articles of Incorporation can be defined as the official statement of creation of your organization. These not only need to be drafted but they are to be filed with the appropriate state agencies.  It is very critical you consider how important this document is, as it protects both your board and staff from legal liabilities that an organization may incur. This document makes the corporation the holder of debt and liabilities, not the individuals and officers who work for the organization. The specific requirements governing how to incorporate are determined by each state. Here's a
sample Articles of Incorporation.

Step Four. Draft Bylaws. Bylaws are simply the “rules” of how the organization operates. Bylaws are not required to file for you 501(c)(3) status, but they are very important for helping govern your organization. Bylaws should be approved by the board early in the organization’s development. 

Step Five. Develop a budget. Success can fall heavily on proper budgeting. Correct budgeting can be a challenging task but a very integral one for the success of your nonprofit organization. A budget is the financial plan of your organization that helps you achieve you objectives. As a new organization your first challenge may be looking at the process of obtaining initial income and figuring out how much to spend. Budgeting however does not stop there, so be prepared for startup and future costs.

Step Six. Record-keeping System. Systems for any organization are very import. Just the thought of developing a system may make you tired, but a proper system helps you to avoid pitfalls later on. Your system can take care of things you are legally required to do when you have a nonprofit. By law, for all nonprofits, all Board documents including and minutes and financial statements must be recorded. It is necessary to preserve your important corporate documents, including board meeting minutes, bylaws, Articles of Incorporation, financial reports, and other official records.

Step Seven. Develop an Accounting System. Here we go another system for you to do! Again, this is very important to the success of your organization. Think about this from the time you are forming your Board of Directors. This may be easily solved if you choose wisely and engage a board member with some financial or accounting background. Even better would be if the board member is familiar with accounting for nonprofit organizations. Keep in mind when creating your accounting system that nonprofits are accountable to the public, their funders, and, in some instances, government granting bodies. With this in mind, it is vital to establish a system of checks and balances when establishing the organization’s accounting practices. Responsible financial management requires the establishment of an accounting system that meets both current and anticipated needs.

Step Eight. File for 501(c)(3) status. To apply for recognition of tax-exempt public charity status, you must obtain, complete and file Form 1023 http://www.irs.gov/pub/irs-pdf/f1023.pdf and
Publication 557 (detailed instructions http://www.irs.gov/pub/irs-pdf/p557.pdf ). The filing fee depends upon the size of the organization’s budget. 

For more specific information on starting a nonprofit in Maryland, please follow the following link http://www.startnonprofitorganization.com/starting-a-nonprofit-in-maryland

“How wonderful it is that nobody need wait a single moment before starting to improve the world.”
- Anne Frank

Cheryl Ndunguru

www.naomisconsulting.com