What you need to know before starting your non-profit business
If you’re considering starting a non-profit also referred to as not-for-profit business, what you need to know is it’s a lot more involved than starting a for-profit business, in which you register the business with the state, get all the necessary licenses and permits and then open for business. While starting a not-for-profit business is a great way to serve and make a difference in your community, it can also bring with it a lot of complications. The attrition rate for the non-profit business sector is high; many experts put the failure rate at between 50%-80%. But, with the proper planning and guidance, you can greatly increase your chances of success.
What steps do you need to take when starting up a non-profit business? The first step is to do some research to determine if a not-for-profit is right for you. What are the advantages vs the disadvantages of starting a not-for-profit business? Are there other organizations in your area that are already providing the same or similar service? Will you be able to develop and maintain a reliable stream of income?
The next step is to draft a well-thought out mission statement in which you state the charitable purpose of your business as well as your goals and objectives. Then, write a business plan that describes how your not-for-profit is going to meet these goals and objectives. A well-crafted business plan is important when it comes to attracting the necessary funding from potential donors as well as government agencies.
To ensure that your business plan comes to fruition, it needs to be combined with a financial plan. Financial planning works to join the mission statement with the resources available to make it happen. Establishing an annual budget is just the first step to implementing a financial plan that should cover several years of operation.
Setting goals for non-profits is one of the first steps in communicating the purpose of your business, what group(s) it will serve, and how it will serve them to potential donors. Then the paperwork that goes into setting up a non-profit business. Each state has an office that’s responsible for the oversight of charitable organizations. You’ll need to register with your state’s agency and create articles of incorporation to file along with your registration.
You’ll also need to apply with the IRS for not-for-profit status. A 501(c)(3) tax-exempt status allows tax write-offs for donors. If you plan to acquire funding by soliciting for charitable donations, you may need to register as a charitable solicitor in your state.
Positioned for success
GYL provides a full range of accounting, audit, business advisory, and tax services for not-for-profits. We understand the unique business and financial challenges that today’s non-profits are faced with and the importance of sound financial planning for non-profit businesses.
If you’re considering opening a new not for profit company, contact us today to schedule a free consultation with one of our GYL partners.