| Below are some notes for those wishing to start | | | | help complete this task, which involves completing |
| a foundation, charity, or non-profit organization. | | | | an IRS Form 1023 - Application for Recognition of |
| We put these ideas together and wanted to | | | | Exemption under Section 501(c)(3) of the IRC. |
| share it with others. This is not an exhaustive or | | | | The application fee for the Form 1023 is currently |
| complete list, but covers many issues that you | | | | $400 or $850, depending on the non-profit's gross |
| might want to think about when starting your | | | | receipts over a four-year period. |
| non-profit - and planning your events. | | | | The IRS is expected to release a Cyber Assistant |
| Type of Non-Profit | | | | to help complete Form 1023 sometime in 2010. |
| Some of the most frequently asked questions | | | | Once completed, the Cyber Assistant fee will be |
| from those interested in non-profit organizations, | | | | $200, or $850 for those filing the regular form by |
| foundations, and charities are: | | | | mail. |
| - "What is the difference between a Public Charity | | | | Liability |
| and a (Public) Foundation?" | | | | In addition to liability for the principals, directors, |
| - "Is there a difference between a Public | | | | and trustees - you should consider liability for the |
| Foundation and a Private Foundation?" | | | | organization as it conducts business. Many states |
| Here are some answers. | | | | have good "liability laws" for non-profits that offer |
| Public Charities and Foundations | | | | solid "Good Samaritan" protection. Please check |
| For the most part, there is no real difference | | | | with legal counsel or other professionals in your |
| between a public charity and a public foundation. | | | | area for more information. |
| Both types of organizations work for the public | | | | You will want to study and understand the |
| good, created to support good causes and other | | | | non-profit liability laws in your state. As your |
| unrelated non-profits. If the non-profit is a | | | | organization grows, you may want to look into |
| 501(c)(3) exempt organization, they will have a | | | | various options and / or additional protection. |
| "determination letter" from the IRS. This means | | | | Annual Filings |
| that the entity is exempt from federal income | | | | Non-profit organizations are required to complete |
| tax under Internal Revenue Code (IRC) 501(c)(3) | | | | annual filings with the IRS to maintain their |
| and donations to the charity or foundation are tax | | | | tax-exempt status. This typically means the IRS |
| deductible. | | | | Form 990 series. Private foundations file a Form |
| Public charities and foundations must receive at | | | | 990-PF and have more stringent requirements, on |
| least one-third of their support from the general | | | | average. |
| public, including gifts, grants, and fees. In addition, | | | | Public charities file a Form 990 or variations of this |
| not more than one-third of their support can | | | | form such as a Form 990-EZ, depending on gross |
| come from investment income. In essence, it | | | | proceeds and assets. Small tax-exempt |
| must be publicly supported with a diverse supply | | | | organizations with gross proceeds of less than |
| of gifts and grants and should not rely on its | | | | $25,000, may file an electronic postcard, called |
| asset size or investment income. | | | | Form 990-N. |
| Private Foundations | | | | Public charities are also required to file a Schedule |
| On the other hand, a private foundation normally | | | | A, which ensures that the non-profit receives |
| has one main source of support or revenue. For | | | | most of its support from the general public. This |
| example, a private foundation might be started | | | | is done because public charities or public |
| with a large endowment from a family and never | | | | foundations enjoy certain tax-related benefits |
| solicit support again. For the most part, you will | | | | over private foundations. |
| know if you are a private foundation because you | | | | Fundraiser Logistics and Costs |
| will be setting up the foundation as the main | | | | The purpose of a non-profit is typically to raise |
| donor. In general, private foundations have less | | | | funds to serve the public good. As you plan |
| tax benefits than public charities. | | | | various fundraisers and events to raise money, |
| Create Entity | | | | here is a quick list of items to think about. You |
| Now that you have a clearer picture of the type | | | | want to minimize costs - and maximize exposure |
| of non-profit you want to create, your first step | | | | and effectiveness. |
| is to create a legal entity to give your founders, | | | | In many cases, local organizations such as |
| directors, and trustees protection. The type of | | | | businesses or schools may be willing to donate |
| legal entity for a not-for-profit varies by state, so | | | | items ranging from the venue, to printing costs, |
| don't jump the gun. You may have heard about | | | | entertainment, gifts / prizes, etc. Please scan the |
| corporations, S-corporations, or limited liability | | | | list below to help you in your planning process: |
| companies (LLC). | | | | - Vision and planning. Have a vision and use good |
| However, some states have specific legal entities | | | | judgment for what you expect of the event. Plan |
| for non-profit organizations such as a "Non-Profit | | | | ahead and think of ticket pricing, possible |
| Corporation." Check with your local and state | | | | attendees, attendance, and other logistics. |
| authorities. Many of them have very helpful | | | | - Theme of event: participatory or entertainment. |
| websites. You may want to check with legal | | | | - Venue. Based on your vision and theme, what |
| counsel or people knowledgeable about non-profit | | | | kind of venue can you obtain? Will the venue be |
| and legal issues. There is normally some nominal | | | | made available at a discounted rate or donated? |
| fee involved with creating the entity and filing with | | | | - Printing and other costs (posters, flyers, tickets, |
| the Secretary of the State or other appropriate | | | | programs). Try to obtain sponsors. |
| offices. | | | | - Marketing. Think of all the methods available: |
| 501(c)(3) Status | | | | poster, flyers, cards, and more. Direct mail and |
| After you organize the non-profit corporation as | | | | advertising. And people! |
| dictated by your state, you may want to apply | | | | - People. Get others involved. Community |
| for 501(c)(3) status with the IRS. As mentioned | | | | members may be helpful, as well as the local |
| above, this gives your organization tax-exempt | | | | press. Think of schools (parents, PTAs, principals, |
| status and ensures donors that contributions to | | | | superintendents), churches, and businesses. This is |
| your non-profit will be tax deductible. The | | | | for a good cause so hopefully people will be |
| 501(c)(3) determination letter from the IRS adds | | | | helpful. |
| much-needed credibility to your organization. | | | | - Helping hands. You will need actual hands to help |
| The application form may seem daunting, but the | | | | at the event (collect tickets, money, ushers and |
| filing and number of pages look worse than they | | | | guides). Get help early so that everyone can feel |
| actually are. In general, the forms are designed to | | | | a part of the effort that much sooner. This will |
| ensure that the non-profit is truly set up for the | | | | help with "word of mouth" and "getting the word |
| public good and that there are checks and | | | | out." |
| balances for goodness and righteousness. In | | | | - Depending on the fundraising event, a |
| addition, the rules and regulations focus on proper | | | | photographer can help to publicize the event and |
| disbursement of charitable contributions - and the | | | | at the least, ensure lasting and good memories |
| types of causes that are appropriate. For | | | | for all involved. |
| instance, non-profits should not be established for | | | | We hope you found this information helpful. Please |
| lobbying or political purposes. | | | | contact us with other useful thoughts. |
| Again, there are certain professionals who can | | | | |