Starting a nonprofit similar to starting a business

According to Jim Maltry, retired nonprofit executive and SCORE mentor, nonprofit and for-profit organizations share many similarities.

Both require you to file documents with state and federal agencies. As a nonprofit, you would file Articles of Incorporation with the Arizona Corporation Commission and Recognition of Exemption as a 501©(3)non-profit with the IRS.

The fee to file Articles of Incorporation in Arizona are $40. IRS fees are $400 if your annual budget for three years will be under $10,000; $850 if your annual budget for three years will be more than $10,000.

The IRS will not approve your Application for Recognition of Exemption unless you are already a nonprofit and the process currently takes about one year.

The principles of managing a business — accounting, marketing, management — apply to both for-profit companies and nonprofits. Write a business plan with the assistance of individuals with skills in writing, accounting, and marketing. Much of the information in the business plan is required for the IRS’s Application for Recognition of Exemption.

Many foundations require a business plan to accompany a grant request. The business plan is also useful for recruiting Board members, building credibility and providing useful facts for presentations to major donors and groups.

What are the alternatives to establishing a nonprofit if you want to do philanthropy or promote a cause?

• Approach an existing nonprofit that may have a similar mission and become a program of an existing nonprofit.
• Become an active board member of an existing nonprofit. This provides you with experience in operating a non-profit, improving your chance at success should you decide to form one of your own.
• Become a volunteer for a nonprofit’s programs. This allows you to directly provide the services to those in need.

For more details, go to www.score.org to see all of James Maltry’s non-profit guides and to request mentoring.