Ownership and management structure is what primarily sets a nonprofit apart from a for-profit business. No one individual or group can own a nonprofit organization, and they must abide by specific regulatory requirements.
Board of Directors Requirements
For compliance with state and IRS regulations, all 501c3 nonprofit organizations are obliged to have a board of directors. The IRS mandates that nonprofits maintain a minimum of three board members at the federal level, whereas state requirements may vary, calling for one to five board members.
Board Size Variation with Nonprofit Size
- For a large nonprofit with multiple programs and funding streams, a board of 12-15 members might suffice.
- Larger nonprofits with extensive committees may require more members to manage increased responsibilities.
Startup Investment and Operations
To start a nonprofit, a founder needs an initial investment typically ranging from $500 to $1,000 or more. This investment may be supplemented with donations or grants. A nonprofit founder is entitled to a reasonable salary for their operational role, and these salaries are factored into the organization’s operating costs. Most nonprofits employ staff, varying from a few key individuals to thousands across global operations.
Fundraising and Grant Opportunities
- Founders should contact local authorities to discover the best methods for accessing grants.
- Creative fundraising methods, such as community events, help to raise awareness and funds.
State and Federal Regulations
Nonprofits must register with state governments in at least 39 U.S. states and comply with the necessary protocol, which includes submitting an application and filing a charter. These regulations coexist with federal requirements, such as maintaining a minimum number of board members and defining board service terms in the bylaws.
When starting a nonprofit organization, keep in mind:
- Complete the articles of incorporation.
- File the articles of incorporation.
- Create your bylaws.
- Hold your first board of directors meeting.
- File for tax exemption.
For a more detailed guide on creating a nonprofit, consider watching instructional resources or utilizing free checklists offered by organizations like Donorbox.