Thursday, July 31, 2008

The voice says, who will go for us, who will speak for us, who will care for us, who will show us?

There are those of us who see the mission, vision and the passion of a nonprofit organization as a spiritual process seeking and expressing the values of the individuals and the organization. It is an inward event, an inward experience. It is what you feel about an issue, a problem and the incredible desire to do something about it. What you feel is deeper than your head and your heart. You feel it in your soul. If you do not believe in a "soul", it is still deeper than your head and your heart, wherever it may reside.

It is stupid. It is stupid the problem exists in the first place. No one should have to fix this problem – it should not exist in the first place. And here I am. I feel the problem either because I have it, a loved one has it or I have seen it face to face through reading, through pictures or in person. Some stimulation hits me and I have to do something. It seems I have no other choice. I have to do something. But it is so absurd!

It is also an outward spirituality. It is the pursuit of perfection and, if not that, then it is the pursuit of excellence. It is an experience of constant renewal; there is a dimension of the human soul and an orientation of the heart and the action of our body and being. It is a way of making sense of the insensible, the senselessness, the hole that needs to be filled and made whole. A stupid problem that should not even exist does not need a stupid fix. It needs the best of me and the best of people with whom I join.

The spiritual slams the brain and says, what are you going to do about it? What do you have to find out? Is someone already working on it? Where can I link up with them? I have to learn more about the problem, about possible resources, about the best and most sensible approaches so that I am a help and not a hindrance. Are there new and innovative ways the problem can be attacked and minimized or overcome?

And so we begin the spiritual quest with mundane research, learning, taking classes, getting licensed, reading, thinking, writing, incorporating, and talking with people who share the same or similar sense of the stupidity, the absurd.

Beginning a nonprofit organization is a spiritual act, a leap of faith. It is walking to the end of a cliff and taking one more step. I know it is the right thing to do. I may not know the right way to do it. But I believe that next step is for me to take. It is a calling that is difficult to hush and put to sleep.

With this spiritual side of a nonprofit organization, there are the hard facts that are the outward and visible signs of that inward and spiritual belief in the mission, the vision and the passion of the organization:

  • Listening
  • Observing and working with the stupidity of it all
  • Leadership
  • Followship
  • Developing partnerships
  • Paper work
  • Teams
  • Servant
  • Planning
  • Beauty
  • Facing/causing/accepting change
  • Management
  • Giving voice
  • Study
  • Deadlines
  • Hiring to firing or leaving
  • Record keeping
  • Reporting
  • Angst
  • Standards
  • Joy
  • Rules
  • Meetings
  • Solving
  • Budgets
  • Healing
  • Quality
  • Reaching agreement
  • Conflicts
  • Honesty
  • Handling the finances
  • Giving talks
  • Anomie
  • The law
  • Supervising people
  • Feeling hurt
  • Giving bad news
  • Awe
  • Training
  • Stuff happens
  • Winning
  • Feedback
  • Loving the job; hating the reasons for it
  • Messing up
  • Exhaustion
  • Evaluating
  • Inspiration
  • Resource development
  • Grant writing
  • Anger
  • Human resources
  • Marketing
  • Ethics
  • Celebrating
  • Fund raising
  • Advocacy
  • Cleaning the bathroom
  • Living to work yourself out of a job by eliminating or reducing the stupidity
  • Moving on

It is a spiritual evolution and not a revolution. It is not a quick and unthoughtout repair job...although that may be only what you have the funding to do.

The voice says, who will go for us, who will speak for us, who will care for us, who will show us?

The silence hears, here I am, send me.

Tuesday, July 29, 2008

There Is No "I" In Team - But There Is An "I" In Win

The story goes that when former USA professional basketball player Michael Jordon was at the University of North Carolina, his coach, Dean Smith, said to him, "Michael, there is no "I" in team". Michael retorted, "But Coach there is an "I" in win".

In my view they are both correct. And when it comes to creating and maintaining a nonprofit organization, a team and many "I's" make up the leadership. That will include the team that creates and incorporates the organization and the teams that will form the boards in the future. In many ways the board is the "owner" of the organization. In nonprofit organizations with a strong membership that elects the board, the membership may be the "owner" In another sense the owner is the public and the community served.

A nonprofit organization is not a sole proprietorship. It is not YOUR organization. If you are looking for your mission and vision to be born and survive and thrive it will require a team of "I's". The"I's" will share your sense of mission and vision. The team of "I's" will help develop that mission and vision with values, knowledge, talent, experience, passion, advocacy, ignorance, communication, silence, agreement and disagreement, leadership and followship.

The board members have legal obligations. We will flesh them out as we go along but for now, let's focus on just three. The nonprofit board, itself, is charged with carrying out the oversight responsibility, to act as a fiduciary. A board's performance is judged by three key legal precepts:

1. Duty of Care: To exercise reasonable care when making a decision as a steward of the organization. A trustee must be well informed; know and understand the organization's mission, programs, and structure, attend meetings and come prepared to meetings.

2. Duty of Loyalty: To act in the best interests of the organization and never use or be perceived to use information obtained as a member for personal gain or a competitive edge for another group.

3. Duty of Obedience: To uphold the organization's mission and actively work to ensure that the organization operates consistently within its mission, the by-laws and state and federal law.

Here is one way to translate those legal duties:

The good faith responsibilities of board members checklist.
  1. Attend all board and committee meetings. If unable to attend, be able to show a valid reason for the absence. If attendance becomes impossible resign from the board.
  2. Select leadership who will lead, maintain order, allow the flow of information at meetings and keep the board informed of any problems including those that might have litigation potential against the organization.
  3. Assure that board members fairly represent the community, its diversity and language.
  4. Have a thorough knowledge of the duties of a board member and provisions of the charter and bylaws.
  5. Be prepared at meetings by reading the material sent in advance. Leadership and staff have a responsibility to send material in advance, not wait until the meeting to present a significant amount of data and information for decision making
  6. Pay attention to corporate affairs; be informed about the general activities and operation of the organization.
  7. Encourage that organizational activities remain consistent with the mission of the organization.
  8. Express yourself at board and committee meetings meaningfully, directly, honestly and accurately on the issues presented or new ideas.
  9. Review and approve the annual written budget of the organization and any amendments during the year.
  10. Advocate for a small but reasonable portion of the budget be reserved for board training and orientation.
  11. Formally and informally assess the community's needs and priorities.
  12. Participate in the organization's annual or periodic planning and/or long-term planning.
  13. Provide evaluation of the organization's mission development, planning, funding, activities, structure, opportunities and problems.
  14. Ensure that statutory or technical requirements are met such as filing annual reports, withholding employee's taxes, meeting grant requirements and so on.
  15. Require a well-developed written internal financial control system and assure it is followed.
  16. Require regular (monthly, for instance) written financial reports that provide the necessary information in a clearly understandable manner.
  17. Require an annual written internal or professional audit to be conducted with the results reported directly by the auditor to the board or a designated committee.
  18. Assure the minutes are accurate, fairly represent the decisions made by the board, are timely and that dissents and abstentions are recorded.
  19. Avoid any sign or semblance of any self-dealing or enrichment. Discourage any business between directors and the corporation unless conducted entirely open and with tight, stringent safeguards.
  20. Disclose any conflict of interest related to board or organization business.
  21. Review the organization's conduct of any unrelated business enterprises or income and assure yourself that it complies with state and federal tax law.
  22. Support the organization with an annual contribution within your economic means.
  23. Represent the organization in the community at large and communicate with the public to offer and receive information about the organization in an accurate fashion.
  24. Advocate for the organization for funding and in necessary political arenas.
  25. Support and maintain written ethical standards for the board.
  26. Make no financial profit and receive no pay from the organization except as provided by law, the bylaws or for reasonable travel.
  27. Resign from the Board prior to seeking employment with the organization.

They reasonably demonstrate the three duties of a board member: care, loyalty and obedience.

They also illustrate why the board is a team made up of "I's" to create, maintain and sustain the organization.

Saturday, July 26, 2008

The Nonprofit Business Plan - Program Precedes Money. Planning Precedes Program

Here is an outline about what you should cover in your business plan. Each topic should be touched on in the Plan. As we noted earlier, the business plan can be short or long. It can be narrative or in an outline. It is never cast in stone. It is a document that changes over time.

Title Page - The Title Page will have the name of your organization, a list of the board of trustees or directors, the chief executive officer (I will refer to this person throughout this paper as the "executive director"), and the office address, telephone and fax numbers. If there is an e-mail address and a web site, include them as well. Note: some States call the board "trustees" and some States refer to the board as "directors". There is no real difference; use the word that is in your State nonprofit law.

Executive Summary - Actually you will write this last but it should be placed right after the Title Page. The reason you will write this last is that it summarizes briefly all the material following. The Executive Summary will tell the reader how the nonprofit is organized. It tells who you are and the function of the nonprofit organization. If you are looking for grants and money or will conduct fundraising activities, it will summarize your method and purpose for raising money that way. Key elements of the Executive Summary include clear identification of the organization, at least one sentence each on credibility, history, the problem being addressed, experience, goals and objectives, purpose and methods, assessment and evaluation. Include budget totals - total project cost, funds already obtained. Be sure it is brief, it is clear, it is interesting and it is truthful. This can also serve as a separate brief document to leave with potential supporters.

Corporation Description - Here you will give an overview of the function of your organization. Discuss briefly a history of how the idea of the organization began, its projected size (building needs, space, employees, equipment and tasks), a description of the service you will provide, how you will provide it and the community or the market your organization will be in. Character is the general impression you make to a prospective supporter, contributor or funder. Describe the character of your organization and its leadership. Discuss the values this organization and its leadership exhibit. Discuss the credibility of the principals, the problem being addressed, goals and objectives, purpose, methods and evaluation to be utilized. What are the benefits offered by the organization to the target population? Supporters and funders will form a subjective opinion as to whether or not you are sufficiently trustworthy actually to be able to perform the service and to handle the funds. The educational background and experience of the board and staff will be reviewed. The quality of the references and the background and experience of your leadership and employees will also be taken into consideration. Discuss those items here.

Market Analysis, Priorities, Data - Starting a nonprofit requires doing your homework, study and research. In this section you will discuss the research you preformed and the conditions and trends in the needs you want to meet. Write about the need for your service and the demand for it; how is it unique? Know what is happening in your community. Describe the priorities of the service or product and show how you developed the priorities. Describe how many other major competitors you have, both for-profit and nonprofit organizations, how much of the need your competitors meet and control, and your strategy for gaining a place meeting that need or developing a new niche. Describe how you are going to communicate with the community you intend to assist, to potential partners and funders. You need to be able to explain any barriers that you will have to face at the beginning, how you will maintain and sustain your activities as a nonprofit organization and how you plan to overcome those barriers. You may have discovered a gap in services; describe that gap, why you believe it exists and how you will close that gap. Are there other organizations that are willing to help you close that gap (list them and include letters of support in the Appendix)? How many people or other needs will you serve and what are those needs? What are the priorities and how do you know they are the priorities? Describe briefly the methods used to develop the priorities. Place the demographics about the need for this service in this section. Detailed surveys, tables and charts can be placed in the Appendix. You may need statistical information or data from the US census, for instance. Who will be your collaborators or partnering organizations? Do not name them unless you ask them and they agree to be included. Are there community leaders, both public and private, who support this effort? Have they written supporting letters? Put such letters in the Appendix. Is there anecdotal information that can support your plan?

Services - Explain your vision, your mission, the goals and objectives, the kind of services that will be provided and the activities, functions, evaluation and results in detail. How will other people know that you are able to meet these goals and objectives? How are your goals and objectives measurable? How will anyone know you are meeting your stated goals and objectives and meeting them timely? How do you know the activities you have planned will meet the stated goals and objectives? You have to answer the question, "So what?" So what if you will perform these activities? So what if you outline an extremely busy and detailed activity list? What will be different because you perform these activities in the way you perform them? What difference will it make? How will people or the problem improve or be alleviated or resolved? I have met with many community groups that work very hard and I have asked the question, so what? What have you changed or accomplished? Many are not able to articulate and prove they accomplished or changed anything. So…what will you change, how will you change it and how will you know your activities produced the change? What are the conditions under which your service will work? What is your mission and what is your mission statement? If your mission statement is brief and you have a logo, consider placing them on the Title Page as well. Here are some thoughts about a mission statement: There are those who believe it should encompass the basic reason for existence and can be several sentences long. There are others who say make it short so everyone can say it by memory and so it will fit on a T-shirt. Either way put the time in on creating this. It is not easy. Include others in the discussion and allow refinement as time goes on. We will discuss mission statements in a later article.

Operations - Explain how you will create and how you will deliver your service and meet the identified priorities and need(s). Specify how you will get your service out the door to customers/clients or supporters and meet the needs you see. Give the location of your service and state how and why that location was selected. Are there any barriers for your clients/customers because of this location? Will you be compliant with all laws regarding disabilities? Do you have a storage area? Where will your inventory be warehoused or kept? Create a flow chart that shows the steps you will take to offer and to provide the service. What records will you need to keep and what reports will you prepare about the organization? The State, IRS and funders require written reports, usually annually. In order to be recognized as a tax exempt organization (so that contributors may take a tax deduction for contributing) you have to complete and file IRS Form 1023. Form 1023 will take you hours and hours to complete. One of the most difficult sections of 1023 is Part IV where it states “describe your past, present, and planned activities in a narrative”. See also Part VIII where you are asked to list and discuss certain specific activities. The information you provide in your Business Plan here will help you be prepared for that IRS’ narrative and required details.

Marketing Plan - Describe how you intend to provide your service and who will use it. How will people know about the service? Describe your distribution plan and advertisement plan. Describe how you are going to market the mission, the vision, the activities, the results. Describe how you will reach potential customers and clients, how they will learn about the organization. Give the details of your marketing plan. Will you use fliers, the Internet, local newspapers and media, e-or snail-mailings, web site, blog, social networking, communication network or word of mouth? As with any other business the new nonprofit has to include in its marketing plan product positioning. Placing the NPO and its mission in front of its customers, clients, constituents, possible supporters and volunteers is vital to the success of providing the service. How will people know your address, your telephone number, how to reach you? For many new NPOs the marketing plan seems to be to have a web page up and running. I am surprised by the development of a web presence before the group is even incorporated. Do not be confused by this - I believe in a web presence but it is only one part of the marketing plan that has to be broader. How will your organization handle public relations? How will you protect privacy when required? Who can speak for the organization? Will there be a committee of the board to develop and hand marketing and public relations? If there will be such a committee, discuss its role here. If there is no experience in the group concerning marketing, how will you overcome this barrier? How will the organization handle bad publicity and other risks? Has the board detailed a risk assessment? There is a relationship between the mission of the organization and the marketing of the organization. For some material showing that discussion see

Board of Trustees and Members – It takes a TEAM to raise a nonprofit organization – to raise it, to maintain and to sustain it. That team begins with the governing body. Describe the governing body of the organization, the board and indicate whether you will have members. Do you have bylaws? If you have bylaws, place them in the Appendix. What role will the members play? Who is on the board and who are the officers? Describe how these individuals became members, board members and officers. What experiences do the board members bring to the organization and its mission? NPOs should carefully consider paying for board and staff Errors and Omissions (E&O), Directors and Officers (D&O) insurance and liability insurance as protection in legal actions. If you intend to have a significant web site presence on the Internet, consider insurance to protect the organization with that as well. In my view insurance is a necessary ingredient to the budget, it is a cost of doing business. See my material Insurance Questions for Nonprofits - . Attach resumes of at least the officers to the Appendix although it would be more helpful to have the resumes for all board members if the board is not too large.

Management and Personnel - Explain who will direct the day by day operation of the nonprofit. Who is she or he? What is the job description? Attach a job description and resume to the Appendix. Who will work with that person? What are the written standards that will be used to hire, train and evaluate the executive director and other staff? Describe how their experience and leadership will contribute to the success of the mission of the organization. Demonstrate the use of technology in your plan of service, particularly communication, finances and budgeting, Internet, e-mail strategy, web site and blog development, and availability of the technology to employees, volunteers and constituents. The organization needs to outline a risk assessment in this section and show how the mission and activities require the organizations to have risk management. What might cause risks, how will it be managed and by whom? Give an outline of the work plans that will be followed by employees and volunteers to meet the mission of the organization. A work plan shows what work will be done, who will do it, how it will be accomplished, where activities will take place, the date by which it will be done and feedback, evaluation and analysis of the effectiveness and efficiency of the tasks accomplished. Outline the employee policies you have or will have in place such as a written personnel manual, anti-sexual harassment policy, equal employment opportunity and so on; government and private grants require copies of many formal board-approved policies of this kind. Include written employees' job descriptions and personnel needs. Include copies of resumes for all known key staff people in the Appendix.

Funds and Resources Required and Expected Use of the Funds - If you are going to raise money, seek grants, hold fund raisers, collect dues, sell products, explain how you intend to raise the money, why you need the funds, how you will use the money, and how you will maintain fiscal records. Show how you will account for the money and what records you will keep. Please keep in mind that the board should prepare a resource development plan separate from the Business Plan. The resource development should address not only funding but other resources such as volunteers, pro bono assistance, low-cost or donated material and goods, such as through TechSoup, linked below. Describe your accounting system and the policies you have or will have in place concerning salaries and fringe benefits, travel expenses, bank reconciliation, separation of functions and so on. State a specific amount of money you will need for the first year and for the next two years. If you have letters of support and persons who are willing to provide funds once you are approved by the IRS as a nonprofit organization, consider whether to include them in the Appendix. You may not want to publicize them at this stage of your progress; they may want to remain anonymous. Describe your plan to secure funding and other resources and give a contingency plan in case your initial plan fails. One of the three most difficult sections of IRS Form 1023 is Part IX, the Financial Data. Form 1023 states in part: “If in existence 4 or more years, complete the schedule for the most recent 4 tax years. If in existence more than 1 year but less than 4 years, complete the statements for each year in existence and provide projections of your likely revenues and expenses based on a reasonable and good faith estimate of your future finances for a total of 3 years of financial information. If in existence less than 1 year, provide projections of your likely revenues and expenses for the current year and the 2 following years, based on a reasonable and good faith estimate of your future finances for a total of 3 years of financial information.” The time spent in preparing fiscal information here and in the next section below in the Business Plan will reduce the time and effort answering the questions in Form 1023, Part IX. Demonstrate the role of the board in funding and accounting in this section. Indicate how the organization will be maintained and sustained during the first three years. See internal controls suggested by the

New York State Attorney General -


Financial Statements and Projections - Include projections and budgets for the expected performance of your nonprofit for the upcoming three to four years. You will need to demonstrate your understanding of basic accounting and the financial concepts that are crucial to the success of your organization. Detail the budget for three to four years covering personnel, fringe benefits, employee taxes, telephones, computers, insurance, space costs, travel, training, board development, furniture, supplies, insurance and so on. By using complete and accurate projected financial statements, you will be able to communicate to a prospective contributor or funder how these concepts will be successfully applied in your organization. The narrative about the finances will be in this section and the supporting documents are to be attached to the Appendix.

Appendices/Exhibits - This section will document any issues you cannot address in other sections. An example is an agreement you have with other nonprofits or individuals, contracts for the lease or purchase of your property, equipment, job descriptions, professional, operating or health licenses and so on. Add any surveys or questionnaires or other assessment tools you used to assess the mission, the market, the purpose, activities, the priorities and the risks. Other sections above list other documents to include in the Appendix. The material that you use here should be ultimately in separate files for retrieval. You will many of them over and over again.

Are you finished? Then you can prepare the Executive Summary.

The Nolo Press has an excellent brief article answering the question, Why You Need to Write a Business Plan linked below. The article addresses the reasons to create a business plan, the importance of financial forecasts and the need to raise money. There are temptations to skip financial projections; they are hard. There is an old bromide that says the devil is in the detail. That is true for the business plan and will be in every grant application you prepare. Do not skip the financial projections.

SCORE has a useful 60-second Guide to Writing a Business plan, They also have a 31-page business plan template linked below. While it is aimed at small businesses, it can serve the purpose for a nonprofit as well. SCORE is a nonprofit association that provides entrepreneurs with free, confidential face-to-face and e-mail business counseling.

See also


Program precedes money. Planning precedes program. You have to start the program of your mission before others will provide funding. It is best if you have a business plan before you start the activities.

Friday, July 25, 2008

You Can Pay Me Now Or You Can Pay Me Later

OK, here is your homework. It is an open book test. It is not a quiz. It is a test. As a commercial announced for an auto repair shop talking about regular maintenance for a motor vehicle and failure to provide it: “You can pay me now or you can me later”. This is about the cost to you right now. It will cost more later if you don't pay now.


Take the second question below, "What is the purpose of your nonprofit?" (It is really not yours, you know; it belongs to the board and the community, not an individual) Your answer may be to save whales, to overcome AIDS, to work with troubled youth or to have a community development corporation. Go beyond those broad answers. Review and work on the rest of the questions and come back to the second one and see if you have some additional purposes or reasons for starting a nonprofit. Put your answers down on paper. Save them, review them and amend them every so often as you progress.

1. Are you being HONEST with YOURSELF? What do you want out of this for yourself? What is it in your character development that makes you the one to do this? What do you stand for ethically? Are you looking for a job or control or an organization that will be active the day after you die? Will you be honest with others and up front about what you are looking for? Do you have personal knowledge and/or experience with details, budgeting, managing people and leadership? What are your personal strengths and personal weaknesses and will you talk about them with others to make this organization happen? Are you an ethical person?

2. What is the purpose of your nonprofit? Why are YOU starting a nonprofit? Why are you starting THIS nonprofit? What is your vision, your mission? Describe the opportunities that are available.

3. Can you partner or join with another nonprofit organization performing the same or similar mission without incorporating another group? How will you avoid duplication of mission, services and work?

4. What are your qualifications and experience to open and operate this nonprofit business?

5. What kinds of activities will the nonprofit involve or sponsor? Who will be responsible for these activities? When will they be accomplished? How will you KNOW they were successful?

6. Will you be providing a service? Will that service be limited to certain customers/clients/others? Who? How? Why? When? By whom? What will be the proximity of your office and service to your customers/clients/others?

7. Will you have membership? If so, who will be eligible and what duties, obligations, authority and dues will members have?

8. What will be the name of your organization? Have you reserved that name with the State? Does the name reflect in some manner the mission, the vision or the activity of the organization?

9. Where will you be opening and operating this nonprofit? Do you intend to use property you or a family member owns?

10. Who will you have on your board of trustees? Will they and other people provide money and assistance? Why will you have them on the board? What part will they have in decision-making? What part will they play in the organization? Please note that some states call the board “trustees” and some call them “directors”. Be consistent with your state. Your state law may also list the required officers.

11. What are the advantages and disadvantages to incorporating THIS organization? Make two columns and list both advantages and the opportunity and the disadvantages and risks. Talk to others who are working with you to add to both lists. Do the advantages outweigh the disadvantages?

12. What are your resources? What are your talents, experience or education to operate this organization? Will the board contribute financially to the organization annually?

13. Will you have paid staff and personnel? Will you have volunteers? What are their responsibilities and authority? What roles will they play in the organization? What are the responsibilities of the organization to its employees and volunteers? Who will handle those responsibilities? What written policies, procedures and forms will be required?

14. What is your experience in managing a nonprofit organization or other endeavor? How good are you in writing and maintaining records, policies, procedures and forms? Do you know what reporting you will have to do, when and with whom?

15. Will your organization or personnel require licenses, registrations, approvals, certificates or permits? Will your staff require licensing, professional degrees, criminal background checks, or drug testing?

16. Do you own equipment or other forms of property? Do you plan on acquiring property and equipment? Will you purchase or lease the equipment and property? How will you acquire these resources? How will you pay for renovations, furniture, equipment and signs at an office? How will you pay for the continuing maintenance and improvements?

17. How and where will you keep supplies, stock and inventory?

18. What are your financial needs? Does the organization have a bank account? What are your financial skills? What kind of grants or funds will you need? How much money will you need to begin to open this organization and sustain it - for 1 to 6 to 12 months, or for three years? Where will that money come from? How will you assure fiscal integrity?

19. What potential liability and risks does this nonprofit have? What insurance protection will you need? How will risk management be assessed and handled?

20. Have you received any training, education or technical assistance to operate a nonprofit business? If you have not received any training, education or technical assistance, will you need that kind of help? Where will you find that help? How will you pay for it?

21. Have you developed a business plan? Do you know what a business plan is and why you need one?

22. How will you keep financial records and other important records such as contracts, orders, wage payments, vouchers, bills of lading, bank accounts, tax information, personnel records, annual reports, audits and so on?

23. Are there other nonprofits or for-profit groups - competition - like yours in the community where you will open? How and why is your nonprofit different than they are?

24. What are the major impediments for you to start this organization? What are the barriers? How will you overcome these impediments and barriers?

25. How will you advertise or market the nonprofit's service? How will you get customers/clients/supporters? What will be your niche or specialty in the community you serve, the market place?

26. Have you or other members of your family and friends operated a business or another nonprofit? Will they help you in this enterprise? What will that help be? Are you aware of rules on conflict of interest and intermediate sanctions?

27. Does your group plan on dissolving after a period of time or is it a long-range project?

28. Do you believe the organization will be involved with lobbying, advocacy and/or political activities?

Do you have the right stuff to create, maintain and sustain this dream? Are you ready to pay the price?

Starting a nonprofit is complex. You cannot simply have a great idea and a community need and look for funders, customers or clients. You do not simply put up a webs site and expect things to happen. You need a plan, a plan in writing. Such a written plan is called a business plan. A business plan can be short or it can be long. A business plan can be a narrative or an outline. If you sat down and started writing answers to the 28 questions listed above, you have a start to producing your business plan.

Start your engine...

Wednesday, July 23, 2008

Honesty - And The Nut Holding The Wheel

It is said that the most important part of a motor vehicle is the nut holding the wheel. It may be that in starting up a nonprofit you are the nut holding the wheel. So, let’s look at you and your honesty.

Here are some thoughts on the role of honesty in starting a nonprofit group – starting with you!

  1. How honest are you with other people with whom you share common interests?
  2. What do you really want out of it? A job? Board leadership?
  3. You can only have one, a job or a position of leadership on the board; which do you select?
  4. Are you putting some of your own money into the initial coffers for incorporating which can amount to $900 - $1,000?
  5. Can you be up front and tell the people you gather together that your hopes and expectations are for you to have a job or to have the chairperson’s job?
  6. Can you tell a family member or a close friend that they should not be on the board because of the potential for conflict of interest?
  7. If you are looking for a job, what salary are you looking for? The board sets the salary of the CEO, you know?
  8. Are you aware that the board has to evaluate you and can fire you as the CEO?
  9. What are your strengths for this mission and tasks?
  10. How do you monitor your strengths so they do not become weaknesses?
  11. What are your weaknesses?
  12. What is needed in this organization to make up for your weaknesses and to complement your strengths?
  13. Have you read any material about running a nonprofit organization?
  14. As you think about the nonprofit organization what are the mission, the vision, values, passion and activities? Can you write them down on a piece of paper and explain them clearly to others?
  15. Who has talent that is needed but does not always agree with you and will say so? How do you feel about them working with you on the organization?
  16. Do you expect to get everything for free, such as furniture, computers, file cabinets, accounting and legal work?
  17. How will you include the recipients of the services in the planning of the organization, decision making and on the board?
  18. We need dreamers and dreamers need support in the details
  19. Are you a dreamer or a person of action?
  20. How well do you handle your own finances?
  21. How ethical are you in your personal life?
  22. What life experiences do you have that will help toward the mission?
  23. What life experiences do you have that may be a barrier to the mission?
  24. What formal education do you have that will help toward the mission?
  25. Who do you know, other than your family, who share your sense of mission, vision, values and passion?
  26. How are you at paper work?
  27. How are you at technology and the use of computers?
  28. Are you prepared for evaluation of the organization and public scrutiny?
  29. What language skills are needed for the organization?
  30. How do you work with others and in a diverse group of people?
  31. How do you handle supervision? With others supervising you? With you supervising others?
  32. What will happen to the organization when you become seriously injured, sick, tired, move, change jobs or become burned out? What is in place NOW for a written succession plan
  33. Will you know when to let go?

Mirror, mirror on the wall, am I being honest with myself at all? If you are most of the time, keep moving forward and keep learning and checking your honesty quotient. You are the nut holding the wheel for now.

Tuesday, July 22, 2008

Reasons Not to Incorporate a Nonprofit Organization

There are a number of reasons to try to incorporate a nonprofit organization. Here are some suggestions for NOT incorporating.

  1. You do not have a group of people who share your mission, passion and sense of vision who will work with you to create this nonprofit tax exempt organization.
  2. You are not sure whether other people will work with you on the project.
  3. You left a similar organization and you want to compete with them and you know you can do better.
  4. You think it will be pretty simple to incorporate in the State and file with the Internal Revenue Service.
  5. You are not sure what kind of work goes into operating a nonprofit corporation after it is incorporated and recognized by the State as a nonprofit organization and by the IRS as a tax exempt organization.
  6. You own some property that would be perfect for (your choice: an office, a pet sanctuary, avoiding property taxes).
  7. You know there is a need for this service but you have not documented the need and do not know how to go about assessing and meeting the need.
  8. You have never volunteered or worked in a nonprofit group but that should not be too hard.
  9. You are not aware of other groups in your community already doing what you are thinking about doing.
  10. You believe the first thing you should do is create a web site about your ideas and your organization to start raising money (the "if you build it, they will come" syndrome).
  11. You believe it is easy to operate, sustain and maintain a nonprofit organization
  12. You believe it will be easy to raise the money to accomplish your goals and objectives.
  13. You like to be independent.
  14. You have a great idea, this is a great opportunity and you are concerned that other people who become involved will change the programs and activities you want.
  15. You and your family want to control the organization so that it will be run right.
  16. You want to be the chief executive officer with a salary and sit on the board as chairperson.
  17. You are aggressively going to seek grants because it must be easy.

Please rethink why you want to start a nonprofit. If one or more of these are in your mind, back up and think again. I will try to help you think it through as we go along in this blog. There are many great reasons and motivations for starting a nonprofit organization but these are not among them. We'll see some more questions about starting a nonprofit group as we go along that may help you in your thinking.

Agenda and Minutes of First Board Meetings

Your State law may provide for the minimum agenda for the first meeting of the organization. The Board members named in the Articles/Certificate of Incorporation are to receive at least five (5) day's notice of the meeting by mail to each trustee. The notice must state the time and place of the meeting. State statutes may provide that the Board shall adopt bylaws, elect officers, provide for initial members if there are to be members and transact any other business that may come before the first meeting.

At some point earlier than the statutory meeting described above the organizers should create an agenda for the first formal meeting of the Incorporating Board of Trustees. The agenda and the meeting should include approval of the name of the organization, reserving the name, approval of the expenditure for reserving the name, filing of the Articles/Certificate of Incorporation, the signing of the Articles/Certificate and the payment of fees to the State.

This initial meeting may also approve the filing for the Federal Employer Identification Number (FEIN or EIN). There is no charge for the FEIN and may be secured over the Internet or be telephone. An FEIN is similar to a Social Security number, but for businesses. You will need an FEIN to file the IRS Form 1023. The FEIN is an important part of the nonprofit’s identity so do not use it everywhere, such as on a web site. Applications for the FEIN may be filed by telephone, FAX, online or by regular mail.

Each item on the agenda should be the subject of a motion to approve, a vote and recorded in the minutes.

The Board may approve the opening of a bank account in the name of the organization subject to receipt of the FEIN and approval of the Articles/Certificate of Incorporation by the State. The motion to open an account should name the bank and branch address, the names of the two or more persons who are approved to sign checks and deposit funds. All checks should require at least two signatures. No check should be signed that is blank. The Board will manage the affairs of the corporation. The Board can also approve the filing of the business entity public record filing form with the State.

When the agenda also includes the adoption of the Bylaws, the Board may have the election of officers, begin the process of naming members if there are to be members and transact other business that may be raised. Thereafter, the corporation is governed by the Bylaws. Requirements for the meeting of the Board and members, if any, are to be spelled out in the Bylaws, subject to the Articles/Certificate of Incorporation and state and federal law.

At one of the early meetings or a subsequent meeting the Board must approve the filing of Internal Revenue Service Forms 1023. The name of the person approved to sign the forms should be named in the motion. The motion should include the payment of the appropriate fee to be sent with this material to the IRS.

After the Board has received the determination from the IRS, the Board may have to approve the filing of a State form relative to avoiding certain State taxes on corporate purchases. The motion should include approval for a person to sign the form.

If the corporation intends to hire employees, desires to hold raffles, or wants to receive the State petroleum benefit (if there is one), other forms should be approved by the Board with approval who may sign.

This practice of approving forms or fund raising programs or grant applications and the person responsible for signing at the same time should appear in the minutes. This practice will protect the organization. All motions should be reflected in the minutes of the meetings.

Board meetings can be exciting and focused. A lot depends on the leadership, knowledge and experience of the chairperson. The setup of the room where meetings are conducted can also affect the meeting. For ideas about meetings and room setup, see

There are many ways a board can agree to conduct its meetings. Many continue to refer to Robert's Rules of Order. I would suggest not requiring Robert's Rules of Order in the Articles/Certificate or the bylaws. The bylaws may reflect that Robert's Rules of Order shall provide guidance to the board in the conduct of business.

Parliamentary procedure allows groups to make fair and effective decisions. Someone must propose each item of business as a suggestion that the group do something. This is called a motion. It is usually presented, "I move that we blah, blah, blah…" There then must be a second or the motion dies. Following a second there is discussion of the motion or a motion to table the original motion and then a vote by those in favor, those opposed and those who abstain.

An issue confronting nonprofit groups is using Robert's Rules of Order. There are some sites that are useful to parliamentary procedure. I have found several web sites that I think are helpful to understanding Robert's Rules of Order. Although there is a push to sell the book on each, there are useful "cheat sheets" and discussions as well on the sites. - The official Robert's Rules site - An adaptation and helpful outline to Robert's - An excellent site where a "cheat sheet" is available - A web site from a consultant with free material on writing minutes, counting a quorum and other matters - Trout's Top Ten Rules of Order

Decisions are made by voting on each motion after discussion. The rules for voting guarantee that the will of the majority will be adopted and the rights of the minority will be protected. The rules should explain in advance the method of the voting such as simply saying "yes", "no" or "I abstain" or calling for a role call vote or a show of hands

Remember, the purpose of rules for a meeting is to get the work done in a timely and legal manner and make everyone feel good about the meeting.

For a sample copy of minutes for a board meeting see -

Monday, July 21, 2008

Selecting and Reserving A Name for Your Organization

Selecting the Name

Selecting the name of your organization seems simple enough but it is an important preliminary step to creating the organization. The initial Board should approve the name and so indicate in the minutes. (There will be more about the minutes of the first meetings in a future blog).

Most if not all State laws address several issues:

  1. The name cannot indicate a word, phrase or abbreviation or a word derivative from the abbreviation which indicates or implies you are organized for some purpose other than permitted by your Certificate/Articles of Incorporation;

  2. The name cannot be the same as or confusingly similar to an organization in the State;

  3. The name cannot contain a word or phrase that is prohibited or restricted by laws of the State;

  4. Your organization must conduct its business under its name and cannot use an alternate name, an abbreviation or an acronym, unless you register that other name, abbreviation or acronym also. There are rules about renewing the use of an alternative name.

  5. Many States requires that nonprofits use the words "(Name of State) Nonprofit Corporation", "Incorporated", "Inc.", "Corporation" or "Corp." with the name of the organization, such as "XYZ, Inc.". Some States do not permit those titles.

What name will the organization use? When you have decided on a name, check the State web site for business development. Most State web sites have a subsection for charities or for nonprofit groups. You may be able to check at the web site whether the name you have selected is available in your State.

You can also download or order a package of registration forms that you will need to file for your nonprofit organization incorporation including registering the name. The web site may provide the addresses and telephone numbers you will need to register the name and to file for incorporation.

Reserving the Name

Your organization should consider reserving the name early in the process of preparing to incorporate. You can usually reserve the name for 120 days by contacting the requisite State office. You may be able to reserve several names listing them in priority order; there may be a fee for each name reserved.

The fee schedule for your State may have a cost to reserve a name by telephone with a credit card. You can reserve the name by sending a cover letter and a different fee may apply. If the State permits there may be an expedited service for reserving the name that may have an additional fee. You may also be able to reserve the name at the appropriate office over the counter.

Reserving a business name does not register the business entity. You will still need to register your nonprofit business either online or by submitting all the required paper forms.

A word of caution about suggested wording from the State for the incorporation papers. The State may have language it wants in the Articles or Certification of incorporation. That's fine. But also be aware when you prepare the papers for the IRS, Form 1023, the IRS also has language it wants in the incorporation papers filed with the State. Be certain to include the sections both the State and the IRS require when you first incorporate. It will save you money and time to do it right the first time.

Wednesday, July 16, 2008

Developing a Nonprofit Tax Exempt Organization - Outline of First Steps

Developing a Nonprofit Tax Exempt Organization – Outline of First Steps
  1. Form the initial, incorporating board of trustees, minimum number of 3 people 18 years old or older
  2. Incorporating board members donate funds to pay initial fees
  3. Approve the agenda for the first meeting of the board of trustees
  4. Approve the membership of the initial board
  5. Approve a mission statement for the organization
  6. Develop a business plan for the organization for the first 1-3 years
  7. Approve a registered agent
  8. Approve name of organization and file reservation of name with state. (Fees vary from state to state $50-$60)
  9. Approve the state incorporation papers, signature(s) and file with state, and be sure to use the language that both your state and the federal government require; they complement each other. Your state may require that the approved incorportion papers are a public document. (Fees vary from state to state, about $75; you may receive a state identification number that you will need to have available for correspondence and filing with your state, but the state may use the Federal Employer Identification Number - FEIN, see #s 10 and 13 below)
  10. Approve filing for Federal Employer Identification Number
  11. Prepare and approve minutes of all meetings, dated and signed by secretary or other officer following approval
  12. Develop and approve bylaws in conformity with both state and federal laws
  13. Approve opening bank account in name of the corporation and signatories (You will need the FEIN and Certificate of Incorporation from the state; DO NOT open the account in any person's name as that will make the deposit taxable to that peson as income)
  14. Complete developing the (membership if there are to be members) board and elect officers following the bylaws; form committees as required or desired
  15. Secure all necessary Federal forms and publications for filing with the Internal Revenue (see future blogfor your library list)
  16. Secure documents for recognition as a tax exempt organization
  17. Prepare IRS Form 1023, approve signature and filing with the IRS (Fee $300-$750 on February 1, 2006); save at least one copy with original signatures. This will be a public document along with many others.
  18. Upon recognition by the IRS, file for sales tax exemption with the state if there is such a tax
  19. Approve and file all other necessary forms at the local, county and state level (e.g., zoning, building codes, games of chance, etc.)
  20. Develop and approve necessary policies, procedures and recordkeeping for all mission activity, fiscal and administrative records and for grant compliance
  21. Approve and file all necessary annual reports on time

And there is more...

Tuesday, July 15, 2008

Starting a Nonprofit Organization - Why?

Historically in the United States examples of a charitable organization include:

  • Relief for the poor, the distressed or the underprivileged
  • Advancement of religion
  • Advancement of education or science
  • Erection or maintenance of public buildings, monuments or works
  • Lessening the burden of government
  • Lessening of neighborhood tensions
  • Elimination of prejudice and discrimination
  • Defense of human and civil rights secured by law, and
  • Combating community deterioration and juvenile delinquency.

Elsewhere the IRS Code section 501 (c) (3) describes charitable organizations as those that are formed for "religious, charitable, scientific, testing for public safety, literary or educational purposes or to foster national or international amateur sports competition".

There are benefits and detriments in becoming a nonprofit organization under State and Federal laws. They will be discussed shortly. At this point, it is important to realize that being recognized as a nonprofit organization in your State and as a section 501 (c) (3) corporation by the IRS gives the organization public recognition of tax exempt status. It gives contributors an advance assurance of deductibility of contributions and it allows the nonprofit to be exempt from certain State taxes and Federal excise taxes. Foundation, corporate and government grants are available to nonprofits that have the recognition of the IRS.

There are other benefits including nonprofit mailing privileges and it may provide relief from property taxes. I say, "may provide relief from property taxes" because there have been periodic movements by lawmakers to tax certain nonprofit property. Early in 2001 Baltimore MD considered taxing the huge holdings of Johns Hopkins University and other large NPOs in the city, but the matter was settled by negotiations. NPOs may have to pay property taxes if the property is viewed as a profit-making source of revenue. It is a growing concern as local communities seek a broader tax base.

In most states there are property tax assessments that can be charged to nonprofits including houses of worship, churches, synagogues, mosques and other NPOs as they are with businesses and housing. Each can be required to pay property tax on space leased to other entities such as a day care center, a weekday parking lot or for-profit-businesses. A number of churches have leased their steeples or towers to cell phone carriers. Usually it is up to the local municipalities to enforce the law and to assess the appropriate property tax. That is the bad news. The good news is that the assessment on these lease agreements may help protect houses of worship and other NPOs from fully losing their status as a tax-exempt organization. The best news is that this practice of taxing is negligible.

But there is more...much more.

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