How to Obtain Nonprofit Status to Finance Your Ministry
As a part of the new generation of Christians eager and ready to take your faith beyond the church pew and into the world, you don’t see business simply as a job, but as a calling. For you, your business place is your ministry place. You are a world changer; a marketplace minister sent to influence and transform the community around you.
To manage a successful work in the marketplace, the one skill you must master is how to finance your ministry. Generating a consistent income for both you and your marketplace ministry budget, will place your organization on a firm financial foundation.
One of the many ways you can generate financial support is through the vehicle of setting up your ministry as a 501(c)(3) nonprofit organization.
There are 3 advantages of gaining 501(c)(3) nonprofit status for your marketplace ministry.
(1) Your organization is tax exempt from having to pay federal income taxes.
(2) It allows your donors to deduct contributions to your ministry on their personal tax returns. Obviously, this provides a powerful benefit and motive for your supporters to give to your cause. A Tax deduction benefit is often the critical factor for attracting donations.
(3) Creating a nonprofit enables you to gain access to federal, state, and private grant money.
5 Basic Steps to Starting a Nonprofit
(1) Qualify for Nonprofit Status
The first step to becoming a Nonprofit is to make sure you qualify. Your group is eligible for tax-exempt status under the IRS 501(c)(3) tax code only if your primary activity intends to pursue one or more of the following purposes: *Charitable *Religious *Educational *Scientific *Literary *Testing for Public Safety *Fostering National or International Amateur Sports Competition *Prevention of Cruelty to Children or Animals
For detailed information on the criteria for each type of tax-exempt status, see IRS Publication 557, Tax Exempt Status for Your Organization. Also, if you feel you need help with filling out the 501(c)(3) application, you can go to www.LegalZoom.com for assistance. The cost is $595 for filling out the questionnaire; with an additional $300 to $750 for the government’s filing fee.
(2) Name Your Nonprofit
What will you call your marketplace ministry or group? Try to use a name that communicates your mission and purpose. Use the web, domain search, phone directories, industry sources, federal trademark database, state trademark registries to make sure your proposed name is not being used by another nonprofit or business.
(3) Develop Your Strategic Plan and Devise a Budget
Translating your hopes and dreams into a specific plan of action will help you get beyond the idealistic vision stage. A strategic plan and mission statement will enable you to focus on what you want to hope to accomplish and how you intend to reach your goals. In addition, a well defined mission statement is crucial to obtain nonprofit status with the IRS. The government will look closely at your statement and business plan to make sure your organization meets eligibility requirements. A great resource for: How to Write a Mission Statement is the National Council of Nonprofits. ( http://www.councilofnonprofits.org)
A Budget is Not the Boogey Man!
Budgeting is the planning process of estimating the finances you will need to pursue and reach your mission and goals. Don’t let the budget boogey man intimidate you; a financial plan can be a great help. For example, try publishing your budget on your internet site and invite your core group, friends, family, and supporters to participate to help “author” the budget. A website is a great way to communicate your financial needs; it also provides motivation and momentum for your supporters to feel they are an important part of accomplishing your ministry mission. Getting folks involved in the budget strategizing process also gets them more excited about paying the bills!
(4) Set Up Your Board of Directors
One of the fundamental tasks of setting up your nonprofit is choosing a board of directors. Look for members who might share a passion and commitment to your ministry mission.
The ideal board member:
* should be willing to roll up his or her sleeves to help with the necessary work involved.
* have strong connections to their community
* be willing to help raise money
* have some experience writing grants
*possess fundamental business skills and have the necessary time available
(5) Decide on the legal structure of your ministry. Should you incorporate?
Although it is not necessary to incorporate to get 501(c)(3) status, a group that plans to seek federal tax-exempt status will likely benefit from the more formal corporate structure. The main reason most nonprofits incorporate is to protect those who work for the organization from personal liability. What legal structure you plan to eventually choose for your organization (LLC, C or S Type Corporation) will depend on many factors. It would be wise to take your business plan to an attorney and seek legal advice before you make a final decision in this matter.
Recommendation: Starting and Building a Nonprofit – A Practical Guide
If you intend to form a nonprofit marketplace ministry, an excellent detailed manual and resource is offered by Nolo. (www.nolo.com) Check out: Starting and Building a Nonprofit. A Practical Guide. The cost is around $29 and covers just about everything you will need to know to obtain 501(c)(3) status for your business/ministry in the marketplace.