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How to Start a Nonprofit
Should You Start a Nonprofit Organization?
Nonprofits are essential to our economy, civic society and quality of life.  Just like entrepreneurs in the business world, the nonprofit sector benefits from citizens who see a need and create an organization to address it.

However, just like with business, many nonprofits flounder and fail.  Starting a nonprofit organization is hard work.  Sustaining one is even harder. A good idea or a felt need is not enough to start a nonprofit.  Starting a nonprofit requires as much careful planning as starting a for-profit business and just as much skill to manage it.

The number of nonprofits in Idaho and nationally is growing rapidly.  More nonprofits mean more competition for money and volunteers.  Be sure you can answer the questions below before you begin to create a new nonprofit organization.

1.  Can you demonstrate the need for the organization with solid research?

2.  Have you done a thorough search for existing organizations that may be doing similar work and discussed your idea with them?
You will want their support as you proceed.

3.  Would it be better to collaborate with an existing organization with a complementary mission?  Perhaps you could convince them to start a new project to meet your purpose so you don’t have to create a new organization.  Find out why they have chosen not to do the work you propose if there is such a need.  There may be problems you haven’t considered.

4. Is your vision and mission clear to others?  Do they immediately understand what you want to do?  Can you define it in two or three sentences?

5.  What are your long-range goals and concrete, short-term objectives? Can these be easily stated?

6.  Can you define the outcome of your work – not the activities you will do but the result of your work.  Why is this important to achieve?

7.  Can you outline the steps the new organization will take to achieve the mission?

8.  Do you already have people committed to serve on a board of directors and to give their time and money?  Are these people who will lend credibility to the organization?   Do they have the skills necessary to lead a new organization?

9.  Have you identified likely sources of funds? Do NOT assume that funding will be easily forthcoming; for example, many foundations will only fund organizations that have been in existence for several years.  Don’t make the mistake of thinking that you can sustain the organization by writing grant proposals.  Most donations to nonprofits come from individual donors, not foundation grants. 

10.  Do you have a plan for soliciting donors or other fundraising strategies aside from getting grants?

11.  Do you have a group of volunteers with the skills to put these into place over time or the funds to hire professional staff?

Study the INDC Self-Assessment tool at www.idahononprofits.org to get an idea of all the components of a well-run organization. 
Reasons NOT to start a new nonprofit organization

  1. It is for a time-limited special project.
  2. You wish to support a specific needy individual.
  3. You think a lot of grant money is available.
  4. You have a service or product to sell below cost or to donate and want a tax deduction.
  5. You feel your current work is not meaningful.
  6. You have important knowledge or perspectives to share.
  7. You want to do things your own way, without “a bureaucracy” involved.
  8. You don’t want to pay business income taxes.
Forming a Nonprofit Organization in Idaho
The following checklist will help you understand some of the steps in forming a nonprofit organization in Idaho.  It is not comprehensive.  We recommend that you secure an attorney or accountant familiar with nonprofits to help you with some of the legal requirements.  

Idaho state laws governing nonprofits are in the Idaho Nonprofit Corporation Act (Title 30, Chapter 3 of Idaho Statutes). 
 
1. Determine the purpose of the organization.
Every organization should develop a succinct mission statement that describes in very few words its reason for existing. This can be developed by meeting with potential clients, constituents, board members and other interested parties.

2.  Determine the structure of the organization.
This stage should include determining the type of nonprofit organization that you will form.  Do you need or want to be tax-exempt or not?  If so, what type of tax-exemption?  Consult the IRS website at www.irs.gov/charities/index.html.  Do you want to be a membership organization or governed by a board of directors who elect their own successors?  

3. Choose your board of directors.
Your board will help you transform your ideas into reality by helping establish goals and fundraising strategies. What interests or constituencies should be on the board? 

4. Write bylaws.
Your bylaws will guide your organization's day to day operations. These should be drafted carefully and may require the assistance of an attorney experienced in nonprofit law to reflect the proper power relationships among those with an interest in the group and to make sure they are clearly written.

5. File Articles of Incorporation with the Idaho Secretary of State.
You can file with the Secretary of State's office as an unincorporated nonprofit (see www.idsos.state.id.us/corp/unaform.htm), but there are advantages to incorporating as a nonprofit (see www.idsos.state.id.us/corp/corpform.htm.)   You can also write the Idaho Secretary of State's Office at P.O. Box 83720, Boise ID 83720-0080.

6. Develop a strategic plan and budget, including fundraising plans.
A strategic plan will help you outline the steps needed to fulfill your organization's goals, determine your staff needs, and establish operational priorities for the upcoming year and beyond. The strategic plan should determine your budget priorities, identify potential donors, establish bookkeeping practices, and delineate fundraising activities (e.g., mailings, dinner-dance, silent auction, etc.).

7. Establish a system for accounting and record keeping.
A protocol should be established for keeping all your organization's official records (such as board meeting minutes and financial reports) and records should be preserved for the life of the organization. Establishing written, board-approved, financial and internal management policies and procedures is essential for the organization's success.

8. Obtain a Taxpayer Identification Number from the IRS.
You'll need this number to open a bank account, file informational returns with the IRS and withhold your employees' income tax. You can obtain a Taxpayer Identification Number (TIN) also called an Employer Identification Number (EIN) by contacting the IRS at 1-800-829-FORM or going to their website by clicking here. 
 
9. Request recognition of tax-exempt status from the IRS.
Without a "determination letter" from the IRS, donors who want an income tax deduction may not make gifts to your charitable organization. Nonprofit corporations that are charities and meet the definitions in IRC §501 (c)(3) may request recognition of their tax-exempt status. To receive §501 (c)(3) tax-exempt status from the IRS, you must fill out an IRS 1023 form and attach your proposed budget, Articles of Incorporation (certified), and bylaws (a true copy). Resumes of your board members are helpful as well. This application should be filed within the first 15 months of your organization's existence. Contact the IRS at 1-800-829-FORM or www.irs.gov to receive a copy of this form. There are other tax-exempt nonprofits that are not charities, such as Chambers of Commerce, etc. Different IRS forms are required for these.

10.  Register with your new business with the State Tax Commission if you will have employees or retail merchandise.
You must register your new business organization with the Idaho State Tax Commission if you have employees or if you will be selling retail.  You can register online at www.tax.idaho.gov.  By registering, you will be sent information regarding workers’ compensation, unemployment insurance and state income tax withholding.

11. Be sure to withhold employment taxes for the IRS.  
Employers are required to withhold their employees' wage income and FICA taxes and submit these to the IRS regularly. Failure to do so can result in significant fines and potential personal liability for the responsible officers. Contact the IRS at 1-800-829-3676 or www.irs.gov to receive appropriate forms.
 
12.  Be sure to file your IRS Form 990 annually if your revenues exceed $25,000.  
You must file the IRS Form 990 “Return of Organization Exempt From Income Tax” if your organization’s revenues exceed $25,000 and you are not a religious institute (i.e. church.)

13. Establish personnel policies.
Before hiring employees, the personnel committee from the board of directors should develop written personnel policies.   They can be expanded as the organization develops but should cover basic operational procedures.

14. Obtain liability insurance for your organization.   
Like the business community, nonprofits are exposed to legal risks.  While Idaho law does protect members of boards of directors from liability in most cases, good practice suggests that nonprofits purchase directors and officers and other liability insurance.  Contact an insurance representative or your attorney for more information on general liability insurance, directors' and officers' liability insurance, and general professional liability coverage.

15. Consider obtaining a nonprofit bulk mail permit from the U.S. Post Office.
If your organization will be doing any large mailings, you may want to obtain an imprint authorization for bulk mailing.   The permit provides a discount on the cost of mailing if you are sending at least 200 pieces and the mailing is sorted and processed within the regulations of the Postal Service.  There is a one-time imprint fee and the permits must be renewed annually.   Certain nonprofit organizations may qualify for reduced rates. For more information on bulk mailing contact your local post office.

Some of this material is from the Utah Nonprofit Association and was reprinted with their permission.
Resources
Idaho Nonprofit Corporation Act
State laws for nonprofit corporations, Title 30, Chapter 3. These apply to most nonprofits.

Idaho Uniform Unincorporated Nonprofit Association Act
State laws for “nonprofit associations" meaning an unincorporated organization consisting of two or more members joined by mutual consent for a common, nonprofit purpose.

Idaho Secretary of State
Idaho requires that nonprofit organizations register with the Office of the Secretary of State and file Articles of Incorporation. Registration forms are online.  Note:  The Secretary of State offices are located at  450 N. 4th Street at the State Library Building at 4th and State streets during the Capitol renovation.

Internal Revenue Service
Tax information for all types of charities and nonprofits, including Form 990: Return of Organization Exempt from Income Tax, and Form 1023, Application for Recognition of Exemption.

Applying for Tax Exempt Status - instructions
Also known as IRS Publication 557, this 63-page document describes the application process in detail.

Sample Articles, Bylaws, Form 1023, and more
From the website of Alliance for Justice, these samples are excellent!

Help filling out your IRS Form 1023 application
This website, posted as a public service by Sandy Deja, a tax consultant with over 32 years experience with IRS Form 1023, is designed to help new non-profit organizations complete the Application for Exempt Status Under Section 501(c)(3) of the Internal Revenue Code.

Establishing a Nonprofit Organization
Tutorial describing 12 tasks to accomplish as part of the process of establishing a nonprofit organization.

How to Start Nonprofit
Templates and samples from the Minnesota Council of Nonprofits.

How to Start a Nonprofit
FAQs from the Connect Nonprofit Information Network.

Funding nonprofit start ups - from the Funders point of view
 Commissioned by the Packard Foundation and published by Grantmakers for Effective Organizations, this tool was designed for use by funders assessing a grant application from a start-up nonprofit. Includes sample interview questions and worksheets.

Handbook for Idaho
Nonprofit Corporations

We suggest you review this handbook, published by the Idaho Law Foundation and created by the Business and Corporate Law Section of the Idaho State Bar, which explains the laws. 

Idaho Law Foundation
P.O. Box 895
Boise, ID 83701
Phone: 208.334.4500
Fax: 208.334.4515.

Often your local public library has helpful information.  The best collection of information on starting and running a nonprofit is at the Funding Information Center at the Boise Public Library .  There are similar collections at the Caldwell and Pocatello libraries.