Do You REALLY Need 501(c)(3) Status?

I often run into many people who are typically frantic about obtaining 501(c)(3) status for their organization. Actually, sometimes it's not even an organization, but perhaps a mere thought or "good" idea. Here's a hypothetical scenario:

Susie has a passion for helping the homeless and has been influential in organizing assistance and mobilizing people in her community... Now Susie wants to file for 501(c)(3) status and continue her work through her own nonprofit organization.

While I appreciate Susie's efforts and zeal, these are not automatic indicators that she needs to file for 501(c)(3) status. Starting a nonprofit organization may seem like a simple process, but there is a lot of work that must be done before, during, and after you've officially obtained your tax-exempt status. Desire and zeal are good starting points, but that's about it. And quite frankly neither should be used as the sole litmus test for establishing a nonprofit organization. When it comes to obtaining 501(c)(3) status I recommend first examining the 3 M's -- Mission, Money, & Manpower.

1. Mission - Nonprofits are mission-centric. If you're planning to start a nonprofit because you think you'll get tons of free money or donations, then stop now. PLEASEEE! You don't go into the nonprofit business for the money; you go in for the mission. What problem are you seeking to address? How do you want to improve the world around you? How can you serve your community and meet the needs of its members? Does your mission require establishing a new nonprofit, or can you collaborate with an already established nonprofit? The bottom line is that your mission will be the primary driving force behind your organization, so make sure that you have solidly identified your objective before going any further.

2. Money - I'd be foolish to omit the importance of money when it comes to nonprofit work. No, money is not THE most important element, but you need money to power your mission. Yes, obtaining 501(c)(3) status will help you generate more funding in the future, but you need to have money in the bank before you get started. Specifically, the is an initial fee to file 501(c)(3) status. This amount varies from state to state, but generally, you can expect to spend at least a few hundred dollars. Additionally, it is wise to start your organization by retaining an accountant and an attorney (if possible). Accountants and attorneys can help you smoothly navigate through the difficult tax and legal webs. Also, not only can an accountant and attorney help you get started on the right path, but they can help you remain on the right path by ensuring that your organization maintains compliance to keep 501(c)(3) status.

3. Manpower - A successful and thriving nonprofit does not start and end with one person. It's always a collaborative effort. In fact, having a Board of Directors is a requirement that must be fulfilled before filing 501(c)(3) status. Just like you need money to power your mission, you also need people. And to be clear, you don't just need "bodies in a seat". You need a variety of people who support your mission and can bring a wide range of skill-sets to the table for the betterment of the organization on the whole. In some cases, a lack in money can be made up through manpower. For example, perhaps you don't have the funds to retain an accountant or attorney, but maybe you can secure two board members who are skilled in these areas and are willing to volunteer their services for a period of time. Even after you've gotten your organization off the ground, it's good to have a solid team of people who are vested in the mission of your organization; this ensures that your mission will continue for years to come.

All in all, my job as a consultant is to position my clients for success, and sometimes that means telling them "not yet". It's better to start on a solid foundation so that your organization can thrive for many years, as opposed to starting on a shaky foundation and finding your organization defunct after a year or so. My goal is to help organizations build capacity so that they can effectively run with minimal assistance from me in the future. So, before you decide to take the leap into the nonprofit world, ask yourself, "Am I willing to do what it takes to ensure that my nonprofit org thrives and remains in good standing? Am I in this for the long haul? Am I committed to doing the hard work?" If so, let's chat! Book your free consultation with me today!