Nonprofit Organization Formation Seminar #1
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This document is a guide to forming a nonprofit organization, detailing the importance of nonprofit structure, tax benefits, and the required legal steps for establishment in North Carolina. It includes information on the roles of a board of directors and the significance of nonprofit services in community engagement. The seminar aims to educate attendees on nonprofit formation processes and best practices.
Nonprofit Organization Formation Seminar #1
- 1. Seminar 1 – Nonprofit Organization Formation Central Library, Greensboro Public Library Greensboro, NC March 3, 2020© STC Consulting, LLC 2019 www.stcconsultingllc.org NONPROFIT DEVELOPMENT SERIES
- 2. WELCOME Before we get started… 2 • Do not record the class using your technology! • Slideshare link: • Silence your phones • Limit texting/outside conversations during the presentation • Be respectful to the presenter & attendees © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 3. ABOUT STC CONSULTING, LLC Nonprofit Consulting Services 3 • We are a team of business consultants with expertise in: o Nonprofit Startup o Nonprofit Formation o Board Training o Technology Support • Services are delivered in person and/or using technology: o individualized coaching/mentoring o group trainings o workshops o public speaking o seminars © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 4. YOUR PRESENTER Dr. Kathryn Addo, B.S, J.D., M.Div., Th.M. 4 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Over 23 years of training/nonprofit experience as an Educator, Community Advocate, Nonprofit Founder & Minister • Master of Theology (Missions), Union Presbyterian Seminary • Master of Divinity (Magna Cum Laude) from the Samuel DeWitt Proctor School of Theology, Virginia Union University • Juris Doctorate, North Carolina Central University School of Law • Licensed Community Development and Outreach minister • Certified John C. Maxwell Coach, Teacher, Trainer, & Speaker
- 5. SERVING OUR COMMUNITY “Community Inspirations with Dr. K” 5 © STC Consulting, LLC 2020 www.stcconsultingllc.org “Information that inspires & music that soothes the soul! The weekly 30-minute program promotes philanthropy & nonprofits as forms of community engagement & empowerment. FRIDAYS @ 10:00 AM www.WDRBmedia.com www.iHeart.com 24/7 on www.soundcloud.com
- 6. NONPROFIT EDUCATION GTCC Nonprofit Development Series – March 2020 6 © STC Consulting, LLC 2020 www.stcconsultingllc.org 3/3/20 Nonprofit Organization Formation 3/10/20 Developing Nonprofit Programs 3/17/20 Improving Nonprofit Impact Through Technology 3/24/10 Nonprofit Financial Basics The Nonprofit Development Series is sponsored in partnership with the Small Business Center at GTCC and the Greensboro Public Library.
- 7. NONPROFIT COUNSELING Small Business Center at GTCC 7 © STC Consulting, LLC 2020 www.stcconsultingllc.org Dr. Addo is an Advisor at the Small Business Center at GTCC located in The Nussbaum Center Clients receive 1 free hour of confidential counsel focused on establishing and developing a small nonprofit organization Consultations are available on weekdays starting at 10:00 am & ending at 3:00 pm Registration is required https://bit.ly/2C3yOu6 (336) 334-4822, ext. 62001
- 8. LET’S GET STARTED! You will learn… 8 © STC Consulting, LLC 2020 www.stcconsultingllc.org • What is a Nonprofit Organization? • Why Start a Nonprofit Organization? • The Nonprofit Organization Formation Process • Forming the Board of Directors Disclaimer: This presentation is provided for educational and informational purposes only and should not be construed as legal advice or as an offer to perform legal services on any subject matter.
- 9. WHAT DO YOU THINK? TRUE OR FALSE? 9 © STC Consulting, LLC 2020 www.stcconsultingllc.org 1. There are two types of 501(c)(3) charitable organizations. T F 2. A nonprofit organization is a corporate business entity. T F 3. Nonprofit organizations can solicit public funds without registering with the State of NC. T F 4. Nonprofit organizations are required to limit their revenue. T F 5. All nonprofit organization records are public records. T F
- 10. PHILANTHROPY = SELFLESS GIVING TO OTHERS Two Types of 501 (c)(3) Charitable Organizations 10 © STC Consulting, LLC 2020 www.stcconsultingllc.org Public Charity – provides “hands on” services & programs to the public Private Foundation – financially supports public charity services/programs
- 11. AMERICAN PHILANTHROPY The Early Settlers 11 © STC Consulting, LLC 2020 www.stcconsultingllc.org • The early settlers formed charitable and other “voluntary” associations, such as hospitals, fire departments, and orphanages, to confront a wide variety of issues and ills of the era. • The earliest statute giving a charitable tax-exemption was in 1894. • Voluntary associations comprised two distinct types of organizations—public-serving and member-serving. Early charitable organizations included schools, churches, and other voluntary organizations designed to provide services to the public. • By the end of the 19th century, private philanthropy, as typified by the modern private foundation, had joined voluntary associations as an important component of the public- serving charitable sector of the United States. Source: The History of the Tax-Exempt Sector: A Statistics of Income Perspective https://www.irs.gov/pub/irs-soi/tehistory.pdf
- 12. AMERICAN PHILANTHROPY, CONT’D People of Color 12 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Historically, charitable giving among people of color (African-American, Latino, Asian- American/Pacific Islander, American Indian) has been a way of life. Their understanding of collective responsibility initially created informal systems of community caring to combat the lack of access caused by slavery and segregation. • After Reconstruction (late 1800s-early 1900s) & 1920’s, the establishment of Black Wall Street communities in Durham, NC, Richmond, VA & Tulsa, OK formalized philanthropic endeavors in Black communities. • The era immediately following the Civil Rights Movement gave rise to the professionalization of Black charitable giving through nonprofits engaged in social change, development, and human services. Sources: http://financialjuneteenth.com/yes-there-was-more-than-one-black-wall-street-tell-these-stories-to-your-children/, https://www.insidephilanthropy.com/home/2016/9/14/a-rising-force-on-the-state-of-black- philanthropy.html, https://www.learningtogive.org/resources/latino-donor-motivations-preferences-interests
- 13. WHAT IS A NONPROFIT ORGANIZATION? Characteristics of a Nonprofit 13 © STC Consulting, LLC 2020 www.stcconsultingllc.org • A Nonprofit Organization is a corporate entity formed for the purpose of serving a public benefit other than the accumulation of profits for owners/investors • Nonprofit organizations may be tax-exempt on the State and Federal levels (IRS) • Generally, established as Charities, Foundations, Social Welfare or Advocacy Organizations, Professional/Trade Associations or Religious Organizations • A nonprofit organization may be classified as a public charity or a private foundation
- 14. WHY START A NONPROFIT ORGANIZATION? Benefit 1: Tax Exemption & Donor Deduction Incentive 14 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Organizations that qualify as public charities under Internal Revenue Code 501(c)(3) are eligible for federal exemption from payment of corporate income tax • Once exempt from this tax, the nonprofit is usually exempt from similar state and local taxes • If an organization has obtained 501(c)(3) tax exempt status, a percentage of an individual's or company’s charitable contributions to this entity are tax- deductible
- 15. WHY START A NONPROFIT ORGANIZATION? Benefit 2: Eligibility for Public & Private Grants 15 • Grants are often made available to nonprofits to support their programs and services. • Public grants are generally awarded to public charities from local, state, or federal governments. • Private foundations are generally financially supported by one or a small handful of sources — an individual, a family, or a corporation • Many government agencies and foundations limit their grants to public charities with the 501(c)(3) designation. © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 16. WHY START A NONPROFIT ORGANIZATION? Benefit 3: Formal Structure 16 • Nonprofit organizations must have State approval to operate • A nonprofit is a legal entity in its own right and is separate from its founder(s) • Incorporation puts the nonprofit's mission and structure above the personal interests of individuals associated with it • All documents filed with state and local entities are public record • Gaining state and IRS approval for the nonprofit informs potential donors that the organization is legitimate © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 17. WHY START A NONPROFIT ORGANIZATION? Benefit 4: Limited Liability 17 • Generally, creditors and courts are limited to the assets of the NPO • The founders, directors, members, and employees are not personally liable for the nonprofit’s debts • Exceptions: A person cannot use the corporation to shield illegal or irresponsible acts on his/her part • Directors have a fiduciary responsibility & may be held liable for not acting in the nonprofit's best interests © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 18. LET’S TAKE A BREAK! Please return promptly! 18 © STC Consulting, LLC 2020 www.stcconsultingllc.org
- 19. NC NONPROFIT FORMATION PROCESS State & Federal Requirements 19 © STC Consulting, LLC 2020 www.stcconsultingllc.org 1 Establish the Nonprofit Corporation (State) 2 Secure the 501(c)(3) tax-exempt status (Federal) 3 Charitable Solicitation License Registration (State)
- 20. NC STATE FORMATION Step 1: Establish the Nonprofit Corporation (State) 20 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Nonprofit organizations are legal entities created by the State • North Carolina requires an application process that allows the NPO to operate • Required before filing the Federal 501(c)(3) application • NC allows nonprofit corporations to be established for “charitable” purposes • Articles of Incorporation filing with the NC Secretary of State – Filing fee $60
- 21. IRS FEDERAL FORMATION Step 2: Secure the 501(c)(3) Status (Federal) 21 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Nonprofits that are “charitable” in nature and desire to be tax-exempt must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3) • IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code -- typically used by larger organizations that anticipate yearly revenue of $50,000+ in the first 3 years of operation. Filing fee: $600 • IRS Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code -- online application that may be used by small organizations who meet the strict criteria set out by the IRS. Filing fee: $275 Source: https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501-c-3-organizations
- 22. NC FUNDRAISING COMPLIANCE Step 3: Charitable Solicitations Registration (State) 22 © STC Consulting, LLC 2020 www.stcconsultingllc.org • Any nonprofit corporation that solicits charitable contributions is required to obtain a license from the N.C. Department of the Secretary of State Charitable Solicitation Licensing Section annually. • The licensure requirement also applies to professional fundraising counsel and professional solicitors. • The application for licensing or exemption must be filed every year. • Organizations that meet special requirements may be eligible for an exemption. Source: https://www.sosnc.gov/csl/
- 23. THE BOARD OF DIRECTORS Leadership Makes the Difference 23 © STC Consulting, LLC 2020 www.stcconsultingllc.org • The Board of Directors has the legal responsibility to manage and direct the affairs of the nonprofit organization • The selection of highly qualified board members is critical to ensure proper administrative and financial management • Bylaws are required that state how the nonprofit organization will operate. Generally, they include provisions for the Board of Directors
- 24. BOARD RESPONSIBILITIES Governance with Care, Loyalty & Obedience 24 © STC Consulting, LLC 2020 www.stcconsultingllc.org 1. Determine mission and purpose 2. Select the chief executive officer (ED) 3. Support and evaluate the chief executive officer (ED) 4. Ensure effective planning 5. Monitor and strengthen programs & services 6. Secure adequate financial resources 7. Protect assets & provide proper financial oversight 8. Build a competent board 9. Maintain legal & ethical integrity 10. Enhance the organization’s public standing
- 25. Contact Us! STC Consulting, LLC Greensboro, NC 27410 (336) 252-4891 (704) 315-8459 www.stcconsultingllc.org Follow Us! Facebook: STCConsultingLLC Instagram: stcconsultingllc LinkedIn: stcconsultingllc Twitter: stconsultingllc 25