Once a nonprofit organization identifies a clear purpose, decides on a legal name, and establishes a Board of Directors, it is ready to start the process of officially forming. While these three steps are crucial, they alone are not enough to legally operate a nonprofit business. In every state, asking for donations before following the proper steps to start a nonprofit can result in fines, penalties, and taxes. Not to mention, anything donated to an organization that is not legally established is not tax-deductible.
Step 1 in every nonprofit organization’s startup journey is what we at BryteBridge call the initial documents. These documents help set the organization up for legal operation in the state and prepare the nonprofit to file for federal tax-exempt status (which we discuss in the next step).
While the process to start and operate a nonprofit organization is different in every state, the initial documents are uniform. They are:
- Incorporation: Establish a legal corporation in the state of operation.
- Employer Identification Number (EIN): Create a federal identification number.
- Bylaws: Develop a set of governing practices.
- Conflict of Interest Policy: Develop rules to prevent potential profitability conflicts.
The initial documents create a corporation capable of legally operating in the state. These documents provide the necessary documentation to open a bank account, rent an office, and begin operations. Not to mention, anything donated to an organization before it legally forms is not tax-deductible.
BryteBridge provides multiple options for nonprofit startup packages that include all or part of the initial documentation, depending on budget and steps the organization chooses to undertake independently.