Getting Your 501 (c) 3

Starting an African Community Based Organization in Your Community

Starting an African Community-Based Organization (ACBO) involves more than applying for nonprofit status with the IRS. The Foundation Center – an expert on nonprofit development – has identified 12 essential steps for starting your own organization, which we have adapted for use by African community leaders. These steps are:

• File the certificate of incorporation
• Select individuals to serve on the board of directors
• Develop vision and mission statements
• Establish bylaws and board policies
• Obtain an employer identification number (EIN)
• Open a bank account and establish check signing procedures
• File for federal tax exemption
• Follow state and local nonprofit regulations
• Find office space and obtain office equipment
• Recruit staff and prepare a personnel manual
• Establish a payroll system and procure necessary insurance coverage
• Develop an overall fundraising plan

1. File a certificate of incorporation

To learn of particular requirements related to your state, check out the Internal Revenue Service’s (IRS) links to state government websites.

Sample Articles of Incorporation can be found here.

2. Develop your Board of Directors

Board members 1) establish strategic direction, 2) cultivate and ensure resources, and 3) provide organizational oversight and accountability (for programs, finances, and operations). Consider the following when developing a Board.

• Duty: makes prudent decisions; respects laws and the rules of the organization; keeps the interests of the organization above personal interests
• Cultivates resources: board members should be expected to bring resources to the organization, by giving themselves or soliciting others to give.
• Time, Talent, Treasure: Personal wealth is a helpful trait of any board member, but it is not essential. Some board members are professionals with valuable work skills that your organization needs, such as accounting, real estate, or legal expertise.
• Diversify: by age, gender, ethnicity, professional and personal experiences, etc.

3. Develop a Vision and Mission Statement

Vision and Mission statements guide all aspects of a nonprofit organization and define the essence of why that organization exists. The vision is the overall goal of your program, while the mission is the plan of how you will achieve the goal for a particular group’s benefit.

To determine your organization’s vision, ask yourself the following questions:

• What are the underlying values of the organization?
• What do we hope to accomplish through our work?

To determine your organization’s mission, consider the following questions:

• How will you work toward this vision?
• Who is your project’s beneficiary?

Consider this sample vision and mission statement from Michael Seltzer’s Securing Your Organization’s Future:

“Biloxi AIDS Service Organization”

“Vision: Our ultimate goal is a world without HIV/AIDS.”

“Mission: The mission of the Biloxi AIDS Service Organization is to help people both infected and affected by HIV/AIDS to secure adequate nutritional and health support to enhance their lives.”

 

4. Establish Bylaws and Board Policies

Bylaws formally establish how an organization will be managed and operated. Bylaws describe key characteristics of an organization’s structure, staffing responsibilities, and most important functional processes, such as how contracts and finances will be internally handled.

Board policies govern the roles and responsibilities of the Board of Directors, including the composition of the Board, its meeting procedures, the resolution of conflicts between its members or between the Board and organization staff, among other topics.

For sample Bylaws, please click here. The sample should be used for demonstration purposes only. Bylaws vary from one organization to another depending on the purpose, structure, and processes involved in the organization.

5. Obtain an Employer Identification Number (EIN)

Every organization must have an Employer Identification Number to open a bank account and to annually report financial statements to the IRS. Obtaining the EIN from the IRS is easy and takes approximately 30 days to acquire. The following two forms will assist you with this process. The SS-4 is the application, and the Publication 1635 will help you complete this form.

SS-4
Publication 1635

6. Open a bank account and establish check signing procedures

A formal bank account is necessary to keep your organization’s financial resources in a safe location. Signing of checks and review of bank statements are important processes which should be formalized in writing and respected during daily operations. Formal processes clarify which organizational staff are responsible and accountable for financial decision-making and oversight.

CARI highly recommends that any new organizational leader either receive formal training in non-profit financial management techniques (e.g. from a local community college or university) and/or find an experienced finance professional to volunteer time with your organization. Volunteers may be found through local accounting firms or through your local chapter of the United Way.

7. File for Federal Tax Exemption

This is the step commonly known as “filing for 501c3 status.” By completing and submitting Form 1023 to the IRS, you gain federal tax exempt status as a charitable organization. With tax exempt status, your organization will qualify for certain grants from government and foundations, which require applicants to have this status. The IRS review and approval process generally takes between three and six months.

CARI highly recommends that your organization use an attorney to complete the lengthy and complicated Form 1023. Attorneys with a personal interest in your organization or the people whom your organization serves may consider volunteering their expertise to this process.

IRS Package 1023
IRS Guide to Completing the 1023 Form (Publication 557)

8. Follow State and Local Nonprofit Regulations

After receiving federal tax exemption, your organization may wish to apply for your state and local government tax exemption. To do so, you should contact your state’s Department of Taxation or similar department for forms, application procedures, and regulations governing such status.

9. Find Office Space and Obtain Necessary Equipment

Finding office space involves more than determining a location. Your organization must negotiate a lease, assess the cost of utilities, renovations, and handicap and safety compliance. CARI highly recommends that your organization utilize a Board member or volunteer who is an experienced real estate professional or commercial property owner for successfully completing this step.

CARI also recommends that your organization make an inventory of office equipment and materials that 1) you currently own/lease and 2) those that you need to obtain. Condition of equipment and the cost of maintenance and use are important factors to consider when obtaining office equipment.

10. Recruit Staff and Prepare a Personnel Manual

Human resources management is fundamental to the success and sustainability of your new organization. Staff are the individuals who engage in the operations of your organization – both its administration and its provision of programs. Accordingly, each position should have a well-defined listing of job responsibilities, and the staff members you hire for these positions should have the skills, abilities, and attitude to fulfill these job duties.

A simple personnel manual will help you explain to staff any health benefits, compliance with federal and state government hiring and payment regulations (e.g. workers’ compensation), and leave policies.

How to establish a personnel manual, by Carter McNamara, PhD

11. Establish a Payroll System and Procure Necessary Insurance Coverage

In order to pay your staff, it is necessary to arrange a payroll system with a payroll services company. Use of payroll services companies allows organizations to outsource payroll tasks to financial professionals. Payroll services companies arrange for the timely issuing of paychecks to employees, deduct related taxes and compensation from these checks, and help your organization guard against errors in payroll accounting systems.

Insurance is important to cover liabilities your organization may incur from physical or professional damages or malpractice. Examples of common types of coverage include (but are not limited to): workers’ compensation insurance, long- and short-term disability insurance, property insurance, and provider liability insurance. Depending on the types of programs and services your organization may provide, your state will likely require that your organization maintain certain current insurance coverages. For more information, contact your state’s Department of Labor.

12. Develop an Overall Fundraising Plan

Funding allows organizations to provide consistently high quality programming, and stability of funding is paramount. Funding stability is achieved by attracting funds from diverse sources. Most organizations acquire funding from four sources: government grants; individual donors; private foundations and corporations; and earned income projects (e.g. fee-for-service interpreting project). Without diversity of funding, your organization risks loosing large portions of its programs and staff when a single grant expires or individual donor shifts giving priorities.

Nonprofits spend considerable time and effort writing grants to federal government, state government, private foundations, among others. But these organizations seldom conceive their grant writing efforts as part of a comprehensive fundraising plan. Just as organizations should diversify their sources of funding, organizations’ fundraising plans should employ multiple funding solicitation methods beyond traditional grant writing. Public education speeches, coverage in the media, organizational websites, newsletters, cultural celebration events, partner phone calls, and even writing program reports are methods for attracting new funds to your organization.

The Foundation Center offers the following online information about researching and developing multiple funding sources.

The Foundation Center and cooperating libraries across the country maintain current information about foundations and grant opportunities by program interest and award amount. Find the Cooperating Collection nearest you.