Establishing a Nonprofit Organization

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If you’re not interested in for-profit work and you want to start an entity that can help people, nonprofits are for you.

There are three categories of nonprofits: unincorporated associations, charitable trusts, and corporations. For unincorporated associations, less government reporting is required. But they may run into the issue of not being recognized as tax-exempt or not being able to receive grants from most foundations or corporations. Charitable trusts may be recognized as tax-exempt, but they don’t provide the protection from liability that the directors of not-for-profit corporations enjoy. A nonprofit corporation is the most likely to win major financial support from major donor organizations, which helps ensure its longevity.

For nonprofits, you don’t have to worry about ownership structure and equity. Also, nonprofits follow a somewhat atypical management structure. Most nonprofits have a president, secretary, and treasurer. Some have other positions like vice president or assistant secretary, depending on their individual needs and state law requirements.

Nonprofits can become a corporation by drafting legal incorporation documents and filing them with a state agency office or state government. The incorporation of a nonprofit legitimizes the organization to the public and potential benefactors. The office of the secretary of state or the attorney general usually handles this process, but in some states approval must first come from a state agency regulating nonprofits. State incorporation of a nonprofit can take a several weeks, depending on the complexity of the review process. 

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