Launching your nonprofit

Transcription

1 Launching your nonprofit

2 What we ll cover What is a nonprofit What difference does that make How to establish nonprofit legal identities with government agencies Maintaining your legal identity with integrity and effectiveness Questions (also answered by panel later today)

3 What is a nonprofit? Generally, a nonprofit is a group that... intends to do good does business that generates benefit for others does not generate profit or personal gain for members

4 Specifically, a nonprofit can be... What is a nonprofit? nonprofit corporation, registered with the MN Secretary of State 501c3 tax-exempt public charity, registered with the IRS Nonprofits and 501c3s can register for additional identities... MN public charity, registered with the MN Attorney General Sales tax exempt, registered with the MN Department of Revenue

5 Specific types of nonprofits... Nonprofit corporation Is registered with the MN Secretary of State Members have incorporated into one body, one legal identity. They no longer have individual liability. Members have agreed upon their nonprofit purpose and structure in their Articles of Incorporation. Incorporation requires a board of directors who will be held by state law to a duty of care for their corporation. Incorporation itself does not exempt a nonprofit from paying state or federal income tax or state sales tax. Bylaws spell out how the corporation will operate. Incorporation itself does not allow donations to the group to be tax-deductible.

6 Specific types of nonprofits c3 Is a tax-exempt public charity, registered with the IRS Exempt from paying both state and federal income tax Donations are tax deductible Makes your organization eligible to apply for sales tax exemption Application process requires financial information and bylaws Corporate contributors or grant-givers often require proof of 501c3 Offers credibility because living up to its requirements requires sound management

7 Specific types of nonprofits... Sales tax exempt Exemptions are granted by MN Department of Revenue Must be 501c3 to apply Can be exempt from your nonprofit paying states sales tax (with limitations) Can be exempt from your nonprofit collecting state sales tax (with limitations) Application form available online on the MN Department of Revenue website

8 Specific types of nonprofits... Minnesota public charity An organization that solicits or intends to solicit contributions from Minnesota residents in excess of $25,000 is required to register with the Charities Divisions of the Attorney General s Office. Some donors use the list of MN public charities to make their funding decisions Being on the list strengthens credibility A yearly report is required All information is available online on the Attorney General s website

9 Specific types of nonprofits... Foundations Do not raise funds from the public Receive funds from a private source (person or corporation) Subject to different government regulations

10 Fun fact: what s in a name Groups with association or foundation in their names often are not associations or foundations! An example is the Anoka-Hennepin Educational Foundation, which is a 501c3 tax exempt public charity.

11 Why should we care about our nonprofit legal identity? Any time groups raise money in the U.S. it s taxable unless the group is exempted, or the annual amount raised is less than $5,000. Failure to follow the law can result in fines or jail time. Incorporation protects individual members from liability. PTOs and boosters are autonomous from the school district. There is no umbrella that provides legal identity or protection. Applying for nonprofit legal identity creates momentum and promotes unity. Complying with requirements of nonprofit legal identity results in focus on mission, strengthened finance, and sound organizational management.

12 Search online for your status What if we don t know our legal identity? 1/2 Nonprofit corporation Create an online account on the SOS website (it s easy). Then search for your organization s incorporation status and history. 501c3 Type SelectCheck in the search box on IRS website Minnesota public charity Search for Charities under the Charities menu on home page

13 What if we don t know our legal identity? 2/2 Check with Parent Involvement to see if they have any history on file.

14 Choose a name How do we incorporate as a nonprofit? 1/3 Check for name availability and reserve your booster club name with the Minnesota Secretary of State Office Enlist & Elect a board of directors At minimum you will need to have a President, Treasurer, & Secretary. It is also recommended to have a Vice President and chairs for your various activity committees. Notify the school administration Please provide the principal or athletic director at your school with your new booster club information.

15 How do we incorporate as a nonprofit? 2/3 Obtain a Federal Tax ID Organizations must be incorporated before applying for a Federal ID #(EIN). Your tax year will begin at the time your EIN is assigned. When opening bank accounts you will likely be asked to provide your EIN. The person applying for the EIN may be asked for a personal SSN. This is only to establish that you are a bona fide person applying for your organization. The SSN is not used after that. Complete your Articles of Incorporation The articles establish the existence of your new not-for profit organization, your purpose and your structure. The Minnesota Council of Nonprofits website has templates for creating your Articles of Incorporation. If you choose to become a 501c3, at any time, this is the template that is needed.

16 How do we incorporate as a nonprofit? 3/3 Develop your Bylaws How your organization will run on a day to day basis is defined in the bylaws. The roles of the board members are explained and the rules of how the organization will operate. File Articles of Incorporation This can be done online with the Minnesota Secretary of State. There is a fee of $70.

17 How do we become 501c3? 1/2 Go to irs.gov and enter 1023ez in the search box Read the Instructions for Form 1023-EZ and complete its Eligibility Worksheet found at the end of the instructions. (If you are not eligible to file Form 1023-EZ, you can still file Form 1023.) If eligible to file Form 1023-EZ, register for an account on Pay.gov. Enter 1023-EZ in the search box. Complete the 3-page form.

18 How do we become 501c3? 2/2 Fun update Beginning July 1, 2016, Revenue Procedure reduced the user fee from $400 to $275. The new fee replaces the amount listed in the instructions.

19 How do we become a Minnesota public charity? Required if your gross receipts are over $25,000 annually Register online with the State of Minnesota Attorney General to be recognized as a registered charity. There is a $25 filing fee.

20 How do we become exempt from paying state sales tax? Your group must receive authorization of sales tax exemption from the Minnesota Department of Revenue Read through the fact sheet ST16 on the Department of Revenue website for details Parent-teacher associations and booster clubs must provide copies of their signed articles of incorporation and bylaws and letters from the principals of the schools indicating the organizations affiliation with the schools. Booster clubs must provide additional 501c3 documentation. Once authorized you will use form ST3 when making purchases.

21 How do we become exempt from collecting state sales tax? Read through ST16 (starting at page 4) from the Department of Revenue website In general, all nonprofits that have 24 days or less of fundraising events in a year qualify for this exemption, but important details are spelled out in ST16.

22 Operating legally and effectively your legal responsibility Minnesota law stipulates that officers and directors are fiduciaries of the organization they are in a position of trust. Board members have duty to act in good faith, with care, loyalty, obedience, and honesty in fact, and in the best interests of the organization. Examples

23 Be transparent Operating legally and effectively Exercise good faith, care, loyalty, obedience, honesty in fact, and act in organization s best interests In decision making identify the process used to make decisions and who is involved in the process. Document. In finance widely share financial documents and information, revealing the entire fiscal picture. In potential conflicts of interest if there is an apparent conflict of interest on the board it must be acknowledged by the board, discussed, dealt with and documented. Create a conflict of interest policy that can be used in such situations.

24 Operating legally and effectively Exercise good faith, care, loyalty, obedience, honesty in fact, and act in organization s best interests Your duty of care All officers are responsible for sound finance, not just the treasurer All officers are responsible for focusing the organization s finance and operations on its mission All officers are responsible for seeing that annual processes regarding legal status are completed

25 Operating legally and effectivelycomplete annual renewals Nonprofit corporation Complete the free online renewal of your organization on SOS website If renewal lapses for 3 years the corporation is automatically dissolved 501c3 Complete the annual 990 tax return Organizations with gross income of less than $50,000 use a very simple online form, the 990N. Online filing moved to the IRS website in The site will guide you through onetime registration for your organization and then lead you to the 990N. Organizations making more $50,000 but less than $200,000 use the 990 EZ. If the report is not filed for 3 years 501c3 status is automatically revoked Minnesota Charity File Annual Report with MN Attorney General as described on the website

26 Operating legally and effectively courtesy communications Boosters, prior to a sport or activity s season, the school/athletic director would appreciate the names and contact information of your board members PTOs, prior to a school year, the principal and VSC would appreciate the names and contact information of PTO board members

27 RESOURCES & QUESTIONS For great nonprofit resources... Click Involvement tab on A-H homepage, then PTOs & Booster Clubs