Meeting of the Minds - The Buck Stops Here! - Starting a new non-profit

(Thanks to www.mncn.org for technical assistance, inspiration and guidance for our blog. Any errors are solely ours.  Any resemblance to actual people or organizations already in existance is entirely coincidental.)

Step 8:  Draft the corporate bylaws
& Step 9:  Hold first meeting of the board.

A few weeks back in our blog--Your laws, My laws - By laws--where we discussed writing the articles of incorporation.  Corporate bylaws are similar but typically "much easier to amend and should be reviewed frequently' per www.MNCN.org.  Bylaws are "more detailed than articles of incorporation and address issues such as:  Membership & Meetings (who-when-where-quorum-voting etc), Board of Directors (election, terms, etc), Fiscal Management (compensation, reporting etc) and Amendments (how changed etc)."

It may be difficult for a layperson to differentiate between knowing what should be in the articles of incorporation versus what should be in the organization by-laws.  My blog on the Articles of Incorporation step is evidence of this.  But this does bring up a good point that anyone starting a new organization would want to take into consideration. 

Notably, sometimes a task may have to be "redone" because the person doing a task may not have been the best person for the job.  The volunteer may have had good intentions but not sufficient knowledge of the task responsibilities or requirements.  This illustrates the point that just because a volunteer is willing to do a task - doesn't mean the organization should always accept that offer of help.  In some instances (especially in the finance and legal areas), the organization may be better off hiring a professional to accomplish the task.

So now that our fictious organization, Paws-i-tive Hands, is back on track and has elected to hire an attorney to help set up the articles of incorporation and guide the group with drafting our by-laws.

Holding our first meeting of the board and electing board members, we'll want to keep in mind "THE BUCK STOPS HERE".  The person elected to head the organization must be someone who is willing to take responsiblity should there be a mass mutiny and half the board quit.  Having a single person that can and will veto an idea (if it is not in the best interest of the organization) is a good idea.

If the "Buck Stops Here" person just goes with the flow, tough decisions that are really for the good of the group may not be made.  For example:  Consider a pet rescue organization and the number of homeless pets in area shelters.  If a group agrees to "rescue" more dogs than they have foster homes for, then alternate temporary homes have to be found such as boarding facilities. 

Having a large quantity of their rescue program dogs in a boarding facility could rack up bills that could actually bankrupt the group so in the long run rescueing too many dogs without sufficient resources could have the opposite effect on the group and essentially cause the group to not be able save any dogs.  

The initial board meeting will be a meeting of the minds - the bylaws drafted will guide those minds to a clear course of action - and having strong leadership will keep the group on focus and operating within the means and mission of the group.  This board will also then start the process of obtaining tax-exempt status.

Next week - legal mumbo jumbo??

 

Feeding the Poor In Spirit? - Starting a new non-profit?

(Thanks to www.mncn.org for technical assistance, inspiration and guidance for our blog. Any errors are solely ours.  Any resemblance to actual people or organizations already in existance is entirely coincidental.)

Step 7:  Create a business plan with a budget.
MNCN.ORG give the following useful developmental tips:  "Creating a thoughtful business plan during these beginning stages of a new nonprofit can provide a sense of dircetion to the organization as it develops.  A plan should include what the organization's goals are, what programs it will operate, where it will get funding, will it conduct events, will the organization have staff, volunteers, and more.  It should also include a budge plan.  Where will funding come from?  Will programs rely on grants,individual donations, state or federal contracts?  What expenses will the organization incur?"

If your new organization is small, it may be tempting to forego the written business plan and/or the budget plan.  The thing to remember is that the bigger your organization becomes the more important these plans will be.  

Finances - A business plan can be used to guide in various decision making processes such as where to allocate funds for: staff, website, or promotional literature & signage.  Other big budgetary decisions include whether the organization will operate thru a physical location owned by the organization, a physical location rented by the organization or simply operating via an on-line presence.

A business plan will also provide guidance for financial decisions such as how many paid staff to keep and what their wages will be (for an all volunteer staff, the funds could go elsewhere).  Likewise, if all promotional literature and/or signage for a particular need or event will be donated, then the funds can be used elsewhere. The business plan would also provide guidance on how to allocate manpower resources (such as to grant writing activities or to operating fundraising events etc).

Staffing - Having a budget will provide guidance as well.  Often tough choices will often have to be made based on available funds or manpower.  Budget guidance will keep the various committees from becoming disenchanted because "the other committee" was allocated more resources.  The key thing to remember is that what is "mandatory or important" to one person may only be "nice to have" to someone else. 

Wise choices - Most would agree that spending $300 on a new toilet seat for the organization headquarters would not be good fiscal responsibility but the question is - would everyone agree that spending $300 for a booth rental at an upcoming event is a good move financially for the group?  If the event is a fundraising event that would be expected to net the group, $3000 then most would agree the $300 entry fee would be a good investment. 

Public Awareness - If the event, however, is just an event to raise public awareness about the group - the conclusion of whether the $300 entry fee was a wise investment is more arbitrary. By having a business & budget plan that specifically states how much of the weekly, monthly, quarterly or yearly budget is spent on advertising, would undoubtedly help in determining if the public awareness event fee was a wise investment.

Joint Ventures - Organizations may at times also be called upon to help another organization.  The joint event may even cost your organization time and money.  Can your organization spare the resources to aid another group?  Having clearly defined mission goals and plans will also guide you into knowing which joint ventures will be beneficial to your organizations and which could potentially detract from your organization.

For example:  If your organization was a purebred animal rescue, would teaming with another rescue (for the same breed) be a wise decision?  The answer to that question might depend on many things, may vary at different times and different people may have differing viewpoints.  This type of joint venture would maybe not have to fall into guidance for the business plan. 

Feeding the Poor in Spirit - On the other hand lets say your organization was a vegan group and a meatpacker union gives you a call and wants to do a joint event to aid the local food pantry - would this be a venture your group would want to pursue?  Probably not - why?  Because even though both groups have a mission to help feed the poor, the two groups would be at opposite ends fundamentally in how to accomplish their mission.  In instances such as this, having guidance from a clearly defined business plan would be helpful.

Step 6 in the Planning Stage for starting a nonprofit organization is incorporating.

According to the www.mncn.org, the main purpose of incorporating an organization is that of risk management.  Filing articles of incorporation as a nonprofit with the Secretary of State office provides a limited liability for the govening body of the organization.  If directors act in a responsible, reasonable way, they can avoid personal liabilities to creditors of the organization.

Lien vs Lean Times - Obviously this step in the planning is very important for your family and heirs.  Many nonprofit groups have times where there is more money going out to pay bills than there is coming in thru donations.    Fellow board members (or future board members) will not wish to risk their homes and possessions should the nonprofit not be able to meet financial obligations.  Incorporation limits the risk board members face.  

Debts to the IRS or due to fraudulent activities, however, may not be covered by incorporation.  
In the planning stage, you will want to have something in your bylaws that addresses fraudulent activities performed by board members or volunteers.  Depending on the circumstances and the position involved, there may be some advantage to doing a background check or approval process on all volunteers and board members before allowing them to become a part of your organization.

If our "ficitious" organization Paws-i-tive Hands were a "for profit" business operating as a non-profit, we would have some other options for business entity filing.  We can set our organization up as a Partnership, a Limited Liability Corporation, Incorporation or a Single Proprietor business.  There are advantages and disadvantages to each business entity but to set up as a non-profit, we'd need to be an "incorporated" organization. 

For a complete discussion on the differences between the various business entity status, please visit the www.irs.gov

The Planning Stage – Articles of incorporation?

(Thanks to www.mncn.org for technical assistance, inspiration and guidance for our blog. Any errors are solely ours.  Any resemblance to actual people or organizations already in existance is entirely coincidental.)

Continuing on with our blog topic of Starting a Non-profit the PLANNING STAGE...

2 weeks ago we finished up the visionary stage discussion – then lo and behold, we skipped a week on our blog.  While the skipped week was unintentional, it does bring up a good point to make for your consideration before you and your team move to the planning stage. 

Life Balance & communication – there may come a time when a board member or volunteer promises to do something but forgets or gets so busy that they just don’t have time to do the task in a timely manner.  It is important to remember you’re your board members and volunteers may have unexpected things come up in their life which prevent them from accomplishing a task assigned to them.  Giving each other the “benefit of doubt” and providing a positive atmosphere will keep the communication flowing and help prevent assumptions that can prove detrimental to the cohesiveness of your group. 

The key point to remember is that the priority status for any given task may change depending on what is occurring in the lives of your board members and volunteers.  It would be wise for any “must have tasks” to always have a backup plan to accomplish the task so that the responsibility is shared by more than 1 person.  By clearly communicating expectations and fostering an open environment for differing opinions, assumptions can be avoided, volunteer burnout can be avoided and occasionally a “new way of looking at things” will be found.

Step 5 in the Starting a Non-profit Organization moves to the PLANNING STAGE.

The organization founders and/or executive board members should at this point write the articles of incorporation (aka bylaws).  The articles of incorporation formalizes the company name, location and purpose for existence.  It is the legal record of how the organization will be managed.  Individual state laws may dictate certain procedures that the group must follow. 

Articles of incorporation are needed prior to applying for tax-exempt status from the IRS.  With a non-profit organization, specific language in the articles of incorporation may be required.  It is at this point that seeking legal council is greatly advised.  Your Secretary of State’s Office may also provide information.  Even though your organization will be a non-profit organization, it is still considered a business and must be ran accordingly.  The state of Indiana has a website that gives tips for starting a business.

http://www.in.gov/ai/appfiles/sos-registration/landing.html

Your laws – My laws – By-laws  by having written articles of incorporation, your group will have a formal guidance to operate.  The by-laws will also guide the organization thru each administration change.  For example:   in our Paws-i-tive Hands ficitious organization, we set forth in the bylaws that any plumbing work provided by the organization to a supporter will be done by a licensed plumber.  In the even that a licensed plumber is not available, Paws-i-tive Hands will decline to bid on any plumbing requests.

A new Paws-i-tive Hands volunteer has indicated a willingness to do plumbing but he is not a licensed plumber.  By referring back to the by-laws, the offer to help provide plumbing can be respectfully declined without causing rancor with the new volunteer.  Whereas if this “by-law” was not set forth, then the various board members and volunteers would have to debate the advisability legal-wise and cost vs reward of having an unlicensed plumber do plumbing.

“Your law” may say – sure go ahead fix that leaky pipe.

“My law” may say – no way can we afford to take a chance on causing more damage while fixing that leaky pipe.

The “By-law” can therefore be used to guide.

Next week:  Non-profit status