Should I Start a Non-Profit Organization?

People often come to me to request help with starting a non-profit organization.

The first question I ask is why he or she feels the need to start a non-profit organization. Often the response I hear is an explanation of something charitable and meaningful that the person wants to do. Sometimes the person is overwhelmed by the many challenges in going from “nothing” to “something” and assumes the best way to start is to form a non-profit organization.

Sometimes forming a tax-exempt entity is exactly the best thing to do to get started. But not always.

I often follow up by asking what needs to be accomplished that cannot be accomplished because there is no non-profit organization in place. For example:

• Are there potential donors trying to give charitable donations to the cause, but they cannot do so?

• Is there a need to avoid paying unnecessary federal, state, or local taxes for any pending activity?

• Does anybody need to be employed in the near future?

If the answer to any of these questions is “yes,” then it may be time to incorporate as a non-profit entity and seek tax exempt recognition from the Internal Revenue Service.

But if the answer to these questions is “no,” then it may be best to move forward with doing the desired charitable and meaningful activities and wait until there is a specific need before moving forward with corporate formation.

There are significant costs and numerous steps required to start a non-profit organization. The expense and effort may be worthwhile in some circumstances, but premature in others.

Seek the advice of an attorney licensed to practice law in your jurisdiction if you are uncertain as to whether you need to form a non-profit organization to move forward with your initiative.