Non Profit Organizations

What is a Non-Profit Organization

Some business ventures do not have as their primary objective that of making a monetary gain or profit. Instead, the motive for the activity may be for some worthwhile cause that you wish to benefit. The term "non-profit" may seem somewhat non-logical. Afterall, does not every business have to take in more money in cash receipts (ie revenue) than it pays out in cash disbursments (ie expenses) in order to stay in business? Well, the term non profit does not refer to an organization that makes no "profit" or financial increase in its assets, but rather describes an organization which is not subject to federal, state, property or sales taxes.

There are many different types of non-profits depending upon the purpose created. For example, religious, literary, arts, business leagues, social clubs, humanitarian causes etc. However, the type of non-profit that most people have at least heard of is a 501c(3) which can be established for charitable purposes.

Before you go this route, there are a number of things you should first consider. You need to first consider whether a non-profit status is really the best solution for the business and is it likely that IRS will agree. Then, you must make a decision as to who will be the incorporator. You will also need to decide upon a name and define a mission statement for the organization as well as create a Board of Directors and prepare a set of Bylaws. Finally, you will need to Develop a strategic plan. This is essentially the blueprint for the organization going forward. It defines in detail exactly what the organization intends to achieve, who will be responsible for achieving it, how will those achievements be paid for - or in other words, how will funds be raised.

Once you have this information in place, you should seek out an attorney to handle the filing for Articles of Incorporation (DSCB: 15-5306) and related forms with the Corporation Bureau, PA Department of State. There is a state filing fee currently $125. At this point you will also want to acquire an Employer Indentification Number (EIN) (form SS-4) from IRS. To request tax exempt status from IRS will require the filing of form 1024 or form 1023 if you are specifically requesting tax exempt status under 501c(3). Note as well that there is a filing fee required with these forms. Similarly, you will need to request tax exempt status from Pennsylvania by filing form REV-72. Also, if you will be raising money be receiving or soliciting donations you must register with the Pennsylvania Bureau of Charitable Organizations by filing Form BCO-10. Again, certain filing fees will apply.

Accounting for Non Profit Organizations

Once the non profit organization is setup, you will then need to pay attention to the business transactions aspects of running the organization. Right from the beginning, you must be sure to establish a sound system of financial accounting. As important as this in for any business, there can be some special considerations for a non-profit that is required to closely monitor sources and expenditures of funds by contracts and funding sources. So, you want to get on top of this right from the beginning. One such accounting product to consider is QuickBooks Premier Non-Profit Edition