Do you have an idea for starting an Illinois not for profit but don’t know where to start? As with any business idea, starting a successful not for profit begins with careful planning. Here is a list of questions to get you started:
1) What is the purpose of the organization?
- You need a well-crafted mission statement. It should be memorable but brief, and it is a good idea to reference the governing statute.
- A good mission statement is essential for clarifying your goals, motivating stakeholders, attracting funding, and gaining tax-exempt status from the IRS.
- For more information about drafting a compelling mission statement, see http://nonprofit.about.com/od/nonprofitbasics/a/mission.htm.
- The Illinois General Not For Profit Corporation Act of 1986 (the “Act”) lists the purposes for which a not for profit can be organized. See 805 ILCS 105/103.05: http://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=080501050K103.05
- To attain 501(c)(3) tax exempt status, the organization must be organized and operated exclusively for the following exempt purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. For more information, visit the IRS website: http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exempt-Purposes—Internal-Revenue-Code-Section-501(c)(3)
2) What will be the name of the organization?
- The name of the organization must comply with the standards set forth in the Act. Section 104.05 requires that the name end with the letters “NFP” if the name implies that the corporation is organized for some purpose other than those allowed under the Act or other than the purpose set forth in the Articles of Organization. See 805 ILCS 105/104.05 for all of the rules with respect to the organization name. http://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=080501050K104.05
3) How will authority be delegated?
- In your Articles of Incorporation, you will need to define, limit, and regulate the rights, powers, and duties of the corporation, its officers, directors, and members.
- An Illinois not for profit corporation need not have members, but if it will not have members, that needs to be set forth in the Articles of Incorporation or the bylaws pursuant to the Act. See 805 ILCS 105 Article 7 for the rules governing members: http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=080501050HArt.+7&ActID=2280&ChapterID=65&SeqStart=5200000&SeqEnd=6800000
- An Illinois not for profit corporation must have a board of directors. Also, the not for profit shall have such officers as provided by the organization’s bylaws. See 805 ILCS 105 Article 8 for the rules governing the board of directors and officers: http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=080501050HArt.+8&ActID=2280&ChapterID=65&SeqStart=6800000&SeqEnd=8700000
4) Who will the organization benefit?
- The IRS does not allow 501(c)(3) organizations to be organized or to operate for the benefit of private interests and no part of the organization’s net earnings may inure to the benefit of a private shareholder or individual. For more information, visit the IRS website: http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Exemption-Requirements—Section-501(c)(3)-Organizations
5) How will your organization be financed?
- You might consider consulting with a professional fund raiser. But in any event, you need to think about how much money you will need and where it will come from. This should be included in your business plan.
6) How will you plan for succession?
- As with any business, you need to think about succession planning to protect your not for profit from “founder’s syndrome” or “founderitis.” There are many resources available to help you with this kind of planning. See http://foundationcenter.org/getstarted/topical/succession.html, and http://www.baruch.cuny.edu/spa/researchcenters/nonprofitstrategy/documents/FroelichMcKeeRathge_SuccessionPlanninginNonprofitOrganizations.pdf
All of this information and more needs to go into a well-drafted business plan. There are many free guides online to help you draft a solid plan. Here are some sites to help you get started:
- http://nonprofit.about.com/od/nonprofitbasics/f/busplan.htm, and
Put the answers to these questions on paper and you will have done most of the legwork necessary to form an Illinois not for profit organization. And once you have established your not for profit organization, you can apply for tax-exempt status under section 501(a) of the Internal Revenue Code. For steps on how to get tax-exempt status, visit the IRS website at http://www.irs.gov/Charities-&-Non-Profits/Application-Process.