BUILD YOUR SKILLS There are a number of things to think about when starting a nonprofit organization. Here is a list, along with the major steps to take. SKILLBOX: STARTING A NONPROFIT (OR NOT) Nonprofits are a means for organizing around a mission in a way that focuses interest and effort while allowing for favorable tax treatment. As of 2015, there were more than 1.5 million tax-exempt nonprofit organizations in the United States1 or about one for every 200 people. Of those organizations, nearly 1.1 million were 501(c)(3) public charities.2 Clearly, nonprofits are widely used to address public-serving purposes. The following steps provide guidance when deciding whether creating a nonprofit is the best route: Think Long and Hard about Why, Where, and When It Makes Sense to Start a New Organization. Remember: Most start-ups fail, whether for-profit or not-for-profit. Ask these questions: â€¢ Will this organization serve a niche that is already being served? If not, â€¢ Do enough people care about it that funding is likely? If yes, â€¢ What would the elevator speech be? This is a one minute explanation of the organization, its purpose, activities, and its stakeholders. This will be important for enlisting support of funders, volunteers, and staff. If the speech comes easily to mind then, â€¢ What funding sources are possible? If there are enough then, â€¢ What other organizations are already providing a similar service? How would this organization be different? If the answer is obvious, then perhaps it is time to proceed. Engage a Group of Interested People. A nonprofit is not owned or controlled by any one person, not even the founder. It is accountable to multiple constituencies: its board of directors and officers, the philanthropic community within which it will secure funding, the stakeholders who will benefit from the services rendered, and the volunteers it will engage, among others. Engage representatives from all the constituencies the organization will touch to discuss its creation and what its goals should be. Develop a Plan. Nonprofits need a plan, just as businesses do. The plan sets forth the vision, mission and goals, the methods or activities that will be used to achieve the goals and pursue the mission, resources needed (financial capital, human capital, and office space), and a timeline with target dates for when key steps will be achieved. These steps include creation of the articles of incorporation 122 PART II Capitalizing on the Power of People, Money, Information and bylaws, legal incorporation, and approval by tax authorities. The plan should also include a description of start-up funding that specifies revenue sources. Additionally, in an evaluation of opportunities and threats, the plan should specify the organizations that have similar missions and it should explain how this one will differ. Threats caused by competition for resources should be delineated and there should be an explanation of how the organization will respond. The plan should also contain an incremental vision for the organization in future years. Draft the Articles of Incorporation and Bylaws. Bylaws are the organizationâ€™s rulebook. They specify everything from how officers and directors are selected to when meetings are held to when the fiscal year begins and ends. All bylaws must comply with federal and state laws pertaining to nonprofit status. Establish Leadership. The board of directors is the governing body of the organization. Board members should be a source of information, commitment, wisdom, and often, financial support. Create a Budget. Will money come from donations, grants, service fees, contracts, or some combination? Careful planning helps to reveal sources. Establish Management. Start-ups may rely on the same people to manage the organization as to lead it. As the organization grows, the need for staff will expand. A website and logo will need to be created and maintained that markets the organization, its mission, and its activities. Think Again. Is a start-up nonprofit the right solution for the problem? Is there a better way to address it? What will be the obstacles that pose the greatest threats? Here are some alternatives: â€¢ If starting a new nonprofit is driven by a desire to make an impact in a certain area, then consider volunteering, serving on the board, or fund-raising for an existing organization with an aligned mission. Such engagement supports the interest while providing visibility into nonprofit operations and whether an unmet need really exists. â€¢ Alternately, establishing a local chapter of an existing global, national, or regional nonprofit, like UNICEF, the American Cancer Society, or Goodwill Industries, can be the best of both worlds. The capacity and name recognition of the larger organization can be leveraged, while still allowing for a local grassroots focus.3 â€¢ Another alternative is fiscal sponsorship, where an existing public charity â€œsponsorsâ€ a start-up effort or specific project. The arrangement can extend the sponsorâ€™s tax-deductibility for donations and qualification for grant funding to the nascent activity, while avoiding the necessity to create an organization that will compete for resources. CHAPTER 4 Organizing Principles 123 â€¢ Finally, the boundaries between nonprofit and for-profit organizations continue to blur. An important consideration is whether the identified social purpose can be served more effectively through a private social enterprise unbound by the restrictions placed on nonprofit organizations.4 Hands-On Activity: Determining the Need for a New Nonprofit The goal of this activity is to simulate the early stages of establishing a new nonprofit organization. Document the following tasks in a two-page professional memo written for an audience of potential funders for the new enterprise. Step 1: Identify a social need in which you are interested. The need could be local, national, or international. Step 2: Conduct an environmental scan for organizations that work in the identified space. In addition to their name, include some discussion of the geographic areas in which they operate and the level of organizational capacity (size, employees, programs). Step 3: Determine whether the existing organizations are sufficient to address the selected problem by identifying whether there are gaps in services or programs. Step 4: Propose either a partnership with an existing organization, an extension of a current program, or justify the need for an entirely new organization. Notes 1. National Center for Charitable Statistics (NCCS). 2016. â€œQuick Facts about Nonprofits.â€ Retrieved from: http://nccs.urban.org/data-statistics/quick-factsabout-nonprofits. 2. Ibid. 3. Fritz, Joanne. 2016. â€œAlternatives to Starting a Nonprofit: You Can Do Good Without Starting a Nonprofit.â€ The Balance. https://www.thebalance.com/alternatives-to-startin… 4. Ibid. For Additional Information Foundation Center. n.d. â€œKnowledge Base: Q: How Do I Start a Nonprofit Organization?â€ http://grantspace.org/tools/knowledge-base/Nonprof… /Establishment/starting-a-nonprofit.
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