Forming your own 501c3 nonprofit organization is a lot of work, and if not done correctly could cause you some big headaches or even legal issues. Just like with any project, you shouldn’t go at it alone. Even nonprofits need an internal team to help with all of the day-to-day operations and those that are external like consultants. If you’re looking to start your own nonprofit, keep reading to learn about seven common mistakes to avoid in the process.

Understanding Nonprofit vs For-Profit

A lot of newbies in the nonprofit world overlook just how strict the laws and regulations are to define nonprofit. Walking the fine line between nonprofit and for-profit can land you into some trouble. If you’ve already obtained your 501c3 tax exemption status, you could be at risk to lose it. For example, the amount of revenue a nonprofit receives can only exceed its expenses by so much.

Downplaying The Legal Side

In a perfect world you’d be able to just form your nonprofit and run it as you see fit. After all, you formed your nonprofit for the good and benefit of others, right? Well unfortunately, we aren’t living in a perfect world and there are many people who would exploit the benefits of a 501c3 nonprofit organization for personal gain. There are numerous state and federal laws that govern how nonprofits can operate. Having proper internal documents like your Articles of Incorporation and Bylaws are extremely helpful in mitigating potential problems.

7 Common Mistakes To Avoid When Forming A Nonprofit

Improper Tax Filing

One of the biggest benefits of having a nonprofit lies within the tax benefits. These tax benefits are a great way for a nonprofit to save some money so that they are better equipped to meet their expenses. The tax exemption status is also helpful for donations. This is because not every donation can actually be deducted from an individual’s taxes. Only donations made to a nonprofit organization with a 501c3 tax exemption status are tax-deductible. Mismanaging your tax filings with the IRS and state authorities will put your tax exemption status in jeopardy if you don’t know what you’re doing.

Underfunding Your Marketing

Are you a business? No, not exactly. You’re a nonprofit organization! But people still need to be able to find you. Even nonprofit organizations need to allocate a portion of their budget for marketing. If you don’t put enough into marketing your nonprofit, then you’re missing out on a lot of potential donors.

Choosing Ineffective Leadership

Just like any business, company, organization, and even government, nonprofit organizations need strong effective leadership to thrive. Being passionate about what your nonprofit is about is great, never doubt that. But you still need to have leadership in place that can help you make those difficult decisions, or even make them for you. Invest in the research for finding your top members and Board of Directors to save time and money in the long run.

Low Hiring Standards

Many nonprofits need to hire staff. Whether it’s to staff a physical storefront type building or an office, a nonprofit generally can’t run by itself. You should still strive to have high standards for those that you hire and bring on to work with you in your nonprofit. These people need to believe in what you’re doing, too.

Lack Of Research And Planning

Even though you’re not a business, you should still have a comprehensive “business model”. Short term and long term goals are a huge factor in the success of a nonprofit. You need to know what needs to be done now, and what needs to be done in 10 years and how to reach that goal. A nonprofit consultant is a great asset for your nonprofit to be able to strategize your success.

Nonprofit Startup Tax Filing Assistance And Consulting In Fort Worth

Are you wanting to start a nonprofit organization of your own, but want to avoid making these common mistakes? Not sure where to start or how to achieve that? Fortunately for you, Nonprofit Elite is experienced and specialized with helping nonprofits build their foundation to startup. Let us help take the weight off of your shoulders, including a 100% IRS approval rate, and call us today to get started.