NPH Question: What Purpose does the Board of Directors serve?

nonprofithacks

 

It is so important for all nonprofits to have a strong foundation, especially when they’re starting out. With that in mind, choosing your Board of Directors wisely is fundamental. But what role do these key players have within a nonprofit?

The Board of Directors acts as the governing body of your nonprofit. These individuals are responsible for overseeing the organization’s activities. Nonprofits do not have stockholders or singular owners. The organization will be the responsibility of the Board (you’ll all be like co-owners, fun!). Members of the Board will meet periodically to discuss and vote on matters pertaining to the nonprofit. These meetings should take place annually,  with additional meetings to be scheduled as the need arises. A position on the Board is not usually permanent, and most organizations follow a term agreement as set up in their Bylaws. These terms are typically anywhere between two and five years.

You’ll want to find individuals in your community who are passionate about your mission, and will align themselves with your goals. There are no IRS limitations in place to determine who can serve on your Board, so anyone you deem fit can become a Board Member. However, there are some best practice guidelines that will help you to avoid inurement. For instance, you’ll want to make sure you have an odd number of Board Members to avoid a tied vote in meetings, and that board members that are not related outnumber those who are.

In an ideal situation, the Board of Directors will be different than the organization’s paid management staff. However, it is fairly common for small nonprofits and startups to also have Board members serving in these paid positions. If possible, you’ll want to avoid this scenario as having dual roles can often lead to problems. The Board of Directors should prioritize working on the organization’s mission, goals, and strategic plan, while staff members should be focused on implementing the plan.

Some members of the Board will be elected to serve as Officers. These Officers will have a higher level of responsibility than other board members. Initially, they are elected by the Board, and usually serve similar length terms. The most common and essential Officer roles are President, Secretary, and Treasurer. These roles and their terms should be defined in your bylaws. Keep in mind, an individual cannot be compensated to hold an officer position.

The President will head the Board, supervise its meetings, business, and affairs. The Secretary will keep minutes and insure the organization’s activities are in line with their Bylaws. The Treasurer will account for receipts and disbursements, and insure organization stays in good financial standing.

There are no requirements that suggest an organization cannot elect someone outside of the Board to serve as an Officer, but you are free to place such limitations in your organization’s Bylaws. An individual may hold two separate offices, except the President may not serve as the Secretary.

So go forth, and choose wisely! Your Board awaits.

 

 

NPH Question: What’s the difference between “Nonprofit” and “Not-for-profit”?

In order to answer this question, let’s define what a nonprofit organization actually is.

The term is, unfortunately, pretty misleading. It definitely doesn’t mean that the organization is unable to earn a profit. On the contrary, many nonprofit businesses enjoy large and fruitful profits (see: IKEA). And besides, how would a company function without making any sort of profit? Well, it wouldn’t.

The easiest way to define a nonprofit (or non profit, or non-profit, whichever you prefer) is to first define its counterpart: the for-profit organization (see: Target). The purpose of a for-profit is to generate profits for those who own it-the stockholders. So, after all is said and balanced, including employee payroll, the profits go to them and not into the business itself. So what it comes down to, is who profits at the ownership level.

Both types of organizations are able to earn profits at the entity level, but only for-profits can do so at the ownership level. In fact, nonprofits very rarely have owners (they usually have a Board of Directors, or Board of Trustees), and they are not permitted to pass any profits to those who control them. To keep it in super simple terms, as a nonprofit board member, if you touch the money, you can’t pay yourself.

but-hey

Nonprofit organizations are required to use their profits for exempt purposes only, which according to the IRS, are as follows:

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.  The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

Okay, so what’s the difference between a nonprofit, and a not-for-profit?

People often use these two terms interchangeably, but they are, in fact, different. The official term you’ll want to use for your organization is nonprofit. The other term is reserved for activities that you do outside of the business or profit scope. For instance, binge-watching Netflix, dressing up your cat, painting, or reading are all not-for-profit activities.  Ready for the kicker? If the IRS determines your nonprofit has gone too long without making a profit, it will reclassify you as a not-for-profit activity, and you won’t be able to deduct expenses.


Always remember that we are a document preparation agency, and can therefore not offer legal advice. Nevertheless, we hope you’ve gained a bit of insight into your nonprofit journey. Feel welcome to reach out to us with any questions or comments you may have.

Putting Profit into Nonprofit

If I start calling names like Goodwill, YMCA, Boys & Girls Club of America, everyone is familiar with these names, and agrees that these nonprofit organizations are great resources for the community. But have you ever seen their financial reports? Millions of dollars are generated as profits for large nonprofit organization, because they realized that everything should not be free! They created streams of income to help with the cost of free services.

Habitat for Humanity started building homes for families with donated building materials, and now you see Habitat Resale Stores popping up everywhere. Notice I said “resale store”, instead of giving everything away, why not open your own resale shop. If you can’t afford the space right now, start by having yard sales, some nonprofits generate $5,000 in one day with yard sales of donated items.

I personally know of a nonprofit organization that asked me to help them find extra storage space because they nonprofit need more storage for all the donation of clothes, shoes, you name it! Instead of a storage space, they needed a resale shop. One local nonprofit has a 5,000 sq ft space used as a resale shop, and for the first year, the nonprofit did not pay a single penny for rent. Why? Because they ask that landlord if they could have the space rent-free for one year since they were a nonprofit- he said YES, and the rest is history. You have not because you ask not!

Just because the nonprofit has three letters “NON”in front of it, don’t forget the words after non -“PROFIT”. Nonprofit doesn’t mean you can’t make a profit, and even charge a fee for services. I know it feels rewarding to do good, but it’s much more than that. It’s how you take the fundamental concept of doing good using your vision, talents, knowledge, and money – and apply them to make a difference in your community.

How does the IRS feel about nonprofits making a profit? It’s perfectly legal for nonprofit organizations to sell products and services to generate income as long the income benefits the nonprofit’s tax income purposes. In others words, when you setup your nonprofit organization as a transition home for women, and five years later, you open a re-sale/thrift store. After you pay expenses (rent, salary. etc.) all the money that is left must benefit the nonprofit organization.

So what ideas do you have to put some profit into your nonprofit? Write down your ideas and make sure they are feasible, and can be accomplish on the budget you create. I personally believe, every nonprofit should have a for-profit business. Your nonprofit and for-profit business will be two separate businesses; however, the for-profit business can support the nonprofit business when its needed, but you cannot take funds from your nonprofit business to support your for-profit business. This type of transaction would be considered a conflict of interest. Need ideas or have questions- email me and I will answer your questions in an upcoming article.

 

 

Tools For Success At Grant Writing

Grant writing tools are  necessary components that all non-profits need to have when grant writing. Many organizations set out on the process of writing grants without all the proper tools for success. Many times this will leave you feeling frustrated or annoyed, and who has time for that, literally? When you take the time out of your already busy schedule to do a task not completing it due to lack of information can be agitating to anyone. Acquiring this knowledge can be easy and stress free. In my new book Grant Writing Tools, I outline all the information that you will need to aid you in successful grant writing. View my website at www.mutiplyingtalents.com to receive my contact information and order my line of product.

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Thanks to Bishop TD Jakes

Aretha had an opportunity to  speak at the 2014 International Pastors & Leaders Conference in Orlando, FL March 6-8, 2014.  Her session title was “You DO need a 501c3: Grants to fund your Mission”, A copy of the session will be available soon, but Thanks is in order to The Potter’s House Conference Team for a job well done, and for Bishop TD Jakes for bringing us all together.

 

Nonprofit Standard Report for 2013 is here!

For those in the Nonprofit World here is the latest Nonprofit Standard, a publication by BDO’s Institute for Nonprofit Excellence, which provides financial information for tax-exempt organizations. The newsletter can be downloaded at http://www.bdo.com/download/2702
and covers the following topics:
Higher Education – Mid-year Update
*Institute Professional Profile
*IRS Final Report on Colleges and Universities
*Nonprofit Facts – Did you know?
*Don’t Let This Happen to You: Disallowed Losses on Form 990-T
*IRS Colleges & Universities Compliance Project
*501(c)(4) Organizations and the IRS: A Little Background on the Controversy
*The Importance and Struggles of Nonprofit News Organizations – Nonprofit Media Group Releases Findings
*New GASB Pronouncements
*BDO Professionals in the News
*Other Items To Note

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Go Get That Money- Two Easy Grants You Can Win

It’s summer time, and funders are starting to release Request for Proposals (RFP’s) so that they can get rid of the funds by December 31st. Grant writing is not an easy task, but if have written one grant for your organization then you should have a good start on writing other grants. Most grant applications are completed online, so you can copy and paste your already typed information into the online application and WAL-LAH you’re done. Below are links to two easy grants that are due in the next four to eight weeks.
Happy Grant Writing.

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Multiplying Talents Certified Nonprofit Consultants

Avon Foundation for Women Domestic Violence Survivor Empowerment Grant
Deadline: July 12, 2013 up to $65,000 given
Here is the link http://www.avonfoundation.org/assets/2014-dv-rfp-grant-guidelines.pdf

Walmart grants ranging from $25,000 to $250,000 to nonprofit 501(c)(3) organizations is NOW OPEN.

www.foundation.walmart.com

IRS wants to set the record straight- hmmmm!

Everytime you turn on your computer or tevelision, there is news of the recent (still developing) IRS scandal against nonprofit tax-exempt organizations. We have some recent updates from the IRS.
If you have filed for 501c3 status and it has taken longer than six months to receive your 501c3, please contact our office at 407-575-0685 or 214-699-7636.

Follow this link to be directed to the IRS website concerning 501(c)’s.
http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-501(c)-Organizations

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