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What is a Nonprofit Organization?

  • Incorporated business 
  • Subject to state and federal laws 
  • Created for public benefit 
  • Money is reinvested in the mission 
  • Governed by a Board of Directors

“Not-for-profit” is NOT a business model.

Nonprofit is a tax status assigned to a type of business by the IRS. People often use the words “nonprofit” and “tax exempt” interchangeably. Congress has created almost three dozen types of tax-exempt organizations in different sections of the tax code. Each section identifies conditions that must be met to be exempt from paying federal income taxes. The one common condition is not paying out profits (“no part of the organization’s net earnings can inure to the benefit of any private shareholder or individual”); hence the term, “nonprofit.”

There are numerous categories of nonprofit corporations, but 501(c)(3) is the largest subset:

  • Over 1.5 million 501(c)(3) organizations registered in the U.S 
  • Over 20K 501(c)(3) organizations registered in Louisiana in 2021 
  • Over 7% of Louisiana’s workforce is employed by nonprofit organizations

Why do individuals want to start a nonprofit organization?

  • Lifelong dedication to the mission 
  • Lack of services in your neighborhood 
  • Lack of quality in available services 
  • You or your family have been impacted by this service 
  • You have a vacant building 
  • You have been told that there is a lot of money for nonprofits


  • There is a lot of money out there for nonprofit organizations 
  • No one else is doing what I am/want to be doing 

Other options to consider before starting a nonprofit organization

  • Volunteer with a nonprofit organization with a similar mission 
  • Get a job with a nonprofit organization with a similar mission 
  • Start a for-profit business 

After you have done a market assessment of your area by researching other organizations, your area’s populations, needs and more and you are still determined, you need to contact two agencies: The Louisiana Secretary of State & The Internal Revenue Service

  • Incorporating as a non-profit does not automatically result in 501c3 status or state sales and income tax exemption. These must be applied for separately. 
  • To successfully obtain 501c3 status, an organization must be able to show a defined charitable purpose, and a structure that ensures that the organization benefits the public, not the employees or owners of the organization. 
  • Consulting with a CPA or lawyer for this process is advisable.

Steps to Incorporation

Step 1: Plan, Plan, Plan

  • Have a clear and well-developed mission statement 
  • Have a clear description of all of the activities of the organization 
  • Have a clear idea of your financial sources 
  • Identify who is doing similar work in your community 
Mission Statement v. Vision Statement:
  • The Mission is: the organization’s purpose defined and approved by the Board of Directors and specifically stated
  • The Vision is: a vivid picture of an ambitious future state that is better in some important way than what now exists 

Step 2: Recruit and Develop a Board of Directors

  • Individuals who believe in your mission 
  • Individuals who have expertise in areas of business 
  • Strategic thinkers 
  • Diversity of backgrounds 
Basic responsibilities of a Board of Directors
  • Determine the Organization’s Mission & Purpose 
  • Select the Chief Executive Officer 
  • Support the CEO and assess performance 
  • Ensure effective organizational planning 
  • Ensure adequate resources and manage effectively 
  • Serve as a public ambassador for the organization 
  • Ensure legal and ethical integrity and maintain accountability 
  • Recruit and orient new board members 

Step 3: Define the Activities of the Organization

Financial Support

  • Budgeting 
  • Expenses 
  • Revenue 
  • Fundraising Sources 
  • Set Goals 

Step 4: Reserve a Corporate Name

Step 5: Obtain your EIN (Employer Identification Number)

Step 6: Articles of Incorporation

Step 7: Bylaws

Step 8: IRS Form 1023

Application for 501c3 status- key parts 

  • Narrative 
  • Board members 
  • Fundraising activities 
  • Budget 
  • Public charity v private foundation 
  • Conflict of interests 

Step 9: Develop Policies & Procedures Manual

Step 10: Open a Bank Account

Step 11: Determine Insurance Needs

  • General Liability 
  • Directors & Officers 

Step 12: Establish an Operations Calendar

  • Board Meetings 
  • Annual Events/Fundraisers/Services

P.O. Box 1924
Baton Rouge, LA  70821

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