Transcript Become a project of another organization

The following training on the different structures that
ECBOs may consider was developed for ethnic community
leaders in Wisconsin, and was held at the Pan African
Community Association in August 2010.
It is based in large part on materials in the resource:
Choosing the Right Structure for a Community
Organization:
A Toolkit for Refugee Community Leaders
Prepared by Mosaica: The Center for Nonprofit
Development and Pluralism www.mosaica.org and the
Southeast Asia Resource Action Center, www.searac.org ,
through Project ROSE.
So you have decided to organize to help your
community…
1. Become a project of another organization
2. Become an unincorporated association
(without tax-exempt status)
3. Become an incorporated organization
(without tax-exempt status)
4. Get a fiscal sponsor
5. Become an independent 501(c)(3) non-profit
organization (tax-exempt)
Become a project of another organization
Your idea for a specific program or
service, or one you've started
Becomes part of an already existing
tax-exempt organization (501c3)
EXISTING ORGANIZATION
Control and authority; overall
responsibility for planning,
implementation, and management
ADVANTAGES
• Your time and
effort on
services, rather
than building
an organization
• You can quickly
get org.
support, space,
admin help,
management
• Easier
fundraising
• Visibility and
credibility
DISADVANTAGES
• Limited
autonomy
• You'll have to
follow the
organization's
policies and
practices
• Project could be
changed or cut
• Your relationship
depends on what
you negotiate
YOU
Become staff
member or
volunteer
WHY CHOOSE THIS MODEL?
• You have an idea for, or have started,
a very specific service that needs
more support to continue & grow
• You do not want to spend time building
an organization
• You don't mind giving up control.
• You already have an org you trust
that's a good fit, or there are good
options
• Your interest is getting the project for
your community, not responsibility
Become a project of another organization
SOMALI WOMEN IN MINNESOTA (SWIM)
In May 1999, 6 Somali women came together with
the idea of helping newly arrived Somali women
refugees get connected to community resources
and break their isolation. They decided they
didn't want to create a nonprofit - they just
wanted to work with women. They approached a
member of the Somali community who was
serving on the board of the East Side
Neighborhood Services, an established org, who
was supportive. The women met with staff, who
decided it would fit well. After 6 months of
planning and fundraising (United Way gave seed
money), the SWIM project began with one of the
Somali women serving as part-time project
Coordinator.
Become a project of another organization
NEXT STEPS
1. Define the Project
•What skills,
experience, &
community
knowledge do you
bring?
•Do you want to
coordinate or
manage? Be hired
or an advisor? Or
just turn it over?
•What are the goals and objectives?
•Who is the target population?
•What are the outcomes you want?
•What are the activities to get there?
•What resources are needed?
•Is this temporary or longterm?
•Already know an org
2. Define your role
that you trust?
•What’s most
important - shared
values? financially
stable? good
reputation & leader?
3. Look for a right home
4. Set up a meeting to explore the idea
•Project name
•Where it fits in the org chart
•Who will fundraise
•Staffing
•Physical location
•Project Advisory Committee
Learn as much as you
can about the org
ahead of time.
5. Figure out the details
(it’s a good idea to
put it in writing)
Become a project of another organization
•Make sure the key components are
maintained, but also be flexible to changes
the org may want to make
•Communicate the transition with your
community
•Make sure the organization fulfills its
commitment
Become an unincorporated association
(without tax-exempt status)
Your group comes together
to form a group identity and
carry out some activities.
You can organize, carry out
activities, and minimally fundraise
for your community without any
formal registration and reporting.
WHAT IS IT?




Group of individuals who come
together voluntarily to address a
common interest or purpose
(not for profit)
Can obtain limited amounts of
funding (sometimes up to $25K),
up to $5K no taxes (but no tax
deduction for donors & no grants)
Are loosely organized, led by
members or committee, no formal
board (though for longterm, some
structure is recommended)
No reporting requirements
Can register with state as an
unincorporated association or not
TO REGISTER…. OR NOT
•WI has adopted
UUNAA, so if you
register, you can
get a fed ID # and
open a bank
account as
assoc.
•Assoc has right
to own or
transfer property
•Some protection
against liability.
• No existence
apart from
members
• No assets in
name
(property,
bank acct.
loans)
• No credit as
assoc.
• No protection
against liability
Become an unincorporated association
(without tax-exempt status)
STAND FOR OUR NEIGHBORS, DC
In a neighborhood of DC, a group was
concerned about the wellbeing of refugees
and immigrants, due to welfare and
immigration reform.
They formed Stand for Our Neighbors, which
has existed for almost 10 years as an informal
association and have never incorporated.
They carry out a variety of activities to
increase awareness and understanding of
refugees and immigrants.
They do small fundraisers to pay the costs.
Become an unincorporated association
(without tax-exempt status)
ADVANTAGES
DISADVANTAGES
• Flexibility
• If registered with state, only real
• No
disadvantage is limited fundraising capability
government
WHY CHOOSE THIS MODEL?
approvals or
reports
• Group wants to focus on program, not org dev.
• Lesser fees
• Group is addressing short-term need, with no
• Don’t have to
plans to continue once needs are met
worry about
• Plans to continue as all-volunteer association,
compliance
doesn’t plan to expand
with non-profit
• Doesn’t plan to raise funds from donors who
regulations
care about tax deduction or apply for grants
• Don’t have to
• Doesn’t need significant funds to carry out
spend time
activities (generally more than $5,000/year)
managing a
• Doesn’t need or want a complicated structure
legal entity
• Wants to start informally and see how it goes
before later considering expanding and
incorporating if necessary
Become an unincorporated association
(without tax-exempt status)
NEXT STEPS
1. Conduct outreach for members
2. Ensure members agree on mission, scope, activities
3. Make sure members share commitment, trust and
share equitably in the work
4. Recommended: agree on process for who makes
decisions and how, and other issues like membership
and meeting structure, fundraising, task division
5. Decide to register under UUNAA or not. If yes,
register and open bank account if needed
Form 113c:
www.wdfi.org/resources/indexed/sit
e/corporations/form113c.pdf
6. Remember to develop new leaders
7. If raise more than $5K, DRL form 296
Become an incorporated organization
(without tax-exempt status)
Become a legal entity
with rights and
responsibilities
Register with state as a non-profit
corporation to carry out a charitable,
educational, religious, literary
or scientific purpose
(can be 1st step to 501(c)(3) or not)
CHARACTERISTICS & REQUIREMENTS
 Board of Directors = formal structure
 Assets and liabilities in organization’s name
 Legal liability (except for individual fiscal
impropriety & gross negligence)
 Fundraising (still cannot offer tax deductions; no
grants)
 Reporting and taxes - annual report to state and
taxes over $5K
 Written rules:
 Articles of Incorporation (power & structure)
 By-laws (how operates and makes decisions)
BOARD OF DIRECTORS
A group of volunteers
legally responsible &
accountable (as a
group) for all operations
- upholding mission,
compliance, planning,
budgeting, fundraising,
fiscal & program
oversight, etc.
Become an incorporated organization
(without tax-exempt status)
ADVANTAGES
•
•
•
•
•
•
•
•
DISADVANTAGES
• Lose flexibility (must obey non-profit laws)
Broader
• Must comply with more regulations and file reports
accountability
• Must spend time on tasks needed to manage a legal
1st step towards
entity (e.g. compliance, mtg. minutes)
501(c)(3)
• Lose some individual control (to Board)
Institutional
• Still limited fundraising capability
recognition
Register &
WHY CHOOSE THIS MODEL?
protect legal
name
• Long-term need & hope to exist many years
Public
• You want written rules and formal structure
recognition &
• You want the name & org to continue beyond
credibility
founders
Clarified mission
• You plan to apply for 501(c)(3) status
& structure
• You need to raise significant amounts of funds
Limited liability
• You may want to hire paid staff
No taxes up to
$5K income
Become an incorporated organization
(without tax-exempt status)
NEXT STEPS
1. Consult technical assistance
and legal advice
FOUNDING BOARD
•At least 3 are
required
•Max 9 or 11
recommended
•Odd number
•Local VOLAGs, ECBOs, United Way
•Project SOAR, Mosaica, ECDC, SEARAC
•ECBOs in other states
•www.nonprofitcentermilwaukee.org
•www.wisconsinnonprofits.org
•http://wisconsinrivers.org/index.php?pag
e=content&mode=view&id=129
2. Form your Board of Directors
•www.wdfi.org/_resources/indexed/site/
corporations/form102_f.pdf ($35 fee)
• Name
• Registered Agent name & address
• Org’s office address
• Name/address at least 3 board members
• Purpose (consult lawyer or IRS pub. 557)
• Member or non-member
3. Do assessment and determine your
mission, overall goals, & decide
membership or non-membership
4. Submit Articles of
Incorporation to state
Dept. of Financial
Institutions
Become an incorporated organization
(without tax-exempt status)
NEXT STEPS (CONT)
5. Create your by-laws
•How & how often are you going to meet?
•What are your meeting rules? (quorum,absence)
•What’s the BoD’s role & size? How recruit?
•What committees do you want?
•How are decisions made?
•How do you handle contracts, loans,checks?
•How do you book & record expenses?
•How is Executive Director hired?
6. Create strategic, operational, activity &
fundraising plans, and budget
http://drl.wi.gov/prof
_docs_list.asp?profi
d=85&locid=0 ($15)
7. Register as charitable org with State
(DRL Form 296) (if raise over $5K)
8. Submit ongoing reports (annual report
& fees if earn more than $5K); submit
any amendments to Articles of Inc.
Get a fiscal sponsor
Your group is an
unincorporated association
or incorporated org without
501(c)(3) status, but would
like to receive grants and
more significant donations
GRANT MODEL
If your assoc/org has the
capacity to hire & oversee
staff; manage projects;
manage own finances, payroll
(FEIN), taxes; arrange benefits,
and has insurance: ACCEPT A
SUB-GRANT FROM SPONSOR.
Sponsor will accept funds you
raised, sub-grant to you,
oversee your grant
management, and take a %.
Develop a partnership with an
existing 501(c)(3) org, who will
be your fiscal sponsor and
accept & manage funds on your
behalf
501(c)(3) PARTNER YOUR ASSOC/ORG
Full discretion &
control of funds = their
grant; hires & pays
your staff (legally
theirs) & expenses;
does reporting;
provides insurance;
oversees work;
delegates authority to
your Board or advisory
group; gets a % for
admin costs; may offer
office & admin support,
etc.
OR
Program
Autonomy;
comply with
sponsor’s
policies &
procedures;
chooses staff;
fundraises
Get a fiscal sponsor
ADVANTAGES
• You can fundraise &
offer tax exemption
• You can raise funds
while waiting for
your 501(c)(3)
• You can raise funds
for a short-term
project w/o
developing org &
paying fees
• You can focus on
fundraising,
programs, and
planning rather than
financial mngmt,
reporting, etc.
• Enhances
fundraising
• Provides you
mentorship
DISADVANTAGES
• Sponsor has full legal and fiscal responsibility
for funds you raise, & could limit your freedom
• May limit you from approaching certain
funders if sponsor already works with them
• Sponsor takes a fee from your grant
• If you are unincorporated you have limited
legal power if relationship doesn’t work out
WHY CHOOSE THIS MODEL?
• It is often the most practical short-term
alternative for an emerging org
• You expect to operate for a limited time
• You don’t yet know whether your work will
have long-term support from community or
funders to sustain it
• You want to focus on program activities rather
than building an org and doing fiscal mngmt.
• You will soon file or are waiting for 501(c)(3)
but want to start fundraising
• You would like mentoring before 501(c)(3)
Get a fiscal sponsor
NEXT STEPS
1. If not incorporated, register as an
unincorporated association & create Articles
2. Find a sponsor
•Must be 501(c)(3)
•Good fit: mission, values,
non-overlapping funders
•Strong capacity &
systems
•Knows how to be a fiscal
sponsor
•Good reputation
•Orgs you know
•Local VOLAGs
• Refugee /immig. coalition
•Consult public agencies
•United Way/Jewish Fed.
•Community Foundation
•Community leaders
•NNFS
3. Choose an appropriate sponsor
4. Develop partnership
• Decide your priorities, research orgs: website
and networks. Compare with your criteria.
• Contact shortlist: find appropriate senior staff.
• Set meeting directly via phone or use contacts
• 1-2 of your key leaders attend meeting. Be
prepared to learn; discuss who you are; what
you want to accomplish; why you need
sponsor; why you think that org is appropriate.
• Negotiate a fiscal sponsorship agreement.
Get a fiscal sponsor
NEXT STEPS (CONT)
5. Overcome common challenges during startup, such as learning policies, hiring, handling
expenditures, etc.
•Build trust &
communication
•Hold regular meetings
•Build annual review into
agreement
•Ensure procedures in
place to train new
personnel
•Develop and implement
a comprehensive &
clear agreement
•Ensure regular
communication & timely
problem solving
6. Sustain your relationship
7. Leave planned &
organized
• Do all you can to complete work plans of
current grants
• If you decide you need new sponsor: establish
new sponsor before transferring funds
• If you obtain 501(c)(3), work with sponsor to
transfer funds & assets to you
• Leave on good terms & communicate well to
your community
Become an independent 501(c)(3)
organization (tax-exempt)
Your org takes the big
decision that it can assume
full, long-term responsibility
‘When I started a non-profit & we got
our 501(c)(3), I didn’t know how much
work it would be. I thought that once I
had that letter…the $ would come.’
•Tax exemption (income,
funders, sales tax)
•Ability to raise
significant funding
•Independence, control,
legitimacy
Obtain federal 501(c)(3)
tax-exempt status
YOU MUST
YOU GET
•Exist for public good&
meet definition
•Be governed by
volunteers (Board)
•Be independent
•Be non-partisan
•Not profiting an individ.
•Ensure fiscal
responsibility
•Activities = mission
•Limit lobbying
•Be publicly accountable
(be ready to show: articles of inc;
form 1023; status letter; last 3 990s)!
Become an independent 501(c)(3)
organization (tax-exempt)
BE READY TO:
WHY CHOOSE THIS MODEL?
• Develop policies,
procedures, &
systems for financial
& program
management
• Form audit committee
• Keep good records
• Do more paperwork!
www.irs.gov
• You have special niche, and intend to
have a variety of programs that require
significant funding & paid staff
• You will raise > $25K/year, incl. funders
who want tax deduction & grants
• You want independence & autonomy
• You are willing & committed to building
an organization – to focus on putting
policies, procedures, and systems in
place
• You are committed to building the team
of people needed to be successful.
• You want org to be around for years
• The legitimacy and credibility of
501(c)(3) is important to you.
•IRS form 990 (tax return)
•Annual inc. report to state
•Payroll taxes, form 941
•State income tax withholding
•FUTA tax & state unemployment
• Form 1099 – payment to contractors
•Insurance: liability, D&O, worker’s comp
•Whistleblower protection, conflict of interest and document retention policies
Become an independent 501(c)(3)
organization (tax-exempt)
DON’T CHOOSE THIS MODEL IF:
While the value of specific ethnic
groups coming together for
mutual assistance is huge, not
all these groups need to or
should become 501(c)(3) s. In
most places, there are simply
not enough resources to sustain
numerous ECBOs.
• You think it means you have your own
organization you can control
• You think there’s a lot of $ out there
for refugees & if you start an org you
can get your share
• You think it will mean you can
immediately get a salary
• You don’t get along with the
leadership of an existing non-profit
that serves your community, so you
decide to start your own
• You think it will enhance your
reputation in the community
If no, orgs ultimately end up
competing with each other, in
the worst case, conflict develops
and community suffers
Do we really need
501(c)(3) or can we
carry on without it?
Become an independent 501(c)(3)
organization (tax-exempt)
NEXT STEPS
1. Follow steps above for incorporation.
IRS Form SS-4
www.irs.gov/pub/irs-pdf/iss4.pdf
2. Apply for Employer Identification Number
3. File Application for tax-exemption with the IRS
If you choose, you
must file within 27
months of
incorporation
Useful: consult a
pro-bono lawyer or
an org helping
nonprofits to fully
understand the
questions
Complete and file IRS Form 1023 & attachments:
•Mission statement
•Narrative description of program & activities
•Written description of your existing or
planned fundraising activities
•Budget for the current & next 2 fiscal years
•Articles of Inc.
•By-laws (including conflict of interest policy)
•Board minutes showing approval for 501(c)(3)
•$750 if plan to raise more than $10K
Request & receive ‘advance ruling’
for 5 years ‘letter of recognition,’
then Form 8734
File for state tax
exemption, Wis
DOR Form S-103
So you have decided to organize to help your
community…
Become a project of another organization?
Become an unincorporated association
(without tax-exempt status)?
Become an incorporated organization
(without tax-exempt status)?
Get a fiscal sponsor?
Become an independent 501(c)(3) organization
(tax-exempt)?
Ask yourself 3 questions:
1. Is there a need for a one-time-only project to address a short-term
need or ongoing programs &services to address long-term needs?
2. If you were to start an organization, which niche would it fill?
3. If you started an organization, would you be able to keep it going?
www.ethniccommunities.org
[email protected]
This training is based in large part on materials in
the resource:
Choosing the Right Structure for a Community
Organization:
A Toolkit for Refugee Community Leaders
Prepared by Mosaica: The Center for Nonprofit
Development and Pluralism www.mosaica.org
http://www.wisconsinrivers.org/documents/Filiings%20and%20F
orms.pdf
http://wilawlibrary.gov/topics/comlaw/nonprofit.php
http://www.irs.gov/charities/index.html?navmenu=menu1