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.
Transcript
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)
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
EXISTING ORGANIZATION YOU
Control and authority; overall responsibility for planning, implementation, and management
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 organizationNEXT STEPS
1. Define the Project
2. Define your role
3. Look for a right home
4. Set up a meeting to explore the idea
5. Figure out the details
•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?•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?
•Already know an org that you trust?•What’s most important - shared values? financially stable? good reputation & leader?
Learn as much as you can about the org ahead of time.
•Project name•Where it fits in the org chart•Who will fundraise•Staffing•Physical location•Project Advisory Committee
(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)
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
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
Become an unincorporated association (without tax-exempt status)
STAND FOR OUR NEIGHBORS, DCIn 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
• Flexibility• No
government approvals or reports
• Lesser fees• Don’t have to
worry about compliance with non-profit regulations
• Don’t have to spend time managing a legal entity
DISADVANTAGES
• If registered with state, only real disadvantage is limited fundraising capability
WHY CHOOSE THIS MODEL?• Group wants to focus on program, not org
dev.• Group is addressing short-term need, with
no plans to continue once needs are met• Plans to continue as all-volunteer
association, doesn’t plan to expand• Doesn’t plan to raise funds from donors who
care about tax deduction or apply for grants• Doesn’t need significant funds to carry out
activities (generally more than $5,000/year)• Doesn’t need or want a complicated
structure• 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/site/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
CHARACTERISTICS & REQUIREMENTS
Board of Directors = formal structure Assets and liabilities in organization’s name Legal liability (except for individual fiscal
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)
(can be 1st step to 501(c)(3) or not)
BOARD OF DIRECTORSA 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
• Broader accountability
• 1st step towards 501(c)(3)
• Institutional recognition
• Register & protect legal name
• Public recognition & credibility
• Clarified mission & structure
• Limited liability• No taxes up to
$5K income
DISADVANTAGES• Lose flexibility (must obey non-profit laws)• Must comply with more regulations and file
reports• Must spend time on tasks needed to manage a
legal entity (e.g. compliance, mtg. minutes)• Lose some individual control (to Board)• Still limited fundraising capability
WHY CHOOSE THIS MODEL?• Long-term need & hope to exist many years• You want written rules and formal structure• You want the name & org to continue
beyond founders• You plan to apply for 501(c)(3) status• You need to raise significant amounts of
funds• You may want to hire paid staff
Become an incorporated organization (without tax-exempt status)
NEXT STEPS
1. Consult technical assistance and legal advice
2. Form your Board of Directors
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
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?page=content&mode=view&id=129
•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
Become an incorporated organization (without tax-exempt status)
NEXT STEPS (CONT)5. Create your by-laws
6. Create strategic, operational, activity & fundraising plans, and budget
8. Submit ongoing reports (annual report & fees if earn more than $5K); submit any amendments to Articles of Inc.
7. Register as charitable org with State (DRL Form 296) (if raise over $5K)
•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?
Get a fiscal sponsorYour group is an unincorporated association or incorporated org without 501(c)(3) status, but would like to receive grants and more significant donations
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.
Program Autonomy; comply with sponsor’s policies & procedures; chooses staff; fundraises
OR
GRANT MODELIf 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 %.
Get a fiscal sponsorADVANTAGES• 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 outWHY 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 sponsorNEXT STEPS
1. If not incorporated, register as an unincorporated association & create Articles
2. Find a sponsor
3. Choose an appropriate sponsor
4. Develop partnership
•Orgs you know•Local VOLAGs• Refugee /immig. coalition•Consult public agencies•United Way/Jewish Fed.•Community Foundation•Community leaders•NNFS
•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.
•Must be 501(c)(3)•Good fit: mission, values, non-overlapping funders•Strong capacity & systems•Knows how to be a fiscal sponsor•Good reputation
Do it right!
Get a fiscal sponsorNEXT STEPS (CONT)
5. Overcome common challenges during start-up, such as learning policies, hiring, handling expenditures, etc.
7. Leave planned & organized
•Develop and implement a comprehensive & clear agreement•Ensure regular communication & timely problem solving
•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
•Build trust & communication•Hold regular meetings•Build annual review into agreement•Ensure procedures in place to train new personnel
6. Sustain your relationship
Do it right!
Become an independent 501(c)(3) organization (tax-exempt)
Your org takes the big decision that it can assume full, long-term responsibility
Obtain federal 501(c)(3) tax-exempt status
YOU MUST
•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
‘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.’
(be ready to show: articles of inc; form 1023; status letter; last 3 990s)!
YOU GET •Tax exemption (income, funders, sales tax)•Ability to raise significant funding•Independence, control, legitimacy
Become an independent 501(c)(3) organization (tax-exempt)
BE READY TO:
• Develop policies, procedures, & systems for financial & program management
• Form audit committee
• Keep good records• Do more paperwork!
WHY CHOOSE THIS MODEL?
•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
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.
Become an independent 501(c)(3) organization (tax-exempt)
TAKE
YOUR
TIME!
!
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
Do you have a very
clear & disti
nct
service niche?
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.
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
IRS Form SS-4www.irs.gov/pub/irs-pdf/iss4.pdf
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
Useful: consult a pro-bono lawyer or an org helping nonprofits to fully understand the questions
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?
