Create a Nonprofit for Your Homeschool Community CAROL TOPP, CPA - - PDF document

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Create a Nonprofit for Your Homeschool Community CAROL TOPP, CPA - - PDF document

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4/18/2019 Create a Nonprofit for Your Homeschool Community CAROL TOPP, CPA HOMESCHOOLCPA.COM Carol Topp, CPA 1 4/18/2019 Agenda Difference between a business and a nonprofit Advantages and disadvantages Forming a board

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Create a Nonprofit for Your Homeschool Community

CAROL TOPP, CPA HOMESCHOOLCPA.COM

Carol Topp, CPA

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Agenda

  • Difference between a business and a nonprofit
  • Advantages and disadvantages
  • Forming a board
  • Nonprofit incorporation
  • Creating bylaws
  • Drafting a budget and setting up a bank account
  • The time and expense

A nonprofit is:

Organized and Operated

Founding document

Bylaws Articles of Incorporation

Purpose

Educational

No profit motive No owner. Board run

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Business vs Nonprofit

Owner Taxes Hires workers Owner controlled Profit-motivated No owner Can be tax exempt Hires Exec Director Board controlled Exempt purpose

POSITIVES NEGATIVES

  • Teamwork
  • Eligible for tax exempt

status & donations

  • Mission-oriented
  • Volunteers
  • Respectability
  • Lose control
  • Not tax exempt = taxes
  • No exempt purpose
  • No church host! 
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Form a Board

EIN and bank account

Timeline

What does a board do?

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BOARD

Governance:

Mission Strategy & goals Establish policies Accounting procedures Legal compliance Hire and appraise Exec Director

PAID STAFF Management:

Day-to-day operations

Dual roles common in small and start up nonprofits

Excellent short videos: https://www.youtube.com/user/foundationgroup/videos

Board duties

Duty of Care: Attend meetings, read financial statements Duty of Loyalty: Conflict of interest policy, avoid personal advantage

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Board duties

Duty of Compliance/Obedience: Read the bylaws and policies. Know and obey the required IRS and state laws. Duty to Management: Develop a budget, accounting checks and balances, etc.

Financial Statements

Financial reports should delivered to the board every month. Financial best practices at HomeschoolCPA.com/Fraud

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Who can be on the board?

Board Qualifications

Passion Business skills Nonprofit or committee experience Able to help make financial decisions Integrity, value compliance and transparency

https://www.501c3.org/setting-up-your-nonprofit/

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Unrelated board

Unrelated by Family

  • AHG example

Unrelated by Business and employment https://www.501c3.org/nonprofits-board-directors/

No rubber stamp boards!

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Board Structure

Treasurer

Executive Director

Board/Governance Paid Staff/Management

Secretary Chair

All volunteers

The board can hire and fire the Exec Dir even if she is the founder!

Employees

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Treasurer

Director Director

Board/Governance and Management

Secretary Chair

All volunteers Typical homeschool co-op/small nonprofit

May not have a vote

Treasurer

Board

Secretary Chair

Advisory Board

Committee Committee

Executive Director

Getting others involved in your nonprofit

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Treasurer

Executive Director Board Employees

Secretary Chair Chair Teacher Teacher Teacher Teacher

Hiring employees

Treasurer Chair & Principal Executive Director/Headmistress Board Paid staff

Secretary Teacher Teacher Teacher Teacher

WRONG!

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Nonprofit Boards Questions?

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Nonprofit Incorporation

Bylaws

Nonprofit Incorporation

EIN and bank account

Timeline

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Advantages of NP Incorporation

Protect leadership: Limited liability

By default: unincorporated association Individually and severally liable

Legal entity

Hire employees, sign lease/contracts/licenses, buy property in name of corporation

Longevity

Articles of Incorporation

Birth Certificate Filed with your state’s Secretary of State

HarborCompliance.com>Information Center>Nonprofit Start Up Guide >Formation by State

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IRS required language for 501c3 status

1. Purpose statement 2. Limitations 3. Dissolution clause

See HomeschoolCPA.com/Samples

Should my nonprofit be an LLC?

Nonprofit Corp offers limited liability like LLC

501c3 NP Corp LLC LLC LLC

IRS 12 conditions

Nonprofit LLCs cannot get 501c3 status unless under a 501c3

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EIN and bank account

Timeline

EIN and Bank account

Get EIN (free) at IRS.gov Form SS-4 Open bank account

EIN letter

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Money Management

Create a budget early on!

FREE: HomeschoolCPA.com/WebinarFR EIN and bank account

Timeline

Create a budget

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Bylaws

Bylaws

Rules of how an organization will operate

Are there members? Do members vote? On what? How often are meetings held?

 Can they be held by phone or video?

How are board members chosen?

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More on Bylaws

Board officers, roles Executive Director Committees Conflict of Interest policy

Sample bylaws at HomeschoolCPA.com/Samples

State Filings for Nonprofits

Dept of Revenue: Corporate tax

  • exemption. Sales tax

exemption. Secretary of State: Nonprofit corporate status update every 1-5 years. Attorney General: Charitable Solicitation for donations or fundraisers HarborCompliance.com>Information Center>Resources by State

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Questions?

Tax Exempt Status

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Bylaws EIN and bank account

Timeline Nonprofit status like married couple Tax benefits come with filing tax forms!

Nonprofit not same as tax exempt status

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Does my nonprofit have to be tax exempt?

No, but… Pay corporate income tax on surplus

  • 21% of profit on IRS Form 1120

No tax deductible donations or Box Tops, etc.

that require 501c3 status

Perhaps no sales tax or property tax exemptions (varies by state)

Nonprofit Incorporation

Apply within 27 months of formation

IRS will back-date tax exempt status to date of formation

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Filing with IRS for 501(c)(3) status

FORM 1023-EZ FORM 1023 (26 PAGES)

Revenues < $50,000/year IRS fee $275 1-4 weeks Revenues > $50,000/year IRS fee $600 + 3-6 months

Tax exempt application webinar

Coming June 2019

  • IRS Forms
  • Cost
  • Tips for DIY
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501c3 tax exempt status

Convert a Business into a Nonprofit

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Substantially taken over all the assets or activities of a for-profit entity; Been converted or merged from a for-profit entity; or Installed the same officers, directors of a for-profit entity that no longer exists.

  • IRS Instructions to Form 1023-EZ

Convert For-profit to Nonprofit “Successor to a for-profit entity”

IRS requires longer application Form 1023

Narrative, financial statements, Articles of Incorporation, bylaws etc.

IRS focus of audits, questions, etc.

  • IRS 2019 Exempt Org Work Plan

Successor to a for-profit entity

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Cost

Cost

IRS 1023-EZ IRS Form 1023

Nonprofit incorporation $20-100 $20-100 EIN free free 501c3 IRS fee $275 $600 501c3 Professional help $300-$400 $1,275-$3,000 Carol Topp CPA $85/hour $85/hour Total for tax exempt status

$680-$760 $1,980-$3,785

Attorney to review legal agreements (licenses, employee contracts, leases, etc.)

$500-$2,000 $500-$2,000

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.com Questions?