bill_nonprofit

I did a bit of research on non-profit status in the US- it's an involved process. It will take some time and thought on how you would structure the entity. Here's a basic idea of the process:

-Decide on your structure. You will have to have a charter or articles of incorporation which state what your primary purpose is and what your intentions are. The basic idea is something like 'we will perform x services or produce x product for x industry'. Usually there is language that leaves an open loophole like 'in addition to our stated purposes we may pursue other legal means of revenue' or something like that (at least with for-profit companies). The articles may establish the initial board members as well as officers, or at least when and how they will be appointed/elected in the future (varies depending on state law). There are typically several clauses of legalese that establish limited liability and several other boring but necessary things. As a non-profit you will have to operate with a board of directors that will determine business course, appoint officers, create budgets, set salaries, etc. The board will be in charge of the entity although the officers (typically president, vice-president, secretary, and treasurer are required) will handle daily operation to manage the board's policies. Officers may be board members but cannot vote on items before the board that affect them directly, such as their own salary. The articles may also specify business headquarters and financial assets, stocks and initial disbursements (wouldn't apply to a non-profit), investments by stakeholders, intention to seek grants, etc. The articles will require some specific clauses to be eligible for non-profit, such as establishing which non-profit you would dedicate your assets to should your non-profit end.

- Incorporate. Corporations are created on the state level so you have to pick a state to incorporate in. The state of Delaware is popular to incorporate in due to minimal restrictions. A couple of other states are recommended as well. Read this: http://nonprofit.about.com/od/faqsthebasics/f/Where-Should-We-Incorporate-Our-Nonprofit.htm .

-Apply for non-profit status. Most likely you will file as a 501c3 non-profit which is an IRS tax status. Being a non-profit means that monies made or taken in that are related to the corporation's stated purpose are not taxable. A non-profit can make a profit; however, those profits cannot be distributed to board members or stakeholders (like dividends from stocks are). Expenses and salaries are paid but any profit after that can only be used to promote the stated purpose of the non-profit. Donations, grants, and gifts must be handled specifically in a way that is determined by the IRS. There are only a few possible purposes that are eligible to be non-profit: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, and preventing cruelty to children or animals. I'm not exactly sure what you have in mind, but I'm assuming it could be charitable if you are giving away work to other non-profits, such as with local support, or maybe educational if your stated purpose is to train coders. I do not know how you would handle charging for maintenance, set-up, ongoing support as was being discussed the other day.

IRS publication 557: http://www.irs.gov/pub/irs-pdf/p557.pdf
Charitable organizations (from publication 557):
If your organization is applying for recognition of
exemption as a charitable organization, it must
show that it is organized and operated for pur-
poses that are beneficial to the public interest.
Some examples of this type of organization are
those organized for:
Relief of the poor, the distressed, or the
underprivileged,
Advancement of religion,
Advancement of education or science,
Erection or maintenance of public build-
ings, monuments, or works,
Lessening the burdens of government,
Lessening of neighborhood tensions,
Elimination of prejudice and discrimination,
Defense of human and civil rights secured
by law, and
Combating community deterioration and
juvenile delinquency.
The rest of this section contains a description of
the information to be provided by certain spe-
cific organizations. This information is in addi-
tion to the required inclusions described in
chapter 1, and other statements requested on
Form 1023. Each of the following organizations
must submit the information described.
Charitable organization supporting educa­
tion.
Submit information showing how your or-
ganization supports education — for example,
contributes to an existing educational institu-
tion, endows a professorial chair, contributes
toward paying teachers' salaries, or contributes
to an educational institution to enable it to carry
on research.

- Run as a corporation. After establishment, you must create the corporate by-laws that establish how the corporation is run and to what ends. Board meetings must be held regularly and minutes kept. A non-profit is not actually owned by anyone and so cannot be sold, only dissolved. You will have to file a form yearly with the IRS at least, if not also with the state of incorporation.


Of course there's more to it, but this is the basic process. I used a lawyer once to incorporate a business and since then I just kind of copy/paste from those documents when creating a corporation (I've started a few businesses. I get bored easy, ok?). The first time it cost about $500 for the lawyer plus state fees (many years ago, my guess is it would be quite a bit more now). The other times it just cost the state fees which totaled about $100. There is enough information online that I believe you could do it without an attorney if you were so inclined. On the other hand, an attorney with non-profit experience could possibly save you a lot of time and trouble, as well as point out possible pitfalls along the way.

Hope it helps, let me know if there's something more you'd like on the topic.