Organization
INRC Director Richard Koontz offers training sessions on nonprofit startup filings. For the next available session, watch the INRC home page.
II. A. Principle–Statutory Guidelines
Iowa charitable nonprofit organizations, whether nonprofit corporations, trusts or unincorporated associations, must ensure that they comply with statutory guidelines and common law in creation of their legal form.
Practices
- A charitable nonprofit organization can be organized in Iowa as a corporation, a trust, a limited liability company or an unincorporated association. While partnerships and sole proprietorships are legal entities in Iowa, the Internal Revenue Service will not give 501(c)(3) status to such entities.
a. Nonprofit corporation status under Iowa Code chapter 504 is often a preferable form for charitable nonprofits, due to the limitation on liability of all those working for the charitable nonprofit corporation. Contrast this to unincorporated associations, in which there is a higher degree of exposure for all association members.
Starting an Iowa Charitable Nonprofit Corporation, by Richard Koontz (2008).
Frequently Asked Questions about Organization
Yes. The Iowa Principles and Practices for Charitable Nonprofit Excellence provide that "Bylaws should be composed and adopted by the board which provide for regulating and managing the affairs of the charitable nonprofit entity." (II.C.1) Bylaws describe the process by which a board of directors meets and takes action for the nonprofit. There are provisions in bylaws concerning the board size, how often it meets, what committees and officers it has, etc. It is important for board members to be familiar with the terms of the bylaws and for amendments to be made to the bylaws as appropriate to reflect changing processes and activities. As an internal document there is no required filing and disclosure. However the bylaws must be attached to the initial application for federal exemption Form 1023 and if the Form 990 is filed with the IRS changes to bylaws must be included. (See core Form 990Part VI.A line 4)
A nonprofit corporation in Iowa must file a biennial report with the Iowa Secretary of State. The biennial report is an electronic filing done in odd-numbered years. Early in the year during which the report is due nonprofits receive a letter from the Secretary of State's office with a login number. The number gives the nonprofit access to the biennial report filing portion of the Web site. (See 2016 Biennial Report Filing). The biennial report form asks for the name of the registered agent the registered address of the corporation and the names of officers of the board. If the nonprofit corporation does not file the biennial report within the required time it will be administratively dissolved. This is done under Iowa Code 504.1421.
In order to be considered tax exempt under IRC 501(c)(3) your organization's purpose must be one of the following: religious, charitable, scientific, testing for public safety, literary, educational, amateur sports, prevention of cruelty to children, prevention of cruelty to animals, or conservation and environmental activities. If your organization is going to be an Iowa Nonprofit Corporation, the purpose must also be lawful according to Iowa Code 504.301.
An outcome is the final component of any given program carried out by an organization. When a program’s inputs (resources dedicated to a particular program, including staff), activities (how the program utilizes the inputs) , and outputs (the direct products of the activities) are all taken into account, the result is an outcome— the effect the program had on the participants. After the activity, did the participants increase their skill in a particular area? Was their behavior modified? Did they accept a new perspective or obtain new knowledge? Many times, organizations keep thorough records about inputs, activities, and outputs, but they do not have a complete sense of what happens to participants after they receive their services.
Tax exemption under IRS code §501(c)(3) has two primary benefits: 1) the donor making a donation to the nonprofit gets a tax deduction, and 2) there is no income tax on related earned income. This is true for purposes of federal income tax and Iowa income tax. Other benefits include the ability to issue tax-exempt bonds for capital projects, qualification for tax-exempt retirement plans (403(b)), and special postal rates.
Generally, four basic functions are included in the definition of management: 1) Planning. Goals must be prioritized, schedules must be created for employees and volunteers, and dates for various events must be set; 2) Organization. This includes the structuring of operations, implementing efficient communication systems, and developing better filing systems; 3) Leadership. Managers should lead by encouraging staff and volunteers and should champion efficient methods that are in line with the organization’s mission; 4) Coordination. Mechanisms for evaluation should be implemented, and information must be exchanged with the community so the organization can efficiently pursue its mission.
Learn more: The Free Management Library: Planning Assessment Checklist
