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
The process of creating a strategic plan is almost as valuable as the finished plan itself and offers many benefits to the organization. Three broad characterizations summarize some of the benefits that may be enjoyed by organizations that take the time to create a strategic plan. First, creating a strategic plan promotes strategic thought and action. Critical information will be gathered and acted upon in a more systematic manner. The Board and the staff will be more united in their vision of what is necessary to achieve the organization’s goals, and their individual actions will be more aligned with the broader organizational priorities. Second, the decisionmaking process will be improved. Not only do strategic plans focus attention on critical issues, but the plans provide the Board and the staff with rubrics for dealing with challenging situations. Third, strategic plans promote action. Organizations engaging in strategic planning are more responsive to demands placed upon the organization and more effective in dealing with new challenges.
Learn more: The Free Management Library - Strategic Planning Basics
The Iowa Principles and Practices for Charitable Nonprofit Excellence says, "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." (II.A.1.)
The board of directors is the group of individuals that manages the nonprofit. The board of directors serves the organization. It does not own it. Under Iowa Code 504.803, a nonprofit corporation can have a board of one director, but the IRS usually insists on at least three directors. The Iowa Principles and Practices for Charitable Nonprofit Excellence advises nonprofits to have a board of at least five directors. (V.B.3) When a nonprofit is a trust and not a corporation, the board is often called a board of trustees rather than a board of directors.
A mission statement sets forth your organization's purpose, vision (what it hopes to achieve), and values (the guiding ethical principles in pursuing the mission). It is a clear statement of what your nonprofit does, whom it serves, and its uniqueness when compared to similar organizations. The Iowa Principles and Practices for Charitable Nonprofit Excellence gives the following suggestions for what a mission statement should address: "a. Why does the organization exist? b. What service does the organization provide? c. What are the geographical boundaries in which the organization will function? d. Who are the clients to be served? Why should the clients utilize the services of the organization? e. What differentiates the organization from those working in the same or allied fields? What is the organization’s niche? How do you position the organization in the community? f. Who are the key constituents both internal and external? Why should they associate themselves with the charitable nonprofit? In short, who are we? Why are we here?" (III, 5)
Every US and foreign charity that qualifies under Internal Revenue Service Code section 501(c)(3) as tax-exempt is a private foundation unless it demonstrates to the IRS that it falls into the public charity category. According to The Foundation Center, a private foundation is a nongovernmental, nonprofit organization having a principal fund managed by its own trustees or director. Generally, a private foundation is a fund of private wealth established for charitable purposes. The principle function of most private foundations is to make grants to other nonprofit organizations, qualified individuals, and government entities. On the Form 1023 application for exemption Part X, you work through factors to determine if the nonprofit can get public charity status. Generally, tax treatment for a private foundation is less favorable than for a public charity.
There are a number of ways that a 501(c)(3) moves from private foundation to public charity status. If the nonprofit is a church, school, or hospital, or tests for public safety, it will be a public charity. The nonprofit can also get its funding or support primarily from the general public, receiving grants from individuals, government, and private foundations. If one third of the organization's support comes from these public sources, it passes the "public support test". There are a variety of such support tests. For more information about them, see page 32, Qualifying as Publicly Supported in IRS Publication 557 - Tax Exempt Status for Your Organization. On the Form 1023 application for exemption Part X, you work through factors to determine if the nonprofit can get public charity status. After receiving exemption, Form 990 filers will then use Schedule A to calculate that fiscal year's public support.