Consultant’s Corner: Starting a Nonprofit Association

How_To_Start_A_Nonprofit_to_Help_Veterans

Q: I wish to start an “unincorporated nonprofit association” as a nonprofit enterprise to help disabled veterans. What steps should I take and what are the limits of an “association” rather than a 501[C](3) nonprofit organization?

These informal groups are called unincorporated associations. The advantages of being an unincorporated association is that there are (generally) no legal requirements, and they are easy to create. The disadvantages are that they are not tax-exempt, cannot provide a charitable tax deduction to donors for money given to the organization, and will find it impossible to apply for and receive grants from most foundations and corporations.

What is an Unincorporated Nonprofit Association? | About Money

Unincorporated nonprofit associations work best for informal, ad hoc situations where people get together to perform some sort of community service or raise funds for a particular, and usually short-term, goal. If an organization is not ready to file for 501(c)(3) status from the IRS, an alternative may be to seek a fiscal sponsor. This option is discussed in more detail in the article below:

How Fiscal Sponsorship Works | About Money

As to setting up an unincorporated nonprofit association, the following websites outline some of the basic steps, which you can discuss with your lawyer:

5 Reasons to Incorporate Your Nonprofit Association | NOLO.com

About Nonprofit Organizations | AirportNoiseLaw.com

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Bill Wortman

Bill Wortman is the Chief Business Consultant for GoSmallBiz.com, with over 40 years of business experience. In addition to 12 years consulting small business owners, Bill’s professional career includes a big-eight CPA accounting firm, national consumer finance, big-three automotive manufacturing, Arby’s fast food, marketing, and other industries. He’s held multiple executive-level positions and fulfilled the role of CFO at large, publicly held (NYSE, NASDAQ, and AMEX) corporations. In addition, he’s been an owner of private ventures involving residential real estate development and a General Motors new car dealership.