Non-profit organizations have been integral in creating many important changes in the world. There are a lot of causes out there that deserve a helping hand from people with the means to do so. Many of these causes have found their helping hands through the work of non-profit organizations.
As the title suggests, these organizations are characterized by a lack of profit flowing from the work done. Proceeds that come in through donations or purchases are to be spent on furthering the cause and helping those in need. Some of the money will be needed to pay for things like equipment, marketing, and a base income for those whose sole work is involved in the organization. None of it is meant to make a profit.
For people trying to enact such positive changes in the world, it can be confusing to see so many legal documents that have to be filed and government regulations that have to be followed. Why is it so hard for good people to do good things? The answer is simple: There are bad people in the world. Without these documents and compliance stipulations in place, it would be far too easy for ill-meaning individuals to take advantage of the kindness of others.
If you are someone trying to ensure that your non-profit organization remains compliant with the laws, rules, and regulations set forth, then you need to be sure that the following things are happening within your organization.
You Should Have No Investment Opportunities
This is one of the biggest differences between a for-profit and a non-profit organization. Businesses that have been set up for profit welcome investors and share-holders to add to the business coffers—investors make it possible to advance and grow the company. The proceeds that are incurred later on will, in part, be given to these investors.
This is not allowed for non-profit organizations. Donations, obviously, are always welcome, but must be given on a donation basis only. No donation should ever be given with the expectation of a return of the funds in any way.
Your Expenditures Should All Advance the Cause
There are a lot of ways to raise money. As someone running a non-profit organization, this is something you have likely found. Enterprisers over the years have come up with a lot of great ways to raise funds for different causes. No matter how you choose to raise the funds, you need to be completely certain that all of your proceeds are spent for the tax-exempt purposes of the organization.
Whether you are selling items, renting a space, offering tickets to an event, holding a raffle, or simply placing donation boxes in strategic locations, it is vital that all of that money be collected and spent in ways that cannot be seen as personal gain.
If you plan to take some kind of provisional income from the proceeds, then there are some important forms that will need to be filled out in a very specific way to make this possible. To that end, any money that goes to this purpose should be put in an account, and none of your personal purchases from that money should be itemized in the non-profit records.
You Cannot Lobby for Political Campaigns
A surprising amount of non-profit groups have come under fire for this very situation. Even if there is a candidate who is willing to support legislation that will help promote your cause, you have to be very careful never to do anything that would lobby for that candidate while acting under the umbrella of your non-profit group.
Of course, as an individual, it is your right and privilege to support whatever political party or candidate you see fit. You just have to be sure that none of your time, money, or attention is spent in this political bent while acting under the name of your charitable group.
Maxwell Charles Livingston with Rocket Lawyer states, “In addition to removing 501(c)(3) status, the IRS can require payment of special taxes when a 501(c)(3) Non Profit contributes to any political campaign(s).” In other words, there are groups that can offer support for political candidates, but they are very different from traditional non-profit groups. If you want to help a candidate in this fashion, then you will need to create a separate group that will fit into these parameters.
You Must Keep Accurate Records
The IRS is going to demand a very carefully kept record of everything you do with your non-profit group. You will have to monitor all purchases, all donations, all events, all people involved, and many other important details. They will need dates, amounts, statistics, and receipts.
In order to keep so many important files of information organized, you will want to use the organizational tools that come with Document Management Software (DMS) programs. This will help you to easily input, organize, and access information.
When all of this data is properly filed and organized, it will be much easier for you to satisfy the IRS and to ensure that you and those working with you have stayed in line with the set-apart compliance standards.