Starting a nonprofit: an overview

While any company in Tennessee may provide a beneficial product or service, the primary goal of the nonprofit is to benefit the public, not to make money for the owner and/or shareholders. These organizations often receive benefits such as tax exemption as they pursue their mission.

There are numerous factors to consider in whether or not to incorporate the nonprofit, including the need for personal liability protection. Unincorporated nonprofit directors and officers do not receive any liability protection. The directors and officers of Incorporated nonprofits do receive liability protection. However, incorporating is more work. If the nonprofit's activities present a very low level of risk, then it may not be necessary to go through the process, which involves filing paperwork such as state forms and the articles of incorporation, and paying a fee. Both unincorporated and incorporated nonprofits may apply for tax-exempt status.

Just as with any other type of business, a nonprofit needs to have a name that is unique and does not infringe on any trademarks. It also cannot have words such as "federal" or "bank" that imply an affiliation.

Nonprofit organizations must have bylaws that define their operations. This should include how directors and officers are elected, how many the organization should have, how long directors serve in the position, and quorum and meeting requirements. The board of directors takes care of the details that allow the organization to fulfill its mission, such as the following:

  • Creating the policies
  • Adopting bylaws
  • Implementing a strategy
  • Opening bank accounts, raising funds and overseeing other aspects of the organization's finances
  • Electing officers
  • Hiring the executive director

People who serve on the board of directors are volunteers and typically do not receive compensation.

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