Tag Archives: nonprofit

Seliger’s Quick Guide to Setting Up a Nonprofit Corporation and Getting a 501(c)(3) letter (I Hope You’re Not in a Hurry)

We get a couple of calls a week from folks saying, “I’m in the process of setting up a nonprofit to help _______.” We always say the same thing: “Do you have your IRS 501(c)(3) letter of determination of tax-exempt status, and, if not, have you applied to the IRS?” Too often the response is “No” and “No,” or even-more troubling, “Huh?”, which means the caller doesn’t even understand what she’s doing.

We’ve never had anywhere useful to send these callers, but we’d like to—so here’s Seliger’s Quick Guide to setting up a nonprofit:*

  • Spend some time learning about nonprofits, including the IRS tax-exemption rules, as well as the rules in your state. Presumably one goal of a new nonprofit is to secure grant funds. Most funders expect your nonprofit to be incorporated in the state in which most services will be provided. So, if you want to help cyclopses being emancipated from the foster care system in Owatonna, Minnesota, don’t randomly incorporate in Florida. This step usually takes a few weeks.
  • Apply for a nonprofit corporate charter in your state, following the state rules, as well as the national IRS rules, with respect to board membership, composition, interested parties and so on. To do this, you’ll need appropriate articles of incorporation, but you might as well draft bylaws at the same time, as these will be needed shortly anyway for your state (probably) and your federal tax-exemption applications. This step will likely take a few weeks to a month.
  • If your state has a corporate income tax, apply for state tax-exempt status. This step can take a few weeks to several months—think “several months” in a state like California, which has a very complex application process; Pennsylvania, by contrast, has a simple, quick process.
    At the end of the above steps, you’ll have a conformed copy of your formation documents. “Conformed” is just a fancy way of saying a signed, state-approval stamped copy. You’re going nowhere with the IRS without conformed documents. This is a key point.
  • Apply for a federal Employee Identification Number (EIN). This is the only part of the process that is almost instantaneous.
  • If you haven’t given up or died of old age, you’re finally read to complete your Form 1023, which is the actual IRS application for determination of 501(c)(3) status. You need the letter of determination, because without it, your new organization is not exempt from paying taxes and, even more importantly, donations to it are not deductible by the donor.

Most foundations won’t consider a proposal from nonprofits that lack a letter of determination. You can always try to find a fiscal agent while you’re waiting for the IRS to respond to your application, but that carries its own problems, as we discuss at the link.

Wait you will: it can take the IRS anywhere from three months to several years to approve your 1023. Along the way, you’re likely to get a series of interrogatories from the IRS that are designed to make you crazy, discourage you from continuing, or are genuinely aimed at ferreting out phony applicants, depending on your point of view.

If you do the math, you’ll see the completing the nonprofit formation process typically takes about nine months to two years. This news usually comes as a shock to the hopeful but frequently hapless callers I mentioned at the top of the post. We generally advise such callers to contact an attorney or accountant in their area that works with nonprofits and can help them with the paperwork.

I incorporated my first nonprofit over 40 years ago, when I was a young and starry-eyed intern, but the process is much more complex now. Trying to to this yourself or using one of the $99 Internet incorporation outfits is penny wise and pound foolish. You have been warned; as Robbie the Robot said, “Danger Will Robinson!

There is one way of forming a nonprofit more quickly (and it is not the “expedited review” offered by the IRS for an additional fee, which I don’t think actually speeds anything up). Instead, you wait for a giant disaster and try drafting behind it like cyclists behind a big rig.

After events like 9/11 or Hurricane Katrina, state tax officials and the IRS will often quickly approve new nonprofits because of obvious need, even if the proposed nonprofits have no apparent connection to the disaster. Most of the time the IRS and state tax officials are as motivated as any kind of government bureaucrat. Only the possibility of widespread political heat and anger motivate them to act with the kind of haste one otherwise associates with Amazon.com.

If you have a plausible charitable purpose, don’t be discouraged by the process. Thousands of nonprofits get incorporated and receive their 501(c)(3) status every year. Even the NFL is nominally a “nonprofit,” albeit a 501(c)(6) and it made almost $10 billion last year. Stay the course. Don’t lose heart. And while you’re waiting around for a disaster, you might as well start down the IRS Yellow Brick Road.


* The various state and federal fees are going to run around $800. They’re not refundable.

You Don’t Have to be in a Shithole Nonprofit

Seliger + Associates’s main offices recently moved to Downtown Santa Monica. Those of you who have visited Santa Monica recently know that the area has finally upzoned (which is great) and has tons of new buildings that make it somewhat urban. Santa Monica has some of the world’s most valuable real estate, so insisting on one- or two-story houses makes no sense, but that’s classic American urban policy.

(In addition to five- and six-story apartment buildings, Santa Monica is also now filled with $30 plates of pasta and $5 cups of pour-over coffee, but that’s a separate issue.)

Isaac found a European tailor near the office who’s had a shop in Downtown Santa Monica for over 30 years. One day, Isaac asked Gabor if he loves the new developments, since the tailor now has a ton of customers within walking distance. He does. What did Downtown Santa Monica used to be like? Gabor just said, “The houses were shitholes.”

We’re naturally telling this story for a reason. We’ve heard the same kind of description from some clients when they discuss their own agencies. But nonprofits are more like businesses than most people realize. If you don’t like your neighborhood, you might have to wait decades for the political winds to shift regarding development.

But if you don’t like the nonprofit you’re working for,* grab a hammer and go build your own. You’re not beholden to the existing nonprofit. Maybe you can do a better job. Nonprofits aren’t that hard to start, and if you don’t want to deal with the paperwork, you can hire an account or lawyer to do it for you. People create nonprofits all the time.

Think your local nonprofit is a shithole or is otherwise doing a lousy job? Go do it better down the street. We’ve worked for a number of nonprofits started by disgruntled members of the dominant nonprofit who then went on to compete for the same kinds of grants. Dominant nonprofits are often made lazy by success and start to forget that success is never final.


* Or the one serving your neighborhood. Plenty of nonprofits start this way.

A Grant Writer Gets a New Companion and Explains Some Lesser Known Aspects of Certain Nonprofits

Faithful readers will know that I think every grant writer—or any writer—is better off with a dog at their feet. Writing is a solitary activity and even for those of us who rarely experience writer’s block, there are times when one wants a bit of distraction, and watching a dog find the perfect position for slumber or worry a rawhide bone helps me refocus on writing assignments.

A dog will also patiently listen to me rant and rave about a particularly nauseating RFP section, then wag his tail and lick me. The same can’t be said of most HUD program officers. And dogs need and like to be walked—a great way to clear my mind from the fog of grant writing, particularly since I live very near Palisades Park along the Santa Monica bluffs, one of the most beautiful strolls in LA. A writer writing about having a dog is more or less writing a tale about a tail (I should apologize for this).

IMG_0721I just acquired a new puppy—or I should say a dog of an uncertain age, as Boogaloo Dude (“Boogie”*) comes to me as a rescue. He is a more-or-less Golden Retriever and has most of the attributes of a Golden, including the charming golden smile.

Boogie is purported to be around four, but, given his predilection to sleep about 22 hours a day, he might be a tad older. Boogie isn’t his original name—as one should change an abused dog’s name—and he was horribly mistreated. Now he seems happy to have become Pancho to my Cisco** and is content to receive an occasional ear scratch and belly rub. He sometimes literally runs into the ubiquitous Santa Monica pigeons on our morning walk, seemingly not comprehending what a bird is. The pigeons’ feathers are hardly ruffled and they strut away with a look of avian disdain. When Jake next comes to town, he’ll have to give Boogie a lesson in pigeon chasing, as he’s loved chasing pigeons since he was a little boy and probably still does so in Manhattan when he thinks no one is watching.

I did not get Boogie from Southern California Golden Retriever Rescue (SCGRR), the local Golden rescue nonprofit. Although I tried to adopt a dog from them, I kept getting rejected by the volunteers who decide which applicant gets a dog. Like most animal rescue nonprofits, SCGRR is volunteer-run and member-driven, so there is no hierarchy to facilitate appeals; when a volunteer decides you’re not good enough for a particular dog, you don’t get the dog, or possibly any dog.

Since Goldens are a popular breed, SCGRR has way more would-be adopters than available rescue dogs and is very selective. The organization supports itself in large part through application and adoption fees and, as such, is highly motivated to get as many people as possible to apply, even though the likelihood of getting a Golden through them is low. As an experienced grant writer, I knew this because I know how animal rescue outfits—and especially in-demand breed rescue organizations—are funded. But I played the game for a month anyway before giving up on SCGRR.

Boogie came not through a well-meaning and respectable nonprofit, but instead via The Loved Dog, a business run by celebrity dog trainer to the stars Tamar Geller. She’s Oprah’s dog trainer (this is LA and I’m not making this up). I met Tamar at a JDate event, mentioned that I was looking for a Golden, and learned she rescued one from SCGRR, who had earlier rescued the dog but then was going to euthanize him because he was supposedly aggressive—another example of the tyranny of volunteers that can emerge in membership nonprofits. Tamar scooped up the dog, who is all of 50 pounds and docile, and worked with him for a few months—until I appeared to provide what hopefully will be his permanent home.

IMG_0716The lesson of this story—other than it pays to persevere—is that not all nonprofits are necessarily “golden” and not all for-profits are necessarily avaricious. For example, a little-known fact is that PETA, self-portrayed as a paragon of animal welfare, is actually one of the largest operators of shelters thateuthanize animals. You may find this startling, but PETA has its reasons for euthanizing, which you can evaluate for yourself. As a guy who’s been working for or with nonprofits since the Nixon administration, however, not much in the nonprofit world surprises me; nor does much in the world in general, since even dogs in the U.S. eat better than many humans elsewhere, as the linked story about the adoption of some Sudanese “lost boys” indicates:

The next aisle over, Peter touched my shoulder. He was holding a can of Purina dog food. “Excuse me, Sara, but can you tell me what this is?” Behind him, the pet food was stacked practically floor to ceiling. “Um, that’s food for our dogs,” I answered, cringing at what that must sound like to a man who had spent the last eight years eating porridge. “Ah, I see,” Peter said, replacing the can on the shelf and appearing satisfied. He pushed his grocery cart a few more steps and then turned again to face me, looking quizzical. “Tell me,” he said, “what is the work of dogs in this country?”

But, as Sir Paul put it, “Venus and Mars are alright tonight.” Boogie is a happy dog, I’ve got a boon companion and it’s time to take him for his evening constitutional. And, then it will be cocktail hour and I’ll lift a glass or two to all the other abused puppies that are waiting for someone to watch over them.


* Boogaloo dude is a lyric in one of my favorite songs from the early 70s, Mott the Hoople’s “All the Young Dudes.” Boogie is also the name of Mickey Rourke’s character in the wonderful 1982 film, Diner. So I covered the 70s and 80s with this dog naming exercise.

** As a kid, I always liked Cisco, played by the inimitable Duncan Reynaldo, better than Zorro, but that’s just me. “Hey Cisco; Hey Pancho.”