Reserving the nonprofit name (Step 1) only took 6 days!
If doing good should be easy, then why does starting a nonprofit seem so complicated? I was asked this question so many times after launching Idle Tuesdays Recording Studio that I decided to put my responses in a book. Last year, I published Starting Your Nonprofit, a workbook simplifying the process into 11 steps.
Since publishing the book, I’ve been able to help people all over the country launch their own nonprofits.
I recently started working with residents, business owners and local politicians in Studio City, California to create a nonprofit called “Rediscover Studio City East.”
This group of people wants to revitalize the east end of Studio City, near Universal Studios Hollywood, through a number of community-driven initiatives.
Following the 11 steps in my book, I’m blogging about starting a California nonprofit. My hope is that this real-time information will answer questions and help other founders get their nonprofits up and running.
In my last blog, I summarized Step 1 – reserving your nonprofit name with the California Secretary of State. This form was snail mailed on August 11, 2016. By August 17, 2016, the Secretary of State had replied, confirming our nonprofit name was available.
The Secretary of State only took 6 days to reply!
After receiving confirmation “Rediscover Studio City East” is available, it was time to move onto Step 2 (which I started working on immediately after I completed Step 1). Because we had the Articles of Incorporation ready before we heard back from the Secretary of State, we were ready to advance to Step 2 without delay.
Step 2 – Draft Your Articles of Incorporation
I snail mailed 4 copies of the Articles of Incorporation (in a 9″ x 11″ manilla envelope), along with a $30 check, today, August 31, 2016 to the following address:
Secretary of State
Document Filing Support Unit
PO Box 944260, Sacramento, CA
We’ve done everything we need to do for Step 2. The rest is up to the Secretary of State. If everything goes well, we’ll receive an “endorsed” or “stamped” copy of our Articles of Incorporation within 2-4 weeks. The Secretary of State will stamp our “corporate number” on the copy they return to us – this number is important and comparable to a person’s social security number. The Secretary of State will use this number to identify your corporation from this point forward.
If there is an issue with the Articles of Incorporation, we’ll receive a letter letting us know 1) what the issue is and 2) what needs to be done to resolve the issue.
NOTE: California nonprofits are corporations…obtaining a federal tax-exempt status is what differentiates for-profit corporations from non-profit corporations.
Step 3 – Write Your Bylaws
Before the Secretary of State endorses our Articles of Incorporation, we want to draft our bylaws. Bylaws are the “rules” this organization will be governed by. It always helps me to think of this process like a video game.
Imagine you’re responsible for creating a video game from scratch. Will there be gravity? What will the video game people value? Does right and wrong exist? What will happen if a video game alien does something wrong? How will the good video game people be rewarded when they’re brave and do something great?
Each organization must create their own bylaws, establishing how they want their “game” to be played. Unlike the Articles of Incorporation, bylaws are not submitted to the Secretary of State, or any other agency. They are solely for an organization’s use.
And they’re not really that important until they are. Two years ago I was involved in a situation that was ultimately resolved by an operating agreement (bylaws) from the 1970s. For decades, nobody was really looking at the bylaws, but when a decision needed to be made, it was the bylaws that determined the ultimate outcome.
Of the 11 steps in my book, writing the bylaws took more time than anything else.
When I was starting Idle Tuesdays Recording Studio, I google’d sample bylaws and compiled what I found. Then I went through the samples with a fine tooth comb to create the bylaws we ended up going with. Writing bylaws requires attention to detail and forward thinking…you’ll need to answer questions that are not yet even being asked.
One of the biggest mistakes I see founders make is paying too little attention to their bylaws.
They don’t like it. It’s not fun. It’s too technical. Too detailed. Or too anything else, and all they really want to do it focus on programs. So they get their nonprofit up and running and, a few years down the road, bump into an issue that requires the bylaws to play umpire. Only when the bylaws are scrutinized by others, does the founder realize important information was left out. This not only doesn’t solve the issue at hand, but it creates additional issues. Nobody wins with vague bylaws.
Avoid future issues by drafting air-tight bylaws…even if you have to kick, scream and complain as you’re working on them.