How to Start a Charity

With so many different charities already in existence, why would you want to start a charity?

The most common answer to this question is probably that you can't find an existing charity offering the services and or programs that you want to provide. Or perhaps you want to target a very specific group or issue that is not covered by other charities.

When considering setting up your own charity, a sensible approach is to start by defining what you want your non-profit organization to achieve:

Ask yourself why you need to create a new charity:

Answering these questions should allow you to put together a clear mission statement.

Once you have defined your charity's mission, you need to work out how you will be fundraising.

In order to be able to raise funds in the form of tax-deductible contributions, your charity must serve a function that benefits the public. You can meet this condition in several ways. For example, an organization can provide educational programs, advance scientific research, provide religious teachings, or even provide endowments for art and literature.

If this condition is fulfilled, then your charity will be able to seek tax-exempt status from the IRS. To achieve this status, an organization must be designated a "501c3" charitable organization. A 501c3 is simply the name of the section of US tax code referring to organizations that are tax-exempt.

As the name implies, tax-exempt bodies do not need to pay federal corporate income taxes. They may also be eligible for lower rates from the postal service and may apply for certain grants. Tax-exempt status gives your charity credibility and offers benefits, status and powers similar to those enjoyed by large organizations such as the Red Cross and the Roman Catholic Church.

Most successful charities eventually reach a point at which creating an endowment fund is necessary.

Several critical factors should be considered when deciding whether to establish an endowment fund or not. First determine why you want to create the endowment; what will the purpose be? Second, begin careful planning; a successful fund requires thoughtful development. Third, establish the policies and procedures related to the fund, and make sure these are in writing. Finally, consider how you will promote the endowment. Think about how you will convince contributors of the value of the fund and who you will need to employ to close the deals.