Nonprofits play an integral role in your local community, state level, and worldwide organizations. Providing a broad spectrum of services, nonprofit organizations include charities, churches, hospitals, universities and other foundations. Writing a charter for a newly formed nonprofit is vital, as the charter explains the main purpose of forming your nonprofit organization.
The Basics of Writing a Charter for Your Nonprofit
The formation of the charter is critical for gaining tax exempt status. Using an exemption status allows your organization to save money. Failing to incorporate the necessary information into the charter may result in a delay or rejection for tax exemption status at both the state and federal level.
When forming your nonprofit’s charter, you may want to consult or hire a reputable accounting firm to ensure the proper document development. Remember the charter document outlines the structure of your organization.
- Name of the Nonprofit: The charter document must include the legal name of your organization. The legal name should stand out among similar organizations. Using strong descriptive words will help draw members, clients, and others to your nonprofit. Generally, the nonprofit’s legal name is at the top of the charter document.
- Location: The next step is naming the location of the nonprofit organization. You want to ensure interested parties are able to find your nonprofit organization. The location information will include the nonprofit’s business address and the county. In addition to the address, the location information should state the name and phone number for the primary contact of the nonprofit.
- Nonprofit’s Purpose: In the charter document, you need to state the reason for forming the nonprofit organization. Inform the readers of the charter how the nonprofit organization will serve the community, members or group. For example, the nonprofit organization may be a charitable organization working with the area’s homeless or a church serving the local community. By stating the reason for the nonprofit’s formation, the readers of the charter will understand your purpose in the community.
- Board of Directors: The charter document must include the full names and addresses of the board of directors or the initial trustees in the nonprofit organization. Along with contact information, you need to inform the readers of the nonprofit charter the position of the members of the board.
- Statement of Earnings Clause: The charter needs to ensure any monetary earnings are not for profitable use. Trustees, the board of directors, officers, members and other interested parties will not benefit from the formation of the nonprofit organization. Employees will receive reasonable compensation. Paying invoices, distributors, vendors and other needed services are justifiable from the earnings.
- Dissolution Statement: The last portion of the nonprofit charter should include a statement informing the readers the process for the dissolution of assets.
Upon writing the charter for your nonprofit organization, the document requires the signature of a witness. The nonprofit charter is an important document for your organization. Forming the nonprofit charter to meet specific criteria may require the assistance from a tax professional to ensure exemption status.
At Ernst Wintter & Associates, our professional staff can assist your nonprofit in making sure it has the appropriate documentation in place, specifically when it comes to a charter and declaring nonprofit status. Call or email us today to schedule a meeting with our Certified Public Accountants and ensure your nonprofit is on the right track.