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4 Common Traps When Starting a Nonprofit

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The idea of creating, running and growing a successful nonprofit organization appeals to a lot of entrepreneurs and business leaders. That makes sense, since those who hold leadership roles tend to value the notion of improving conditions for underserved communities or want to advance environmental and social causes important to them. However, it can also present a minefield of potential traps for the unwary to navigate. That's why it’s important to identify the following potential obstacles before you undertake the arduous process of securing 501(c)(3) status from the Internal Revenue Service.

The 501(c)(3) is what most of us think of when we say “nonprofit.” It's an entity named after the special section of the tax code that governs it, and it's limited in how it raises and spends funds by both heavy IRS oversight and prevailing economic realities. Generally, a 501(c)(3) is required to minimize operating expenses in order to maintain a good reputation. Nonprofits that spend a smaller percentage on advancing their mission than on operational expenses are not well-regarded in philanthropic circles. Inefficiencies........

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