It’s common sense that the right type of organization to run community events to benefit the public is a non-profit. What perhaps is not common sense, is the cost associated with running one. Let’s start with non-profit benefits, but focus more on direct and indirect costs. One of the benefits of a registered 501.c.3 like our Data Driven Technologies, Inc. is not paying any Federal/CA State income taxes which gives an impression that it’s free. Let’s attempt to clarify and effectively debunk the idea that the cost of running a non-profit is zero.
Perhaps now, after 4-5 years of running a non-profit out of California, we can clearly see what direct and indirect costs are as well as startup vs. ongoing costs. The following is neither tax nor legal advice. Just our personal experience and observation.
Startup cost
CA Secretary of State+CA DOJ Charity Registration+IRS+Bank+Credit Card Payment Gateway
Using a paid service such as SwiftFillings.com (see Fig #1) allowed us to complete all the initial fillings with the Internal Revenue Service (501.c.3 determination), California Secretary of State (creation of new corporation), California Department Of Justice (public charity registration) in 1-2 hours.
Once we received an EIN and IRS letter of determination, we started to look for a bank that offered a free checking account. Finding a bank that is willing to open a free checking account for a non-profit took at least 3 trips to 3 different banks with about 4 hours spent in total.
Cost: direct = $300 with indirect = 4-5 hours
Ongoing cost
CA Secretary of State – The California Secretary of State requires any new organization to file papers with the State (Fig. #2). The age of your organization will define the amount of effort as well as the cost
Cost: direct $20-$200 with indirect = 30-60 minutes
CA Department of Justice Charity Registry – The California Department of Justice requires any new charity to register (Fig. #3).
Cost: direct $25-$200 with in-direct cost of 30-60 minutes (depends on how fast https://oag.ca.gov/ website works on that day)
Internal Revenue Service – IRS requires yearly filing for a non-profit/public charity. It is free and requires submission of a 990-N electronic form (Fig. #3)
Cost = direct $0 with in-direct cost of less than 30 minutes (depends on https://www.irs.gov website performance)
Total cost: direct = $50-$200 vs. indirect = 90-160 minutes
Conclusion
Contrary to popular belief, running an IRS-recognized 501.c.3 organization is not free. That being said it’s fairly inexpensive at a direct cost, but you need to take into consideration the indirect cost as well. Your indirect cost will include your dedicated time to “feed the government bureaucracy” and it could easily take more than just a few hours.
Hopefully, by now know exactly what it takes to create and most importantly keep your non-profit running. Good luck!
Data Driven Technologies (DDT) 