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How to Start a Nonprofit Thrift Store

Establishing a nonprofit thrift store is similar to starting a for-profit retail business.

Starting a nonprofit thrift store is a multifaceted task, with legal requirements beyond those associated with starting a typical for-profit retail outlet. The establishment of a nonprofit thrift store necessitates compliance with federal and state laws as well as local ordinances. The process requires the same type of planning required of a for-profit enterprise. The mere fact that a thrift store is not designed to generate profits does not mean that the organizational process focuses on legal compliance and an appropriate revenue stream to ensure the successful operation of the enterprise in the short and long term.

Instructions

Difficulty: 5

Step 1

Draft a business plan. Despite the fact that your objective is to create a nonprofit enterprise, you must adhere to responsible business practices, which includes developing a meaningful business plan. A business plan includes basic elements like a mission statement, three-year budget, marketing plan and organizational structure. The business plan serves as the road map for starting and developing your nonprofit thrift store.

Step 2

Incorporate your store as a nonprofit corporation. The secretary of state in the jurisdiction where you desire to establish your business maintains the form necessary to accomplish this task, according to "How to Form a Nonprofit Corporation" by Anthony Mancuso. You provide basic information in the articles of incorporation, including the purpose of the business, the initial board of directors and its primary location. You also need to name an agent for service of process. The agent for service of process is the individual or firm -- a law firm, for example -- served with a summons and petition in a lawsuit should the store ever end up sued.

Step 3

Apply for a 501(c)(3) tax exemption letter from the Internal Revenue Service. The IRS provides an application form and instructions from completion through its website. A 501(c)(3) exemption letter must be obtained for individuals who donate clothing or other items to the thrift store to take a tax deduction for their gifts. Absent this exemption, people who donate to the thrift store have no tax benefit.

Step 4

Obtain appropriate state and local licenses or permits. Licensing requirements vary from one jurisdiction to another, according to "Start Your Own Business" by Rieva Lesonsky. Examples of licenses or permit requirements include those associated with sales tax and fire code compliance. Retaining an attorney to assist with this process likely is a wise decision. The American Bar Association provides resources to assist in finding an experienced lawyer versed in this area of the law.

Step 5

Select a location for the store. A key consideration in selecting a store location is the terms of a lease. Avoid a lease term that is so short that a risk exists of having to move in a short period of time -- less than one year. A thrift store needs to avoid a lengthy lease term, a lease more than a couple of years. As is the case with all startup businesses, no guarantee for success exists. Another consideration is ensuring the location is accessible to intended customers. Although nonprofit thrift stores cater, in part, to people facing financial problems, these stores can also be attractive to a wider segment of the population. Typically, a location situation relative close to a city center tends to work best as far as connecting with the widest swath of potential customers is concerned.

Step 6

Develop a system for collecting items for sale. A determination must be made as to whether the store accepts donations only or may pay for certain items. Consider establishing offsite donation centers to make contributing items more convenient for potential supporters of the enterprise. For example, specialized donation containers can be set up in shopping mall parking lots and at other locations.

Step 7

Select a manager for the store and other staff members. Ideally, a manager possesses practical experience in both retail and nonprofit environments. Sales positions can be staffed by individuals without that type of specific experience, assuming proper training is provided under the supervision of the manager.


References

  • "start your own business"; rieva lesonsky; 2007
  • irs.gov: exemption requirements -- section 501(c)(3) organizations
  • "how to form a nonprofit corporation"; anthony mancuso; 2009

Resources


Article Written By Mike Broemmel

Mike Broemmel began writing in 1982. He is an author/lecturer with two novels on the market internationally, "The Shadow Cast" and "The Miller Moth." Broemmel served on the staff of the White House Office of Media Relations. He holds a Bachelor of Arts in journalism and political science from Benedictine College and a Juris Doctorate from Washburn University. He also attended Brunel University, London.