How Do We Become A CDC?

A CDC is legally the same as any other non-profit entity organized under section 501 (c) (3) of the Internal Revenue Code. Local residents that are interested in forming a CDC should get together and develop a set of by-laws, file for incorporation with their state or local government and once that is completed apply to the federal Internal Revenue Service (IRS) for designation as a tax exempt non-profit organization. The IRS designation is necessary in order for your organization to obtain grants and gifts from any government, corporate, or foundation sources or from individuals. The following sections will provide you with more detail about the basic yet critical steps to form your CDC.

Getting Started

Before you can start working on any of the pivotal points involved in community economic development, you need to understand the foundation for such efforts — your organization.

The first tasks you must undertake to start a community economic development organization are to:

• Establish your board of directors through your community meeting
• Incorporate
• Get insurance
• Obtain your tax-exempt status
• Use a fiscal agent
• Set up payroll and tax filings
• Set up bank accounts
• Set up annual audits and bookkeeping
• Start keeping board minutes

Establish Your Board of Directors

When selecting board members it is important to identify individuals who have strong credibility with a diverse group of community stakeholders. It is also important that these individuals have a unity of purpose for the advancement of your community. Once these individuals are identified, you may wish to strengthen support and commitment from residents in the identified and surrounding geographic areas. This board will evolve over time. In fact, it can serve just as an incorporating body for a few months until you hold your first annual meeting and select a full board of directors.

It may be important at this phase to identify those who are linked to the service sectors that are important to the future of your work. These individuals can include small business owners, locally elected officials, community-based leadership, and faith-based institutions. You may also wish to consider individuals who have experience in workforce development – those creating jobs, looking for jobs, and helping people get jobs.

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