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How to Start a Nonprofit

6 Jan 2025 3 min read Articles
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A Step-by-Step Guide

Starting a nonprofit organization is a rewarding way to make a difference, but it requires careful planning, attention to legal requirements, and financial preparation. Here’s a comprehensive guide to help you get started.

1. Understand What a Nonprofit Is

A nonprofit organization operates to serve a public or community benefit rather than generating profit for owners or shareholders. Any excess revenue is reinvested into the organization’s mission.

Examples: charities, educational groups, environmental organizations, and social advocacy groups.

2. Define Your Mission and Vision

  • Mission Statement: Clearly define what your nonprofit will do and who it will serve.
  • Vision Statement: Explain the long-term impact your organization hopes to achieve.

3. Research and Plan

  • Community Need: Identify the specific problem or gap your nonprofit will address.
  • Existing Organizations: Ensure your idea isn’t duplicating existing efforts.

Create a Business Plan:

Include:

  • Objectives and strategies.
  • Programs and services you’ll offer.
  • Target population and geographic focus.
  • Funding sources (grants, donations, events, etc.).

4. Costs to Start a Nonprofit

Startup Costs:

  • Filing Fees: Incorporation fees vary by state ($10-$500).
  • IRS Form 1023 or 1023-EZ Fee: $275 (EZ) or $600 (standard).
  • Legal Assistance: $500–$2,000 if hiring a lawyer for filing.

Ongoing Costs:

  • Annual reporting fees (state and federal).
  • Accounting/bookkeeping.
  • Operational costs (website, marketing, office space, etc.).

5. Form Your Nonprofit

Step 1: Choose a Name

  • Check availability with your state’s Secretary of State office.
  • Ensure the name reflects your mission and is unique.

Step 2: Form a Board of Directors

  • Most states require at least three board members while some states only require one.
  • Responsibilities include governance, financial oversight, and strategic direction.

Step 3: Draft Bylaws

Your bylaws should include:

  • Organization’s name and mission.
  • Roles and responsibilities of board members.
  • Meeting procedures.
  • Conflict of interest policy.

6. Obtain an EIN (Employer Identification Number)

What is an EIN?

  • An EIN is a unique identifier issued by the IRS, similar to a Social Security Number but for organizations.
  • Required for opening a bank account, filing taxes, and hiring employees.

How to Get an EIN:

  • Apply online via the IRS website.
  • No cost to apply.
  • Alternative methods: Apply by mail or fax using IRS Form SS-4.

7. File for Incorporation

  • File Articles of Incorporation with your state’s Secretary of State.
    • Fee: $10-$500 depending on the state.
  • Include basic information:
    • Organization name.
    • Registered agent.
    • Purpose of the nonprofit.

8. Apply for Tax-Exempt Status

File with the IRS:

  • Use Form 1023 or Form 1023-EZ for 501(c)(3) tax-exempt status.
  • Submit:
    • Articles of Incorporation.
    • Bylaws.
    • Financial statements and projected budgets.
  • Pay the application fee ($275 or $600).

State Tax-Exempt Status:

Check your state’s requirements for nonprofit tax exemption.

9. Register for Fundraising

  • Some states require nonprofits to register before soliciting donations.
  • File with your state’s Attorney General or equivalent office.

10. Set Up Financial Systems

  • Open a nonprofit bank account (requires EIN).
  • Set up accounting software or hire a bookkeeper.
  • Track all income and expenses meticulously.

11. Build Your Team

  • Volunteers: Recruit passionate individuals to support your mission.
  • Staff (if applicable): Hire qualified personnel for key roles.
  • Provide training and clear role descriptions.

12. Create an Online Presence

  • Website: Include your mission, programs, and donation options.
  • Social Media: Use platforms to engage with supporters.
  • Email Marketing: Build and maintain a mailing list for updates and fundraising.

13. Begin Operations and Programs

  • Launch programs or services aligned with your mission.
  • Use metrics to measure impact and adjust as needed.

14. Where to File and Resources

Filing Locations:

  • State Incorporation: Secretary of State’s office.
  • Federal Tax-Exempt Status: IRS (irs.gov).
  • Fundraising Registration: State Attorney General’s office.

Helpful Resources:

  • IRS Nonprofit Resources.
  • State-specific nonprofit guides (check your Secretary of State website).
  • Legal platforms like LegalZoom or Rocket Lawyer.

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