Starting a nonprofit organization can be an inspiring way to give back to your community and help those in need. However, it is important to understand all of the steps involved in this process before moving forward. Growing and sustaining a nonprofit may take years of effort and a great deal of determination.
The information provided here is intended to offer general guidance on how to form a nonprofit organization. Please note that specific steps may vary for each state, and we recommend consulting with a legal or tax professional for detailed assistance.
Step 1: Do Your Homework
Conduct a needs analysis. Find out if organizations (nonprofit, for-profit, or government) are already doing the same or similar work in your community. It will be harder to get support if you are just duplicating existing services, versus improving or adding to them.
Also find demographic or population data that shows a need for your services, and explain how that need is not being met. Where can I find demographic information about my community?
Know the alternatives. Forming a new nonprofit might be the most complicated way to act on your passion to serve your community. The biggest challenge for most new nonprofits is to develop and maintain reliable income streams. Estimates vary, but most experts agree that less than half of nonprofit startups survive beyond five years. Of those that survive, perhaps one-third are in financial distress.
Consider alternatives that can let you essentially operate as a nonprofit but with far less effort and cost. Thus, you can focus your efforts on serving your community right now while you develop experience and support that will serve you well if you eventually decide to form a separate organization.
Step 2: Build a Solid Foundation
- Draft your mission statement. Developing your mission statement is a critical first step. It communicates your nonprofit’s purpose, what groups it serves, and how it will serve them. Every decision and action in your organization should support and further your mission. Where can I learn about nonprofit mission statements?
Step 3: Incorporate Your Nonprofit
Why should you incorporate?
- Having a formal structure will give credibility to your programs and services.
- The corporate structure limits the liability of the organization’s officers and directors.
- The IRS requires organizing documents and governance policies and procedures that are usually associated with corporations.
Learn more about how to incorporate your nonprofit. Filings and fees will vary by state. Also note, incorporation registers your nonprofit, but it does not make it 501(c)(3) exempt.
Step 4: File for 501(c)(3) Tax-Exempt Status
Apply for exempt status with the Internal Revenue Service (IRS). Be aware, the user fee will be $400 or $850, depending on whether you expect your average annual gross receipts to exceed $10,000 annually over a four-year period. It also can take 3-12 months for the IRS to return its decision, depending on how many questions the IRS has about your application. Where can I get help filling out my incorporation and tax-exempt 501(c)(3) paperwork?
Step 5: Ongoing Compliance
- Register with your state’s agency that regulates charitable organizations and charitable solicitations (usually the Attorney General). If you plan to solicit contributions in other states, you will need to register there, too. Again, registration requirements will vary with each state. Learn more:
Use the Nonprofit Startup Resources by State to view state-by-state nonprofit startup resources such as startup guides, nonprofit associations, legal support organizations, technical assistance, state filing agencies and more! Find your state
Learn more now about starting a nonprofit with our free recorded webinars or tutorials:
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