How to Start a Nonprofit: Your Beginning Steps
There’s a light within. It shines through every crack and crevice. It invigorates our purpose and reminds us that when we’re working in service to others, for the greater good, then we’re doing work of great importance.
Starting a nonprofit to invest in your community is one of the most honorable contributions anyone can make. Whether you’re well-versed in charity or looking to shift the tides of food insecurity, we’ve got you covered with the achievable steps to come.
What is a nonprofit?
Charitable nonprofits make the world go 'round. The 1.5 million nonprofits in the United States feed, shelter, educate, and employ millions of people in varying categories of socioeconomic status. The terms nonprofit and tax-exempt are often misinterpreted and mistaken for one another, but they are not the same.
5 steps to starting a nonprofit organization
We have to start where all great change-makers began– at the beginning. When our communities are in need of support, it’s tough to know where to allocate our energy. The good news is that wherever you begin, if it’s community-centered, then it’s something worth advocating for.
Research the needs of your community
You have a role to play in your neighborhood, but identifying what that role looks like takes time and intentionality. Research the needs of your community. Become the observer and connect with your neighbors and local officials to determine the conditions that are being unmet. Your community relies on public support, local, and federal funding, and more, to function. Whatever area needs triage is the best place to begin.
Begin with a strong foundation
To create an unshakeable foundation, you need to check a few things off your list. If you’re not already going to city council meetings, sign up as soon as you’re done reading this article. Being up to date with local policy is essential to developing a foundation built with supreme time management skills.
File incorporation and state forms
Filing incorporation and state forms are the following steps on your list. The Articles of Incorporation are legal documents you will file with the state to register your corporation. These articles are created to protect your business and keep you free from liability. Some states do require additional information like the purpose of the organization, directors, duration (if not perpetual), and more.
Filing for tax-exempt status (with the right form)
Incorporating your nonprofit means establishing it as a legal entity and becoming a tax-exempt business via the IRS and receiving approval on that application. After you file your articles of incorporation, you can apply for an EIN.
You’ll then provide a detailed description of your organization's purpose and what it will do for your community. Then, you’ll pay the necessary filing fees, complete the state-level application, and reap the benefits of your labor.
Stay compliant to keep your tax-exemption
If you’re not great with deadlines and due dates, you may want to see if you can find a bookkeeper who will volunteer some time, or hire a bookkeeper who can help keep your paperwork current and compliant to avoid a sticky situation where you do end up having to pay taxes.
Other topics you should know before starting your nonprofit
Starting a nonprofit isn't all bells and whistles. It requires organizational dexterity, and the ability to see 5 steps ahead. Sometimes, having the whole picture to start with makes the process easier as you break it down into more digestible steps.
What’s the cost of starting a nonprofit?
While you can’t start a nonprofit for free, you can expect some modest and relatively affordable user fees to include in your start-up cost. Depending on your state, incorporating your organization and registering with the IRS can cost anywhere from $350-$2000. This also includes the cost of mild legal and administrative support.
The different types of nonprofit organizations
There are multiple types of nonprofit organizations that cover various groups and accomplish certain trades and charities. Trade organizations, public charities, social advocacy groups, and foundations are among the most common types of nonprofit organizations.
How to find nonprofit requirements for each state
Although they may legally be registered in a specific home state, nonprofits are organizations that have the ability to operate nationwide. The IRS.gov website provides pertinent information for nonprofits, charities, taxation, and more. You can figure out what the tax requirements are for your specific state and other charities on the nonprofit state links page. There you will find guidelines and expectations that you’ll need to follow throughout the early stages of building out your nonprofit.
Not-for-profit vs nonprofit
While nonprofits are created to support the benefit of the collective good in a community, not-for-profits work to fulfill a specific objective via the owner of an organization. For-profits, like businesses, do attempt to earn profits even though those profits don’t support a single community member or staff member.
Not-for-profits are outliers considered recreational organizations and do not have any interest in earning revenue. Not-for-profits are also typically run by volunteers while nonprofits have community or state and federal funding to pay employees. Nonprofits can also have a separate legal entity, unlike not-for-profits.
How do nonprofits make money?
The word nonprofit implies that revenue isn’t welcome here and that couldn't be farther from the truth. Nonprofits raise money through all sorts of services, products that they provide to their communities, and grants or donations.
The term nonprofit itself means that a particular organization does not create income in the traditional sense, but making money is still an integral part of a nonprofit's success. We can view the nonprofit as an organization that practices generating revenue, just not simply for profit's sake.
Read about Mark Goldsmith's journey to nonprofit CEO
Becoming a nonprofit CEO is no easy task, and you may encounter trials and tribulations along the way. But the end result is something that will knock the wind out of you – a beautiful tribute to a purpose that holds great meaning.
If you’re curious about how to get started, you can read more about my journey through my book, “From Madison Avenue to Rikers Island: The Making of a Social Entrepreneur.”