If you’re looking to make a positive impact in your community, starting a nonprofit is a great way to do so. It’s important to keep in mind that a nonprofit functions like a small business and should be planned and executed in a similar fashion.
So what steps should you take to start a nonprofit organization? There are some questions you’ll have to ask of you and your staff, and lots of filing to do, but the outcome is worth the effort.
Step One: Do Your Research
Before you get started, you should identify the need for your specific organization, to research similar groups that already exist, and to guarantee that starting a nonprofit is the right choice.
You can outline your goals and mission by answering the following questions as part of your larger business plan:
- Is there an obvious need for the nonprofit?
- How much will it cost to start the organization?
- How will we finance the organization now and in the future?
- How can I demonstrate the future value of the nonprofit?
Your first step should be to research the issue your nonprofit will address in your community. Where is their a gap in treatment or social justice? Where are existing organizations or government arms failing?
This demonstration of need is an important factor in attracting funding for your organization. Outside of the fixed costs for filing, you will need operational costs moving forward for technology, office space, employees, and more. A structured business plan that details your future projections can help secure financial capital.
Step Two: Build a Foundation
Once you have a plan and financing, you’ll need to decide what the structure of your nonprofit will look like. In addition to a board of directors, you’ll need to hire based on the function of your organization. Creating a position for present and future financial planning is vital, as well as someone to handle press and publicity.
Consider potential community partnerships with similar visions, for-profit organizations or other nonprofits in your community can be great resources for financial planning, networking, and general assistance.
The key element to your organization’s foundation will be your business plan. This document should be evolving; as your organization grows, your original plan should grow along with it while keeping your mission grounded.
Step Three: Filing and Forms
Starting a nonprofit involves a lot of paperwork. Laws vary from state to state, so it’s important to do your research by looking into resources like this or contacting your local NGO association.
The general process for starting your nonprofit includes:
- Register official organization name
- File articles for incorporation (varies by state)
- File proof of publication with state agency
- Prepare bylaws
- Prepare Conflict of Interest policy
Once your incorporation paperwork is approved and processed, you will need to file for federal tax-exempt status. You should review the IRS tutorials that outline the steps to become a 501(c)(3) organization that is recognized as tax-exempt.
For the IRS to recognize an organization's exemption, it must be organized as a trust, a corporation, or an association. This includes filing for a Federal Employer Identification Number (EIN). The process for filing for tax-exempt status can take anywhere from two weeks to several months, so it’s important to complete all necessary paperwork before submitting the form.
State and local laws for nonprofit organizations also differ for registration needs. You may need to register to fundraise or lobby in certain areas, as well as secure permits for any real estate or office space.