You can create the meaningful change you wish to see in the world. Especially if you know how to start a nonprofit and go about raising money in the right ways.
To help you along, we put together this comprehensive guide to teach you all the basics of nonprofit creation, including business planning, organization, legal structures, raising funds, and more!
Also, we created this guide particularly for those without any previous experience in mind. So, think of it as a “how to start a nonprofit organization for dummies manual” with a step-by-step approach.
Let’s get started!
Start With What You Don’t Know
For many people, the decision to found a nonprofit comes from an emotional reaction to a problem. For instance, having some first-hand experience with a certain issue will most likely cause you to take action.
Still, a little planning and research will go a long way toward making your nonprofit successful — hence why you should take your sweet time to investigate the matter thoroughly.
Evaluate the Need for Starting a Nonprofit
There are around 1.5 million registered nonprofit organizations in the US.
Are you sure the world needs one more? Note that we don’t bring this up to dissuade you. On the contrary, many leaders in the space expect the nonprofit sector to grow substantially in the future.
The point we’re trying to make is that there may be better ways to make an impact than creating one more NPO. For example, start by looking at what other nonprofits operate in the same space.
You may be able to help existing efforts instead of launching your own. If you don’t find any viable alternatives to your aim and decide that starting a nonprofit organization makes more sense, you can move on to the next step.
Nevertheless, before you do, we need to clear up something that gets asked a lot:
Can you get rich by starting a nonprofit?
If your ultimate goal is personal income, a nonprofit is certainly not the way to achieve it. As a nonprofit founder, you can pay yourself a fair salary. However, you’ll fall under intense scrutiny from state and federal regulatory bodies.
In a nutshell, should it become clear your goal is not to serve your nonprofit’s stated aim, you will end up in hot water.
That said, you can expect to make a living and make a substantial difference in the world. When requesting grants and/or holding fundraising events, you would take your own salary and other program directors into account to establish the amounts.
How to Start a Nonprofit — Laying the Foundations
So you haven’t found any “competing” nonprofits, and now you’re off to the races, right?
Well, not exactly.
Before you rush off to start filing paperwork, you’ll do well to figure out what your future nonprofit is about. And in order to help you do just that, we’ve outlined the “Five Ws” below.
Steps to Starting a Nonprofit — The Five Ws
Start with the easy stuff:
What — Your nonprofit will need a name; you’d be surprised how big of a role your nonprofit’s name can play, so don’t take this lightly.
If possible, enlist the aid of like-minded friends and supporters to come up with names. The name should inspire people to take action, and at the same time, establish a clear link to the cause you’re trying to support.
Why — More important than how to start a nonprofit foundation is the why. Here, you’ll want to create a strong mission statement that clearly and concisely conveys what the organization is about.
Specifically, make sure you choose a tax-exempt purpose to make your nonprofit eligible for 501(c)(3) status.
Who — Choose your leadership team.
These will be the people who eventually compose the nonprofit’s board, so it’s important everyone is on the same page. It’s also key that everyone involved understands the commitment they’re making before you incorporate the entity.
Where — There are some genuinely global nonprofits out there, but starting one from scratch is extremely ambitious. More likely, you will want to focus on a geographic region, such as a single state or country.
When — Figure out the best time for starting a nonprofit and filing for tax-exempt status. Many of the filing documents are time-sensitive, and you’ll have to wait for decisions from the IRS before going on to the next step.
You’ll get an idea of the timeline for the whole process below.
Plan Out the Business Side
Another one in the line of steps to starting a nonprofit is planning the business part of your project. Curiously, a nonprofit’s ultimate aim is to generate profit.
The crux of it is to direct that profit into charitable causes. So, you can treat it like any other endeavor that aims to remain profitable.
That is, you should create a business plan for your nonprofit. And a major part of that business plan will be how much you expect to spend, just like you would when starting an LLC or other type of company.
How much does it cost to start a nonprofit?
You should expect to pay specific fees to incorporate your nonprofit and request a tax-exempt status. Here’s how those break down:
- Incorporation fee — $50–$200; this is what you’ll spend filing a Certificate of Formation and varies by state.
- Tax exemption filing fee — $600; the fees for filing the paperwork to receive 501(c)(3) status.
- Charitable registration fees — These vary by state and based on the amount of public support you receive but can be anywhere between $0 and $150.
If you don’t know how to start a nonprofit business plan, don’t let it deter you. You can rely on many business planning tools and guides available online.
Even if your business plan isn’t perfect, you’ll have time to amend it later and fix any errors.
Just make sure it includes all the financial implications of your nonprofit, a growth strategy, a budget, and an analysis of how you intend to make an impact.
How to Start a Nonprofit Organization With No Money
Peer-to-peer fundraising can be a godsend.
If you know your cause is worthy, and you can present it convincingly in a coherent business plan, you can start fundraising to pay for the initial costs. There are plenty of crowdfunding sites to choose from and find the one that’s most likely to fund your cause successfully.
Basically, the costs of starting a nonprofit can add up. In addition to the filing fees, you probably also want to consider initial startup costs such as:
- Purchasing a domain for an organizational website
- Insurance costs
- Marketing costs
The initial costs can quickly get out of hand, and it’s one of the reasons many people fail to get their nonprofits off the ground.
Incorporating the Nonprofit Organization
Assuming you’ve already done your research and come up with an appropriate name, you can move on to selecting a registered agent for your nonprofit. Remember to choose a name that isn’t used by any other nonprofit organization in your state.
The steps we’re outlining here are general. Your state laws may be slightly different, so if you need to learn (say) how to start a nonprofit in Texas as opposed to one in Vermont, you should check with your local Office of the Secretary of State.
- Draft the articles of incorporation — You can find templates for this online or work with someone qualified to help you.
- Appoint officers or directors — You’ll need to appoint the organization’s directors either in the articles of incorporation or via a written action.
Note: In most states, you’ll need at least three unrelated directors to request a 501(c)(3) exemption.
- Draft organizational bylaws — These include conflict resolution procedures, duties of the officers, and how the board of directors can take action.
Again, we advise you to work with someone qualified to help starting a nonprofit, especially if you choose the DIY route.
- Hold an initial meeting.
- Obtain an EIN — When you’re starting a nonprofit, you’ll still need an employee identification number. You can apply for it online after you’ve created the entity.
- Additional state-specific actions — At this point, you’ll have to refer to your Secretary of State for any additional steps you need to take. That usually includes filing additional forms and registrations that you may need to review in the future.
How to Start a 501c3
Once you’re done with all the steps above, you can move on to (arguably) the most critical step — applying for tax-exempt status.
It’s one of the main reasons to start a nonprofit, and most nonprofits in the US use the 501(c)(3) designation for charitable organizations.
If you created the organization correctly, you could apply for tax-exempt status with a Form 1023 (or Form 1023-EZ if you qualify for a streamlined application).
Then wait until the IRS approves your tax-exempt status.
How to Start a Nonprofit Charity with a Filing Service
Should you find the step above daunting and don’t mind paying for a little convenience, you can outsource your charity’s formation. The latest outsourcing statistics are very encouraging.
After that, you just pick from the dozens of available options online or work with an attorney in your area who handles nonprofit formation — you’ll end up paying anywhere between $50 and $300 depending on how much of the work you want to do yourself.
Congratulations on Starting a Nonprofit Charity!
When you complete all the steps above, you will have a charity that can start funding its efforts and making a positive difference.
But starting the charity is just the beginning.
As we mentioned above, there is a lot of oversight when charities are involved in any action. You will have to stay on top of any ongoing legal requirements.
That may include registering for various permits based on what kind of services you provide or the clients you work with. It may also mean applying for additional tax exemption requirements specific to your state after the IRS approves the 501(c)(3) status.
Starting a Nonprofit Organization Organization Checklist
That was a lot of information to take in all at once — hence why we created a full checklist you can work with to make sure you don’t miss anything:
- Research similar charities to establish a legitimate need for yours
- Establish your nonprofit’s founding principles
- Create a comprehensive business plan
- Choose a board of directors in compliance with eligibility requirements for 501(c)(3)
- Incorporate the nonprofit as a trust, corporation, or association
- File for 501(c)(3) tax-exempt status with the IRS
- Stay on top of ongoing compliance needs
How to Start a Nonprofit Organization Without Money: Startup Funding
So, how to start without sufficient initial capital?
The most likely way to do this for many is to apply for grants. Start looking for grant opportunities as soon as possible and apply for them.
If you don’t have experience writing grants, there are many guides you can refer to online or hire a freelance grant writer. Regardless of which path you choose, start with smaller grants that you’re more likely to receive.
How to start a nonprofit organization as a teenager?
If you’re under 18, you can’t form a legal entity, yet you can ask someone to do so on your behalf. Follow this simplified checklist to create the nonprofit and refer to the rest of this article for a more in-depth explanation:
- Research the need for your nonprofit
- Choose a name that isn’t already in use
- Appoint people who will make decisions in the nonprofit (board of directors)
- Incorporate the nonprofit
- Apply for and receive 501(c)(3) status
- Obtain licenses and permits as necessary to operate the nonprofit
How to start a nonprofit organization in Canada?
First, research nonprofits in the same space to confirm the need for your nonprofit.
After that, incorporate the nonprofit at the federal and provincial levels; the incorporation process is identical to what you would do when starting any company.
Once your nonprofit is incorporated and legally active, request charitable status from the Canadian Revenue Agency. Charity status will allow you to fundraise and issue receipts to donors as well as create a bank account for the charity.
How to start a nonprofit organization in California?
Here’s a step-by-step guide to starting your California-based nonprofit:
- Choose a name for the nonprofit
- Incorporate under the name in California
- Choose a Board of Directors that won’t conflict with 501(c)(3) requirements
- Draft your nonprofit’s bylaws
- Hold an initial meeting of the Board of Directors and take initial actions for the nonprofit
- Receive an EIN from the state of California
- File form CT-1 with the Registry of Charitable Trusts
- File an SI-100 Statement of Information with the Secretary of State
- Apply for federal tax exemption in the form of 501(c)(3) status
- Apply for state tax exemption with the California Franchise Board
How to start a nonprofit organization in high school?
If your goal is making an organization that collects and directs resources toward a community issue, there are better ways to do so than start your own nonprofit.
One of those is to create a club in your high school. That effectively makes the school an umbrella organization for your nonprofit efforts, and it’s a more straightforward way to mobilize people who are sensitive to the issue.
You could also form a branch of an existing nonprofit. In short, you can request that the existing nonprofit extends its nonprofit status to your efforts so you can focus on helping the issue and don’t have to start a new one.
How much money do you need to start a nonprofit?
Filing expenses largely depend on the state where you’re incorporating. You should expect to spend at least $300 and as much as $800, including an application for tax-exempt status.
If you choose to work with a service to start your nonprofit, expect to pay about twice what you would if you’d do it yourself.
How do you start a nonprofit with no money?
To collect enough money for filing fees and initial expenses, you can collect money through a crowdfunding service.
First, ensure you have an accurate representation of all the expenses. Then, start a campaign on your crowdfunding website of choice and advertise the campaign to raise the startup costs.
Can one person start a nonprofit?
Broadly speaking, yes. One person could start a nonprofit at the state level without much pushback, depending on the state.
The issues arise when requesting federal tax-exempt status. 501(c)(3) status is extremely difficult to receive unless a nonprofit has at least three directors who are not related to each other.
Can the founder of a nonprofit receive a salary?
The founder of a nonprofit and employees of the nonprofit can receive a fair salary for their input to the organization.
However, a founder is not the owner of the nonprofit. The salary would result from a position within the organization and the work that the position entails.
All Ready to Begin
This guide has all the information you need to go out there and start making the world a better place with your nonprofit.
It’s not a simple or easy journey, but you’ll probably find a lot of help along the way once you get started. Create your checklist for how to start a nonprofit with the information here and refer to it whenever you’re confused about the next step.
We look forward to helping you become the change you wish to see in the world.