A nonprofit is an organization that serves a community or social cause as a club, society, trade association, social advocacy group, or charity. Unlike for-profit businesses, nonprofits do not distribute their profits to their shareholders but funnel them back into their operations.
Step 1: Choose Your Name
Once you have picked a name, make sure another organization has a different name than you with a Google search. Then, you will need to check if it is available with the Secretary of State in your state.
Step 2: Do Your Research
Be sure to research what forms you must fill out in your state; the most common tasks are the following:
Incorporating your nonprofit
Obtaining an Employer Identification Number (EIN)
Applying for tax-exempt status
Registering with your state to collect donations
Filing a Form 990 on an annual basis to maintain the tax-exemption status (see Step 14 )
Individual state requirements vary; please consult a legal professional to ensure you obtain all required forms.
Step 3: Create a Mission Statement
Your nonprofit's mission statement briefly describes what you do and why you do it. It is essential to your organization's success telling individuals why your work is worth supporting.
Step 4: Create Vision and Organizational Values
A vision statement describes your end goal—what do you want your contribution to look like after your work is done?
This should be the driving force behind your day-to-day operations. Your values are principles that everyone in your organization will follow. As a result, your values will be your guide to every decision and action of your organization.
Step 5: Create a Business Plan
A business plan is a blueprint for how your nonprofit will run and how you will achieve your goals. This is beneficial for your planning and anyone considering supporting your organization; your plan will likely be requested for review before making a decision. Your business plan should include the following:
Executive Summary: A brief overview of your business plan (an elevator pitch). Include your mission, vision, values, a summary of your goals, and how you plan to achieve them.
Programs and Services: Describe in detail what needs you will be addressing in your community, whom you will serve, and what value you will provide them, including your nonprofit programs, services, membership benefits, resources, and events.
Market Analysis: Include a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) that will help you determine how to set your organization up for success.
Marketing Plan: This plan will help you spread the word about your nonprofit.
o Who is your target audience (i.e., potential members, supporters, and donors)?
o How will you find these people?
o How will you convince them to get involved?
Operational Plan: This plan will guide your nonprofit's day-to-day functions.
o Where will your office be?
o What supplies and equipment will you need?
o How will you deliver your services?
o What staff and volunteer roles will you need to fill?
Impact Plan: This plan should elaborate on the positive change your nonprofit will create.
o What are your objectives?
o What do you need to accomplish them?
o How will you measure success?
o How will you share your impact with the community (impact reports, annual reports, stewardship activities, etc.)?
Financial Plan: This plan will help you get donations, apply for grants, and maintain a healthy budget for your nonprofit's operations.
Step 6: Recruit Your Board
Start your recruitment by identifying key roles and drafting job descriptions:
· Benefits of the position
· Length of term
· General Duties
· Weekly time commitment
· Legal / Financial commitments
· Qualifications / Skills requirements
Need help finding potential members? Here are several great resources:
· Board Match
· Board Net the USA
· The Bridgespan Group
Step 7: Identity and Brand
Consider creating a catchy slogan for marketing and promotional purposes. Then, design a logo.
Note: Trademarking is an essential step for protecting your brand identity!
Step 8: Funding and Revenue
Most nonprofits generate revenue by providing value, fundraising, and/or government grants.
Step 9: Incorporate Your Nonprofit
The steps to incorporating a nonprofit are as follows:
· Choose a Business Name
· Appoint a Board of Directors
· Decide on a Legal Structure: trust, corporation, or association
· File your Incorporation Paperwork: Regulations vary, so check with your state's National Association of State Charity Officials (NASCO). If you plan to solicit in more than one state, you must register in all participating states.
Step 10: Employer Identification Number (EIN)
Like any business, your nonprofit needs an EIN or Employer Identification Number. You will need this number to hire staff, open a bank account, and fill out many registration forms that your local government requires.
To apply for an EIN, visit the IRS website.
Step 11: Draft Bylaws
Bylaws are the rules that govern your nonprofit. For instance, bylaws dictate how officials are elected within your nonprofit and how assets will be distributed should your nonprofit dissolve. If you apply for federal tax exemptions, you’ll attach your bylaws to your IRS application. In this case, you may want to consult with a legal professional to ensure your bylaws don’t conflict with IRS requirements.
Step 12: File for Tax Exemption
Twenty-nine types of nonprofit organizations can file for tax exemption under section 501(c) of the Internal Revenue Code. The 501(c)(3) is the most common, which includes all charitable, religious, scientific, and literary organizations. Other types of tax-exempt nonprofits under different 501(c) codes are:
Fraternal Beneficiary Societies: 501(c)(8)
Social and Recreational Clubs: 501(c)(7)
Trade associations and Chambers of Commerce: 501(c)(6)
To receive the tax exemption, you must register with the IRS as your appropriate 501(c) organization filling out Form 1023. Form 1023-EZ is the expedited form.
There are also fees for filing for tax exemption:
· $600 for Form 1023
· $275 for Form 1023-EZ (a form you may be eligible for in your state if you have gross receipts of less than $50,000 and less than $250,000 in assets)
The last step to receiving your nonprofit's tax-exempt status is registering with your state. The IRS state links for the exemption page will help you find your state's correct office, filing procedures, and annual reporting requirements.
Step 13: Choose Your Software Tools
· Use multiple software programs to manage separate administrative tasks or:
· Use an all-in-one nonprofit software to manage all administrative tasks
Step 14: Ongoing Compliance
Once your nonprofit is up and running, you must do several things annually to keep your tax-exempt status, such as filling out the appropriate 990 Form based on your gross receipts. This form requests your revenue, expenses, board members, achievements, and other operational details. After the 990 Form, you must do several things to remain in good standing with the IRS.
Best of Luck With Your Nonprofit…
We hope this article has given you the understanding, tools, and resources for your nonprofit!
How to Start a Nonprofit in 12 Steps - WildApricot Blog.