A nonprofit corporation is a charitable entity.
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But that doesn't necessarily mean the incorporation process is any cheaper than the process associated with launching a for-profit business corporation. In some cases, the costs for incorporating a nonprofit can total thousands of dollars – and that's before you've solicited your first donation.
Although you can employ strategies to minimize the costs associated with a nonprofit launch, it is impossible to avoid incorporation expenses altogether, especially if you want to lay a solid foundation for the nonprofit's critical first year. There are a lot of places you can spend your money, but some of the places where you might be required to spend it include the following:
- Filing fees. The least flexible costs associated with a nonprofit startup are the fees connected to the initial document filings. Although these fees vary by state, they're usually reasonable (think a few hundred dollars instead of a few thousand).
- Attorney fees. Some nonprofit execs choose to handle the incorporation process themselves. But many others hire attorneys to handle incorporation for them. There's a wide discrepancy in the fees attorneys charge for nonprofit corporations, but the typical range is less than $1000.
- Startup costs. This is where the costs for incorporating a new nonprofit really start to add up. Technically, to start a nonprofit there are no official expenses beyond the filing fees. But in practice, a nonprofit launch has startup capital requirements, just like a small business. Donations of things like office equipment can mitigate these expenses, but be prepared to pony up at least some cash for startup capital.
- Office space. Before your nonprofit can officially get off the ground, you need a place to call home. Leasing space is the norm. However, under the right circumstances start up nonprofits can inhabit unused space at another nonprofit for free. It's not an ideal arrangement but it'll work until you can afford a place of your own.
- Salaries. Most nonprofits are lean organizations that rely on the work of volunteers to accomplish their mission. Based on the nature of your work, you may also need paid staff. If your nonprofit requires paid staff from day one, you'll also need to incorporate that expense into your incorporation or startup budget.