Nonprofit Organizations

Starting a Nonprofit Organization

Starting a nonprofit organization is easy. We walk you through the steps to start a nonprofit, including recruiting a board and applying for 501(c)(3) status.

Not all entrepreneurs are drawn to for-profit ventures. Many ambitious entrepreneurs find fulfillment in forming and leading nonprofit entities.

Starting a Nonprofit Organization

The not-for-profit world has some significant advantages over their for-profit peers, not the least of which is that revenue generated by a nonprofit is usually tax-free.

Nonprofit ventures aren't for everyone, but if you think a not-for-profit is right for you, here's how to get started.

1. Check your motivation

Earning a profit is never the right motivation for starting a nonprofit. Nonprofits aren't even set-up with profitability in mind (thus the designation not-for-profit!) Although revenue earned by nonprofits is tax-exempt, these organizations cannot be owned by individuals, meaning net income has to stay within the organization. If your motivation in starting a nonprofit is to get rich, then you need to reconsider whether a not-for-profit venture is right for you.

2. Develop a mission statement

Mission is the driving force behind nonprofit organizations. Presumably the nonprofit is being launched to make the world a better place. Your mission statement tells the world how you propose to do that. It also helps you clarify your focus and activities.

3. Assess need

The next step is to assess whether or not there is actually a need for the services your organization will provide. Feeding the poor is a good thing, but if your town already has a soup kitchen on every corner you're going to have a hard time making another soup kitchen work, at least in your community.

4. Recruit a board

Nonprofits are governed by a board of directors. Board members cannot be paid for their involvement and typically consist of people who share your organization's values and mission. A quality board of directors will be invaluable in providing guidance, structure, accountability, and even fundraising assistance.

5. Formally incorporate

Once you have recruited a board of directors, you are ready to formally incorporate your organization. It is possible to do this on your own, but by employing an experienced nonprofit attorney you will save yourself a substantial amount of confusion and frustration. The incorporation process officially spells out your organization's mission, specifies its activities, and lists your board members - important prerequisites for the next step in the process.

6. Apply for a 501(c)(3)

A 501(c)(3) is the federal designation for a tax-exempt, not-for-profit organization. The process for applying for a 501(c)(3) is somewhat complex because the government wants to ensure that organizations given this designation are legitimately not-for-profit. You may want to consider asking the same person who prepared your incorporation to prepare your 501(c)(3) application.

7. Begin fundraising

You can begin fundraising as soon as you have applied for your 501(c)(3). When fundraising, keep in mind that funds can come from a variety of sources ranging from straight donations to fees for service. Talk with your board to decide which fundraising efforts will be most productive for your organization.

8. Execute and expand

Finally, all that's left to do is execute your mission statement, assess your progress, and grow your organization. Sounds simple, right? It isn't. Successful nonprofit organizations require time, commitment, and passion. But with a little hard work, you can make your nonprofit more successful than you ever thought possible.

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Conversation Board

We greatly appreciate any advice you can provide on this topic. Please contribute your insights on this topic so others can benefit.

  • Nya posted on 8/25/2009
    This article was very informative. I followed these steps point by point and started a Non profit yesterday.I believe that each one teach one, and I thank you for teaching me.
  • DBN posted on 6/16/2010
    Hello Nya; I am interested in hearing about your experience. DId you have trouble at any one of these points? How about recruiting Board of Directors?
  • Steve posted on 9/17/2010
    501(c)3 may not be the right designation. There are others. Talk to your attorney so that the correct nonprofit designation is selected for your activity. It could save you a lot of headache when the IRS comes knocking.
  • MASAKE posted on 9/18/2010
    Wonderful advice on how to start a non-profit. i am on my way to setting up a great non-profit organisation that will see me serve de community in a unique way.

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