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How to Start a Nonprofit Organization

Business Insights

Starting a nonprofit to serve a community is a common dream among many individuals. However, doing so involves many factors and takes a lot of dedication.

Consult with local experts (attorney, accountant, or someone very familiar with tax-exempt law and charitable organization operations) to ensure that the new nonprofit you form complies with state and local requirements, as well as federal laws.

Do Your Research

You will need to identify and quantify the need for your specific organization, to research whether there are other groups already engaging in similar work, and to ensure that starting a new nonprofit is the right solution.

Define the “demand” and “market” for the services your nonprofit would provide. There is intense competition for limited dollars from individual donations and also from foundation grants. For funding, you must demonstrate that there is sufficient need for your organization’s services and that your organization is best equipped to address that need. Have a solid plan for financing the organization.

Develop A Strong Foundation

You will need to build the structure for your organization. Ponder the following questions:

Who will be involved?

It takes much more than a solo founder to keep a nonprofit afloat. Having plenty of board members, volunteers, etc.  will create a better chance of success.

What do you need to do?

  • Determine feasibility (Economic climate and funding needs).
  • Develop a business plan (Mission, organizational structure, 3-year budget, marketing plan, and resource development/fundraising).
  • Consider potential community partnerships, and the skills needed for volunteers and staff.

When to file paperwork?

There are three factors involved: Incorporating at the state level, securing your tax-exempt status from the federal government, and filing for tax-exempt recognition at the state and local levels.

Where can you get quality assistance?

For help filling out and filing state and federal level papers, be sure a true expert assists you, not just friends.

Is starting a new organization necessary?

This will determine your efforts to recruit board members, staff, volunteers, and donors.

Incorporation and State Forms

Consult with local legal counsel or CPAs experienced with charitable, tax-exempt organizations to ensure you follow the proper process.

You’ll most likely need to reserve/register the intended name of the nonprofit corporation to make sure that no one else has created a nonprofit of the same name and file the articles of incorporation. You may need to publish articles of incorporation multiple times in a local newspaper, then file proof of publication with a state agency.

Filing for Federal Tax-Exempt Status

For the IRS to recognize an organization’s exemption, the organization must be organized as a trust, a corporation, or an association. It is possible for unincorporated associations to gain recognition as a tax-exempt organization, but not having a corporate form could expose volunteers to legal liability, so seek expert advice beforehand.

Ongoing Compliance

Many states and local governments will require you to complete additional filings to receive recognition as tax-exempt from those institutions. Check with local legal counsel to ensure you are compliant with local initial filing requirements.

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