Nonprofits are often started based on passion and good intentions. Someone sees a need or experiences an event in their lives that prompts them to start an organization as outreach to those in similar situations. Make sure to take it step-by-step so you can get to the fun part - fulfilling your mission.
Step 1: Research and Gather Information
The first step is doing exactly what you are doing right now. Research and gather information. An Internet search for nonprofit agencies through organizations like the National Council of Nonprofits will determine if there are services similar to those offered by the potential organization. Make sure that you are not in competition with other organizations with the same focus, in the same area.
Step 2: Develop an Organizational Plan
Even nonprofits need a plan, especially if you are looking to be successful and enduring in your mission. Developing a business organization plan includes a mission, your organization structure, a budget, fundraising plans and goals, and a marketing plan.
- Mission statement: This is a summary of what your nonprofit is going to do, and why the work its' doing is important.
- Organization structure: This includes a name, choosing a board of directors, and defining roles and/or departments within the organization. No matter what, it is a good idea to have a lawyer, a finance person, and an accountant on board to ensure compliance.
- Budget: Without question, you need to know how much money you will need to accomplish your goals and to run the administrative side of the nonprofit as well.
- Fundraising: Make sure you have an idea on how you plan to secure funds and the various fund options available to nonprofit organizations.
- Marketing: In the digital age, marketing is key. Brochures, websites, social media all of it falls within this realm. There are many resources to assist you with developing a successful marketing plan that fits your organization.
Step 3: File with Federal, State, and Local Governments
Unfortunately, in starting a nonprofit you are signing up for filling out and returning a lot of paperwork. Luckily, technology has created some user-friendly processes for filing the necessary paperwork for nonprofits.
State Compliance
The first step you must take is to incorporate your nonprofit in your state or the state in which you plan to conduct services. Each state will have their own set of rules and laws for what is required at this level. Your best resource is the Secretary of State website. An article of incorporation is normally required. This document is your formal filing with the state, setting up your nonprofit corporation. The articles of incorporation will usually contain the name, address, and purpose of your nonprofit, in addition to the names of all of the directors. Other state documents maybe required, so make sure to check out the National Association of State Charity Officials (NASCO) to get state specific guidance.
Federal Compliance
After you have gotten your state information filed, the next hurdle is federal requirements. There are a number of forms you will need to complete in order to be approved as a tax-exempt organization. Before you get started, make sure to read IRS Publication 557. This is a copiously detailed document that covers every element of the nonprofit process including details regarding 501(c)(3)'s, and their designations i.e. religious, charitable, scientific, etc.
Form SS4
This is your nonprofits' tax ID number. You will need this for almost every financial document that your nonprofit is required to complete as well as for opening any financial accounts.
Form 1023/Instructions
This is the application for recognition of exemption under IRC 501(c)(3). The instructions provide step-by-step guidance on filling on the form, what to file with it, when the best time is to file it, and where.
Form 2848
This document is a power of attorney and declaration of representative, which designates the individual within the organization that will represent it in the matter of any IRS correspondence or contact.
Local Compliance
Once you have gotten clearance from the IRS, you will need to make sure you are in 360 degrees of compliance. This will require taking care of local government document requirements for taxes, employment issues, business licensing, and insurance considerations.
Helpful Resources
There are a number of websites that offer wonderful resources to ensure that you are getting your nonprofit off on the right foot.
- Hurwit & Associates covers nonprofit laws in all 50 states.
- National Council of Nonprofits makes sure you are legally in compliance.
- IRS Tips for Starting 501 (c)(3) videos from IRS specialists providing tips on various aspects of beginning a 501(c)(3).
Get Ready
They thing to remember when starting a nonprofit organization is to conduct as much research beforehand as possible. Information about how, when and why's of nonprofits abound throughout the Internet. Message boards are also a good place to seek advice from veterans as well as form beneficial alliances in the nonprofit industry.
