Do you want to help people? Save the environment? Cure world hunger? A nonprofit organization can be a rewarding way to take on social, environmental, or community issues and start spreading the good around.

The process may look intimidating at first, but if you follow the steps below, you can start your own nonprofit organization — even if you don’t hire someone else to do the legwork.

The tips in this article can help you choose a nonprofit structure, register your nonprofit in your state, stay on good terms with the Internal Revenue Service (IRS), and much more!

What is a nonprofit corporation or organization, exactly?

A nonprofit organization is a group or startup formed with a focus on social issues, education, or donation. Think of it as a public charity, raising money and resources to invest in humanitarian efforts. 

As opposed to a for-profit organization, nonprofits reinvest extra revenue not used in the business of charity and put it toward their mission. They don’t distribute it to a group of shareholders.

Should your organization be a nonprofit?

Starting a nonprofit can be fulfilling, but it’s also a challenge. Here are a few key points to consider when deciding if a nonprofit structure is right for your chosen mission.

Why start a new nonprofit organization?

  • You can provide a public benefit: Serving the public and addressing unmet needs in communities is a great way to help others.
  • Tax-exempt status: Your organization can benefit from federal tax exemptions under IRS guidelines, which means more money goes to your mission.
  • Access to grants and donations: Nonprofits can receive large charitable donations and grants, which are the lifeblood of any charity, whereas for-profits cannot assert the same privilege. 
  • Community involvement: Building a network of volunteers and supporters is often easier for nonprofits because people know the organization’s main goal is not in making a profit.
  • Long-term sustainability: Most nonprofit groups last far beyond the strength of the original founders. Think Peabody Education Fund, which has been around since 1867.

Common types of nonprofit organizations

501(c)(3): Charitable Organizations

  • Best for: Aiming to address social, educational, religious, or charitable needs? This is the most common type of nonprofit.
  • How it works: You only have to meet IRS criteria to file for tax-exempt status. Donations are tax-deductible.

501(c)(4): Social Welfare Organizations

  • Best for: Groups who focus on promoting social welfare and fighting for social causes. According to IRS.gov, this “does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” 
  • How it works: Can engage in other political activities but donations are not tax-deductible.

501(c)(6): Business Leagues

  • Best for: Institutions like the Chamber of Commerce or the Better Business Bureau
  • How it works: Focus on improving business conditions; lobbying is allowed, but there are no tax-deductible donations.

With this additional information in hand, read on to see the 15 steps to take when starting a nonprofit.

How to start your new nonprofit corporation

Step 1. Create a business plan

Steps 1 and 2 are about creating the framework—your nonprofit’s mission and strategy. This provides a basis for what you want your nonprofit to achieve. 

In step one, you’ll figure out your funding, which will help you attract the financial backing you need and ensure that your operation is effective by outlining crucial financial management and compliance measures. 

This section is where you shine, and many people and organizations looking to fund your nonprofit will be paying close attention.

Step 2. Develop a mission statement

In this step, you’ll clearly articulate your organization’s purpose and goal. In just one or two sentences, why will this nonprofit exist? 

Be as specific as you can. Your nonprofit’s mission statement will define and drive all the other parts of your operation. 

Step 3. Choose a name and create a brand

Picking a name and starting the branding process is important. As a nonprofit, your identity means everything and is closely tied to your mission statement—your name and logo will often be the first impression people have of your nonprofit. 

Whatever your ambition, be it a caretaker of the oceans or feeding a million children, the name you pick must be memorable for people to take your mission to heart.

Step 4. Get a registered agent

While it’s not a requirement that you need a registered agent in your state when starting a nonprofit,  according to the CogencyGlobal blog:

“Many nonprofits that solicit charitable donations nationwide use the Unified Registration Statement (URS) to meet their filing obligations relating to initial and renewal charitable registration and compliance filings. These filings are broadly required in 37 states and in D.C. pursuant to state charitable solicitation acts.”

Step 5. File Articles of Incorporation

There are three ways to do this: Hire a lawyer to draw up all your necessary paperwork, use an online platform like LegalZoom or Bizee, or submit the needed paperwork yourself. You must submit these foundational documents to the Secretary of State to legally form your tax-exempt organization.

Step 6. Create bylaws

To create bylaws, first define the organization’s structure, including the board of directors, officers, membership, and meeting procedures. This ensures compliance with legal requirements. Then, draft the bylaws document. You can review it with legal counsel or adopt it through a board vote.

Step 7. Appoint board members and directors

When creating the bylaws, assemble a nonprofit board of directors responsible for overseeing the organization’s activities. Also, choose an executive director who will be in charge of all board proceedings and the decision-making authority of the organization. 

Set up the initial and future board meetings and then acquire the contact information of all involved. In doing so, you set up a strong foundation for efficient and reliable communication for your nonprofit’s leadership.

Step 8. Apply for an employer identification number (EIN)

Your nonprofit will need a bank account. To get one, you need an Employer Identification Number (EIN). A nonprofit is required by federal law to have an EIN, a process made all the easier by the internet. Simply fill out the paperwork online and submit it.

Step 9: File for federal tax-exempt status

Submit IRS Form 1023 or Form 1023-EZ to obtain 501(c)(3) status. The IRS will send a determination letter in a few weeks.

Step 10. Apply for state tax exemption and any business license you may need

If you’ve chosen to do all the paperwork yourself, look into state-specific tax exemptions and their availability, plus the necessary paperwork to comply. This is also the point when you should apply for any state-specific business license you may need.

Step 11. Develop a fundraising plan

First, apply for grants from charitable foundations, government entities and agencies, and corporations that align with your nonprofit’s mission and strategy. Many can be found online like the ones on grants.gov. 

Some of these grants are funded yearly, so plan ahead to submit a proposal by each deadline. Plan out a detailed donation campaign using online platforms or a social media profile to increase public interest and visibility. You may also choose to find and secure individual donors via mailed invitations or community outreach efforts.

Build a website and start collecting email addresses from your anticipated  donors. An email list is worth its weight in gold as these donors are the ones who will provide funding time after time. 

You can look to host fundraising events like auctions or community book fairs to raise funds and increase visibility. This is where you want to create goodwill for the brand and get the word out about you and your mission. Foster partnerships with current sponsors and donors who can help to provide financial management and administrative support for your nonprofit. 

Keep detailed records of all donations using a donor management system or content management systems (CMS) like Hubspot to ensure you’re transparent and accurate in tracking your organization’s progress. Keep thorough records of all transactions.

Step 12. Open a bank account

By now you should have received your EIN, so take all your documentation and open an account with a reputable bank. Some banks even provide financial management help for nonprofits should you need an extra hand.

Step 13. Set up record-keeping and reporting systems

Remember the old adage, “if it’s not written down, it didn’t happen”? You’ll need to keep track of donations, expenses, and grants. Use accounting software tailored for nonprofits or hire a bookkeeper if this isn’t in your wheelhouse. Create regular financial reporting schedules, including annual audits and tax filings, to meet legal and regulatory requirements.

Step 14. Create a conflict of interest policy

If you’re at the head of a nonprofit, you’ll soon find out that you and your organization are under constant, and sometimes intense, public scrutiny. To ensure there’s no impropriety, the IRS recommends creating a conflict of interest policy. The IRS suggests you use form 1023 to “as a means to establish procedures that will offer protection against charges of impropriety involving officers, directors or trustees.”

Step 15. Prepare for ongoing compliance

Use the internet to stay informed about filing fees, reporting requirements, and updates in nonprofit law for each fiscal year. You’ll want to ensure you stay in compliance with federal policies and create FAQs that will inform the public about your practices.

Would a for-profit organization fit you better?

Does a for-profit structure align better with your goals? Consider the following:

  1. If your primary goal is to generate profit for owners or shareholders, a for-profit organization may be better for your needs.
  2. If you want the flexibility to distribute profits, for-profits allow owners to share in the business’s financial success.
  1. If you’re seeking funding primarily through investors rather than donations, for-profits can raise capital through private investments.
  2. Do you feel confined by the additional rules, scrutiny, and audits that come with nonprofit status? A standard taxed business may be better for you.

Can you start your own nonprofit?

Definitely. By following the steps above, you can establish a nonprofit organization that effectively serves your mission and community.