How to Start a Nonprofit in 9 Steps (2024 Guide)

Introduction

Starting your nonprofit is a powerful way to make a positive impact in your community and address pressing social challenges. However, it's also a process that requires careful planning, a deep understanding of regulations, and a commitment to sustainability. In this guide, we will walk you through nine essential steps to start a nonprofit in 2024, including the foundational questions you need to consider before taking the leap. This comprehensive guide will help you navigate the complexities of starting a nonprofit while ensuring that your mission is both impactful and sustainable.

Common Types of Nonprofits

Starting a nonprofit can take many forms, depending on the specific goals and needs of the community you wish to serve. Understanding the different types of nonprofits is crucial to determining which structure best aligns with your mission and the impact you want to make. Below, we outline some of the most common types of nonprofits, each with its unique focus and operational characteristics.

1. Public Charities

Public charities are the most common type of nonprofit and include organizations that receive funding primarily from the public or government. These charities often focus on activities such as education, healthcare, and poverty relief. Examples include food banks, educational institutions, and healthcare organizations. Public charities are eligible to receive tax-deductible contributions from donors, which makes them a popular choice for those wanting to contribute to charitable causes.

2. Private Foundations

Private foundations are typically funded by a single individual, family, or corporation. They do not generally solicit funds from the public, and their primary purpose is to make grants to other nonprofits or individuals. Examples of private foundations include family foundations like the Bill & Melinda Gates Foundation. These organizations play an important role in supporting charitable activities through grantmaking, but they often have more stringent regulations compared to public charities.

3. Social Welfare Organizations (501(c)(4))

Social welfare organizations are nonprofits that focus on promoting social welfare and community well-being. Unlike public charities, donations to social welfare organizations are not tax-deductible. However, these organizations have more freedom in terms of political activities and lobbying. Examples include civic leagues and advocacy groups that work to bring about social or political change.

4. Membership Organizations

Membership organizations, such as trade associations and social clubs, exist to support the interests of their members. These nonprofits often provide resources, networking opportunities, and advocacy for their members. Examples include professional associations like the American Medical Association or social clubs that provide recreational activities for their members. These organizations are typically funded by membership fees.

5. Religious Organizations

Religious organizations include churches, mosques, synagogues, and other places of worship. These nonprofits are often exempt from many of the reporting requirements that other nonprofits must adhere to. Religious organizations focus on spiritual development, community service, and providing charitable support to those in need.

6. Arts and Cultural Organizations

Arts and cultural organizations work to promote the arts, culture, and heritage within a community. These nonprofits include museums, theaters, and arts education programs. Their mission is to enrich communities through cultural experiences, artistic expression, and preserving heritage. Many of these organizations rely on grants, donations, and ticket sales to sustain their activities.

7. Educational Organizations

Educational organizations include nonprofits that focus on providing educational opportunities and resources to the public. This category includes private schools, scholarship funds, literacy programs, and educational advocacy groups. These organizations often work to improve access to education and enhance learning opportunities for underserved populations.

8. Health and Human Services Organizations

Health and human services organizations provide essential services related to healthcare, mental health, and social services. Examples include hospitals, clinics, and organizations that provide support for individuals with disabilities or mental health challenges. These nonprofits aim to improve the quality of life for individuals by addressing health and social issues.

9. Environmental and Animal Welfare Organizations

Environmental nonprofits focus on conservation, sustainability, and protecting natural resources. Animal welfare organizations work to protect animals and their habitats. Examples include wildlife conservation groups, local animal shelters, and environmental advocacy organizations. These nonprofits play a critical role in promoting sustainable practices and protecting vulnerable species.

10. International NGOs

International non-governmental organizations (NGOs) work across borders to address global issues such as poverty, healthcare, education, and disaster relief. Examples include organizations like Doctors Without Borders and Save the Children. These nonprofits often collaborate with governments, local organizations, and communities to implement programs that improve quality of life on a global scale.

Key Questions to Ask Before Starting a Nonprofit Organization

Is Starting a Nonprofit the Right Choice?

Before you begin, it’s essential to assess your motivations and understand whether starting a nonprofit organization is the best option. Nonprofit work is demanding, and it’s important to ensure that you are committed to the mission and capable of tackling the challenges involved. Ask yourself if there are existing nonprofits with a similar mission that you could join or support rather than creating a new entity. The National Council of Nonprofits provides helpful resources to help you determine if founding a new nonprofit is the right decision.

Do You Have a Clear and Sustainable Mission?

A well-defined mission is the foundation of any successful nonprofit. Your mission should be clear, specific, and actionable, focusing on the problem you are trying to solve. It’s also critical to ensure that your mission is sustainable—meaning it can address a long-term need rather than a one-off issue. Conduct research and talk to community members to make sure your mission resonates with their needs.

Do You Understand the Financial Commitment Required?

Starting a nonprofit organization requires significant financial resources, both at the beginning and as the organization grows. Before you proceed, consider the costs involved in launching your nonprofit, including filing fees, initial operational costs, and marketing expenses. Develop a rough estimate of how much funding you will need for your nonprofit and explore potential sources of fiscal support. GrantSpace by Candid offers valuable information on potential funding opportunities for new nonprofits.

9 Steps to Start a Nonprofit

Step 1: Define Your Nonprofit’s Mission and Vision

Your mission statement is the heart of your organization. It should clearly define your purpose, whom you serve, and how you aim to create impact. The vision statement goes one step further by outlining what the world would look like if your nonprofit were successful in achieving its goals. Use your mission to inspire others to support your cause. Nonprofit Hubhas great resources to help craft a compelling mission statement.

Step 2: Conduct Market Research

Market research helps ensure that your nonprofit is filling a genuine gap in service. It involves assessing the needs of the community you plan to serve and analyzing existing charitable organizations to determine how your nonprofit will add value. Look into organizations that are doing similar work and identify opportunities for collaboration instead of competition. GuideStar is an excellent platform to research other nonprofits and gather data.

Step 3: Build a Strong Founding Team and Board of Directors

A strong founding team is critical to the success of your nonprofit. Assemble a group of individuals who are passionate about your cause and bring diverse skills to the table, such as fundraising, marketing, and financial management. Your founding team will be responsible for establishing the governance structure of the nonprofit, including building a board of directors. Refer to BoardSource offers valuable resources for nonprofit corporations seeking guidance on best practices. for guidance on assembling an effective board.

Step 4: Draft Your Bylaws

Bylaws are the governing documents that outline how your nonprofit will operate. They set rules for decision-making, board meetings, and managing conflicts of interest among board members. Drafting comprehensive bylaws ensures smooth governance and helps avoid issues down the line. You can find sample nonprofit bylaws on the IRS (Internal Revenue Service) website to help guide your drafting process.

Step 5: Register Your Nonprofit with the State

Once your mission, team, and bylaws are in place, the next step is to officially register your nonprofit. You will need to file articles of incorporation with the state in which your organization will operate. This process makes your nonprofit a recognized legal entity. Be sure to check your state’s requirements, as they can vary. Nolo offers detailed guides on state-specific incorporation processes.

Step 6: Apply for an Employer Identification Number (EIN) for tax exemption

An Employer Identification Number (EIN) is required to identify your nonprofit for tax purposes. You can apply for an EIN online through the IRS to ensure your nonprofit can benefit from tax exemption. IRS website. The EIN will be needed to open a bank account for your nonprofit and apply for tax-exempt status.

Step 7: Apply for 501(c)(3) Tax-Exempt Status

Obtaining 501(c)(3) of the Internal Revenue Code status is a crucial step for most nonprofits. This tax-exempt status allows your nonprofit to receive tax-deductible donations and access other funding opportunities. You will need to complete IRS Form 1023 or the simplified Form 1023-EZ, depending on the size of your organization. For detailed instructions on completing this process, visit the IRS Website. If your nonprofit qualifies for tax-exemption under federal law as a “501(c)(3)”, it will not be required to pay income tax on donated income and it will qualify for tax-deductible contributions.

See below common types of 501(c)(3)

Step 8: Develop a Fundraising Plan

A well-thought-out fundraising plan will ensure your nonprofit has the resources it needs to achieve its mission. Consider different funding streams, such as grants, individual donations, fundraising events, corporate sponsorships, and fiscal sponsorship. Diversifying your fundraising efforts will help reduce financial risks and provide a more stable financial base for your nonprofit.

Fiscal sponsorship can be a valuable option for new nonprofits that are not yet ready to apply for their own tax-exempt status. A fiscal sponsor is an existing nonprofit that agrees to provide administrative support, financial management, and tax-exempt status benefits to your organization while you get established. This can allow your nonprofit to start fundraising and receive tax-deductible donations without the delay of waiting for your own IRS determination. Partnering with a fiscal sponsor also helps you focus on your mission rather than spending excessive time on administrative tasks in the early stages.

To develop a robust fundraising plan, look into Candid’s Foundation Directory Online for grant opportunities, Classy for insights on modern fundraising techniques, and consider reaching out to potential fiscal sponsors to access resources and guidance. Building relationships with corporate sponsors, local businesses, and community members can also provide ongoing support and help sustain your nonprofit's programs and initiatives. Having a diverse range of funding sources will reduce financial risks and ensure that your nonprofit can continue to serve its mission effectively. 

Look into Candid’s Foundation Directory Online for grant opportunities and Classy for insights on modern fundraising techniques. 

Step 9: Establish Your Nonprofit’s Brand and Launch

Your nonprofit’s brand is what makes it recognizable and relatable to the public. Develop a name, logo, and branding strategy that reflects your mission. It’s also essential to build a digital presence, including a website and social media accounts, to reach your audience effectively. When you're ready, plan a launch event to introduce your nonprofit corporation to the community. Canva offers tools to help create professional logos and graphics for your nonprofit.

Frequently Asked Questions on Starting a Nonprofit

Can I start a nonprofit by myself?

Yes, it is possible to start a nonprofit by yourself, but it can be challenging. While you can complete the initial steps independently, such as defining your mission, filing articles of incorporation, and applying for tax-exempt status, having a team or board of directors is necessary for the long-term success of the organization. Most states require a minimum number of board members, and having additional support will help distribute responsibilities, bring diverse perspectives, and increase your nonprofit’s impact.

How Long Does It Take to Start a Nonprofit?

The timeline for starting a nonprofit can vary. Filing articles of incorporation for your nonprofit organization typically takes a few weeks, while obtaining 501(c)(3) tax exemption status can take anywhere from a few months to over a year. Preparation and understanding the requirements can expedite the process.

What Are the Costs Associated with Starting a Nonprofit?

The costs of starting a nonprofit include state filing fees (ranging from $50 to $500), IRS Form 1023 fees (up to $600), and costs for initial operations and marketing. It’s essential to budget for these expenses to avoid delays in launching your nonprofit.

Can I Get Paid as a Nonprofit Founder?

Yes, nonprofit founders can receive a salary if they work for the organization, provided that the compensation is reasonable and aligns with industry standards. Salaries must be transparent and approved by the board to avoid conflicts of interest.

What Is the Difference Between a Nonprofit and aCharity?

A nonprofit is an organization that operates for the public benefit without seeking profit, while acharityis a type of nonprofit focused specifically on providing relief to the needy or advancing a particular cause. Allcharitiesare nonprofits, but not all nonprofits arecharities.

Choose from the 3 types of nonprofit organization structures for 501(c)(3)

501(c)(3) organizations may take one of three primary structures: public charities, private foundations, and private operating foundations. Each type has its distinct characteristics, and understanding the differences can help you determine the right structure for your nonprofit.

Public Charity

Public charities are what most people recognize as those organizations with active programs. Examples include churches, benevolence organizations, animal welfare agencies, educational organizations, and more. These organizations usually receive a substantial portion of their revenue from the general public or from the government.

In order to remain a public charity (and not a private foundation), a 501(c)(3) must obtain at least one-third of its donated revenue from a fairly broad base of public support. Public support can come from individuals, companies, and/or other public charities. Public charities must maintain a governing body that is mostly made up of independent, unrelated individuals. This means the majority of board members should not be related by blood, marriage, or outside business connections.

Donations to public charities can be tax-deductible to the individual donor up to 60% of the donor’s income, although other tax and income circumstances can affect the deductibility of contributions. Corporate limits are generally 10% of taxable income.

Private Foundation

A private foundation is often referred to as a non-operating foundation, as they typically do not have active programs. They are not required to be publicly supported, so revenue may come from a relatively small number of donors, even single individuals or families. Private foundations are usually thought of as nonprofits that support the work of public charities through grants, though that is not always the case.

Donations to private foundations can be tax-deductible to the individual donor up to 30% of the donor’s income. Governance of a private foundation can be much more closely held than in a public charity. For example, a family foundation is a common example of a private foundation where family members maintain significant control.

Private Operating Foundation

The third category is the least common: private operating foundations. The IRS defines a private operating foundation as “a private foundation that devotes most of its resources to the active conduct of its exempt activities.”

These organizations often maintain active programs similar to public charities but may have attributes such as close governance similar to a foundation. As such, private operating foundations are often considered hybrids. Most of their earnings must go to the conduct of their programs. Donations to private operating foundations are generally tax-deductible to individual donors up to 50% of their adjusted gross income.

Conclusion

Starting a nonprofit is a rewarding journey that can lead to meaningful change in the world. By following these nine steps—defining your mission, conducting research, assembling a team, drafting bylaws, registering your organization, applying for tax-exempt status, planning your fundraising strategy, and building your brand—you can establish a strong foundation for success. Remember, starting a nonprofit organization takes time, effort, and commitment, but with a clear vision and strategic planning, you can turn your passion into a positive force for charitable change.

For more resources on starting and running a successful charitable organization, check out Nonprofit Quarterly and CharityNavigator. Good luck on your journey to making a difference!