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How to Start a Nonprofit Organization in 5 Steps

Author

Kelley Katsanos

More by Kelley
Author

Kelley Katsanos

More by Kelley

Has it always been your passion to help those in need? If you've decided to take the leap and turn your passion into action by starting a nonprofit organization, you must first understand the steps you need to take to start a 501(c)(3). Although the process can vary somewhat by state, you can follow this general, step-by-step guide to help ensure that you're starting your nonprofit organization off on the right foot.

1. Research the Market

Conduct a needs assessment to ascertain if other organizations in the market are doing the same or similar work that you plan to do. This will help you determine whether there is a need for your services. If there is a market need for the type of nonprofit work you plan to undertake, it may be easier for you to garner support and funding. During this stage, it's also important for you to research demographic information that will enable you to better understand the needs of those you're seeking to help.

2. Determine Your Goals

Next, you must develop a business plan that details your mission statement. This statement should lay out your goals as an organization and detail how you plan to achieve them. In addition, you should define the market you plan to serve and your purpose for starting the organization in the first place.

3. Go Through the Incorporation Process

Many charitable organizations choose to incorporate because this decision allows them to obtain certain tax and legal advantages, according to The Balance. After all, incorporation often eases the process of securing tax-exempt status. The incorporation process involves choosing a business name that is legally available in your state and filing for an Employer Identification Number (EIN). In addition, you will need to prepare articles of incorporation, create bylaws and appoint your board of directors.

4. Obtain 501(c)(3) Tax-Exempt Status

You can obtain 501(c)(3) tax-exempt status by filing Form 1023-EZ (or Form 1023) with the Internal Revenue Service (IRS). The information you provide will allow the IRS to review your organization thoroughly. Subsequently, the government organization will decide to either approve or decline your application. The IRS may ask you for additional information in order to approve your nonprofit status.

5. Make Sure That You Remain Compliant

Once you receive 501(c)(3) status, it's important for you to ensure that you remain compliant, especially when it comes to IRS regulations. For instance, even though nonprofits are tax-exempt, most of them are required to file Form 990 with the IRS on an annual basis. This examination by the IRS helps ensure that nonprofits are operating in a proper manner. As compliance requirements may vary by state, it's important for you to stay up to date on the latest rules and regulations, and if you are unsure, consult with your own legal adviser.

Developing a successful nonprofit requires hard work and dedication. By following the above steps to start a 501(c)(3), you can be well on your way to making your mark in your community.