How to Start a Nonprofit in the US
Starting a nonprofit organization is a big undertaking, but it can be rewarding. The first step to starting your own nonprofit is to write down your mission statement and create an action plan that outlines how you're going to achieve it. You'll also need to choose board members and apply for tax-exempt status from the IRS. Once you've incorporated as a nonprofit organization and gotten financing for your project, there are certain annual forms you must file with the government or other agencies if you want to keep doing business legally.
Write a Mission Statement
The mission statement is the core of your nonprofit. It tells donors and volunteers what the organization does, how it intends to achieve its goals, and why it exists.
Create an Action Plan
An action plan is a roadmap for your nonprofit, which outlines the steps you’ll take to achieve your goals. It should be specific in what will be achieved and how it will happen.
Here are some things to include in an action plan:
- A description of the mission of your nonprofit and what you hope to achieve with it (e.g., “to build a playground for kids with disabilities”).
- A timeline of milestones that need to be met before reaching this goal (e.g., “collect $5,000 within 90 days”).
- A list of tasks that will help you meet each milestone (e.g., “send letters asking for money”).
Choose a Board
Once you have a clear mission statement and goals, it’s time to start putting together your board of directors. Be sure to choose people who are passionate about your mission and who can offer skills or resources that will help you achieve them. You should also look for people who are committed to the cause, even if they don't have much experience running nonprofits or large organizations.
Some questions to consider when choosing a board:
- How long do they plan on serving? Are they willing to commit long-term?
- What skills do they bring to the table that would help further our mission? How can we use those skills effectively?
- Do they know any donors or grant writers who might be interested in supporting our organization?
Apply for Nonprofit Tax-exempt Status
Apply for nonprofit tax-exempt status. This can be done through the IRS's website, which will ask you to fill out a form with details of your organization, including its purpose and activities. The IRS may take several weeks or longer to respond to your application after it's submitted, so as soon as possible, start researching other ways you can begin raising money and developing relationships with potential donors while you wait for approval.
Incorporate as a Nonprofit Organization
To incorporate as a nonprofit corporation, you must file Articles of Incorporation with the state. Your board of directors will typically be responsible for this process. State laws vary widely on what information is required in your Articles of Incorporation; however, most states require that you identify:
- The name of your nonprofit corporation
- Whether or not it will be organized as an entity to engage in business (for example, if it's going to sell products or services)
- The purpose for which it was formed or established
Grants are a great way to get funding, but they're not easy to get. In order to qualify for a grant, your nonprofit will have to fill out an application and be approved by the granting organization. To qualify for grants, nonprofits typically need to be able to demonstrate that they're providing services in areas where there is little or no competition, as well as showing evidence of financial stability (such as having enough assets on hand). The amount awarded varies from foundation to foundation and has nothing to do with how much money you raise; it depends on what kind of funding the foundation has available for the year and whether or not your nonprofit fits its criteria for awarding funds.
Complete the Proper Paperwork or File Annually
- File the annual report. Each year, you'll need to file your organization's form 990 with the IRS. This form includes information about your nonprofit, its governance and operations, and its sources of revenue. You can also request an extension on this filing if needed.
- File the 990 tax return. The IRS requires nonprofits with gross income of $50,000 or more to file a Form 990-N electronically every year within 14 days after the end of their fiscal year (or 15 months for fiscal years ending in December). If you don't meet these criteria but anticipate making more than $1 million in gross receipts annually in future years, then consider submitting one anyway—it may save you from having to pay penalties later on down the line.
- Get an employer identification number (EIN). Your EIN will be required when applying for federal tax exemption and state tax exemption if applicable.
Starting a nonprofit is a big undertaking, but it can be rewarding! Nonprofits are a great way to help the community. Nonprofits can be started for any cause, from helping animals to improving health care in communities. There are many ways to start a nonprofit and it is important to have a good mission statement and plan for your organization before you begin. It's also important that you have the right people on your board of directors who will help guide you through this process.
If you’re passionate about your cause and want to make a difference in the world, consider starting a nonprofit organization.