According to the NCCS, today the U.S. has more than 1.6M non-profit organizations. That is quite a jump since 1967 when the figure was around 400K. Starting a nonprofit organization can be a fulfilling and rewarding experience. However, the process of starting a nonprofit can be complex and time-consuming. From obtaining tax-exempt status to creating a mission statement and establishing a board of directors, many tasks must be completed to get a nonprofit up and running.

This step-by-step guide is designed to help aspiring nonprofit founders navigate the process of starting a nonprofit organization. If you're just starting out, this guide will provide the information and resources you need to start your nonprofit on the right foot.

How To Start a Nonprofit: A Step-by-Step
How To Start a Nonprofit: A Step-by-Step Guide Pixabay

1. Select a name for your nonprofit.

You must choose a name for your nonprofit after identifying an unmet need in your community and determining how you will address it. You could also conduct a name search on the Secretary of State's website to confirm availability.

You must exercise caution because the name must not imply that your organization was formed for reasons other than those specified in your Articles of Incorporation. This will help build credibility and trust when future sponsors and donors research your organization.

2. Select a registered agent.

A registered agent, also known as a service of process agent or statutory agent, will be required for your nonprofit. They receive all legal correspondence and documents on the nonprofit's behalf. As a registered agent, you can appoint yourself or anyone else. However, the appointee must meet the following criteria:

  • They must agree to the meeting.
  • They must be available during regular business hours.
  • They must be over the age of 18.
  • They must be residents of the state where you are establishing your nonprofit.

3. Recruit your board members.

At least one incorporator will be required for your nonprofit to sign and file the Articles of Incorporation. Then, a minimum of three directors must be nominated. The directors cannot be related, residents of your state, or members of the nonprofit in question. Finally, your organization will require officers to serve as secretaries and president.

4. Acceptance of the conflict-of-interest policy and bylaws.

Your nonprofit's bylaws are the rules that govern how it operates. The Conflict-of-interest policy, on the other hand, ensures that no conflict of interest exists during decision-making. The board must always act in the best interests of the organization. The bylaws must be kept safe for future reference and need not be filed with the state.

5. Select a structure for a nonprofit startup corporation.

You can choose from the following organizational structures:

  • Charities or charitable organizations:
    These are classified as 501(c)3 and thus are tax-exempt. They are made for religious or educational purposes, animal cruelty prevention, etc. They also include places like daycare centers and food banks.
  • Clubs for social and recreational purposes, such as sports and country clubs.

6. File your nonprofit's Incorporation articles.

Preparing and filing Articles of Incorporation in your state to register a nonprofit organization is mandatory. The Articles of Incorporation detail the nonprofit's specific goal, how assets will be used, and what will happen to these assets if the organization is dissolved.

Include the following information in your articles as well:

  • The address and name of your incorporator
  • The address and name of your nonprofit's initial registered office
  • The address and name of your nonprofit's registered agent
  • The addresses and names of board members.

The Secretary of State's website contains a nonprofit Articles of Incorporation Form.

7. Get an EIN for your nonprofit.

Your nonprofit must have an EIN to function. Your EIN is obtained by completing IRS Form SS-4 and submitting it online. It will be used to open business bank accounts, establish credibility with potential donors and vendors, and apply for tax exemption. Once your state has approved your Articles of Incorporation, you can apply for your EIN.

8. Apply for federal tax exemption.

If your nonprofit receives federal tax exemption from the IRS, it will be automatically exempt from the state's corporate income and sales tax. To be eligible for tax exemption, you must prepare and file your Articles of Incorporation per the IRS's requirements.

9. Apply for state tax exemption.

Your nonprofit corporation is automatically exempt from state income tax, corporate income tax, and franchise tax once it has obtained federal tax exemption.

10. Register for fundraising.

Most states require any charitable organization to register annually before soliciting donations from the state's residents. Registering in your home state is essential, but depending on the scope of your organization, you may also need to register in other states.

Final Thoughts

This step-by-step guide has provided a good overview of the process of starting a nonprofit, including incorporating and applying for 501(c)(3) status. Whether you are located in New Mexico, Wyoming, Delaware, or any other state, this additional informative resource will help you get your nonprofit up and running.

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