Before committing to starting a nonprofit, research whether your desired mission will serve an actual need in the community. Starting a nonprofit when it is not feasible or needed means rapid failure.
This determination puts you on a path to a successful launch, a solid first year, and a bright future. Here is the first question to ask before you do anything else: Why will your nonprofit exist?
Nonprofits need a mission. A stated charitable, religious, educational, scientific or other qualifying purpose recognized by the IRS is required and helps you stay focused and make decisions advancing your cause.
Planning and Research
We cover everything you need to know about starting and growing a nonprofit. Feel free to jump to sections most interesting. Expect waiting months to a year before operating your nonprofit.
The process can feel overwhelming without knowing steps. We guide you through teaching how to start a nonprofit. Define your purpose and values. Over 10 million nonprofits and non-governmental organizations exist, so uniqueness is challenging.
Nonprofits, also called non-stock corporations or 501(c)(3)s, depending on the tax code subsection providing tax-free status. Benefits of a nonprofit include federal tax-exempt status, not paying federal taxes on income.
Get our 9-step checklist for everything you need to know about starting your own nonprofit!
Legal and Financial Considerations
The journey to start a nonprofit alone is undeniably ambitious. You can start an NPO with no money, or at least a small amount to cover registration costs and legal fees. Any profit made from activities associated with the nonprofit’s purpose isn’t taxable as "income."
Generally, you need an investment of at least $500 at a bare minimum. There are immediate funding options available to nonprofits.
Nonprofit corporations are not designed to make money for owners or shareholders. This income can be essential to an organization’s survival.
Starting a nonprofit organization involves several key processes. Step 1: Define your purpose and values.
All nonprofits are governed by a board of directors, a group of volunteers that is legally responsible for the organization. A nonprofit corporation also has officers, who are usually appointed by the board of directors. Most nonprofit corporations have a president, secretary, and treasurer.
Starting a 501(c)(3) usually involves a two-step process:
1) incorporating a nonprofit organization
2) applying to the IRS for recognition of tax-exemption.
Managing a Nonprofit
Can I run a nonprofit by myself?
When you create a nonprofit, you can put yourself in any position within the company. You can set your own salary. The IRS expects reasonable pay based on comparable salaries.
It’s a big step; fundraising becomes higher stakes. The IRS allows founder salaries. Founders decide, ensuring conformity with rules.
Some states refer to nonprofits as non-stock corporations. If a nonprofit dissolves, remaining money and property are distributed to tax-exempt purposes after paying debts.
Your structure affects paying staff and yourself, plus grant eligibility. Paid people can’t be directors/officers.
For full-timers, the law requires salary reasonableness. No percentage dictates salary; it depends on donors.