The journey to start a nonprofit alone is undeniably ambitious. How much money do you need to start a nonprofit? You can start an NPO with no money, or at least a small amount to cover registration costs and legal fees. Tax-exempt nonprofits often make money as a result of their activities and use it to cover expenses. This income can be essential to an organization’s survival.
As long as a nonprofit’s activities are associated with the nonprofit’s purpose, any profit made from them isn’t taxable as "income." What is the purpose of a 501(c)(3)? The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. We are here to help guide you through this process and teach you how to start a nonprofit organization.
Understanding Nonprofit Essentials
Your idea of what nonprofit you want to start will be clear by now. So, let’s dive right into what it takes to start one that is destined for success. Step 1: Define your purpose and values. When starting a nonprofit, it is important to have a clear scope and purpose. There are already over 10 million nonprofits in the world. A nonprofit business is not owned by any one individual or group of individuals. Nonprofit corporations, unlike other forms of business, are not designed to make money for owners or shareholders. Nonprofits are sometimes referred to as non-stock corporations, or 501(c)(3) organizations—depending on the subsection of the Internal Revenue Code Section 501 that provides for their tax-free status.
Leadership and Governance
The founder of a new nonprofit is currently the board president. How many board of directors do you need for a nonprofit? Three board members. All nonprofits are governed by a board of directors, a group of volunteers that is legally responsible for making sure the organization remains true to its mission, safeguards its assets, and operates in the public interest. A nonprofit corporation also has officers, who are usually appointed by the board of directors. Most nonprofit corporations have a president, secretary, and treasurer, and some have other positions such as vice-president or assistant secretary, depending on their needs and any state law requirements.
The exact figure is $123,362, taken from an analysis of tax filings by 4,587 charities within their database. Note that often, for smaller nonprofits, the titles “President” and “Executive Director” are interchangeable meaning that both are commonly used as the title for the founder.
Launching Your Nonprofit
This is the “how”. Starting a 501(c)(3) usually involves a two-step process:
- Incorporating a nonprofit organization
- Applying to the IRS for recognition of tax-exemption
While it is possible to skip the incorporation process, that is not advisable. Corporations are created at the state-level by filing a formation document, usually called Articles of Incorporation. Learn how to start a nonprofit organization in 7 steps in any state.