Nonprofits start with impassioned people ready to make a difference in the world. It only takes one person or a small group to hold passion strong enough to forge ahead and start a nonprofit or charitable organization. But just like with any business, there is a lot of research and planning that goes into starting a nonprofit. There are legal, accounting, and technical considerations as well as funding to consider. Getting the steps in starting a nonprofit 501(c)3 right is paramount to accomplishing your goals.
A Brief History of the Nonprofit Movement for Inspiration
If you’re passionate about a cause, starting a nonprofit 501c3 enables you to make a difference. Change can begin with the smallest nonprofit organization and often does.
- The Salvation Army was founded in 1865 by William Booth. He was an evangelist who wanted to offer practical help to impoverished people. It is now the 5th largest US nonprofit.
- Goodwill was founded in 1902 in Boston by Rev. Edgar J. Helms. He collected used household goods and clothing in wealthier areas of the city. He then trained and hired impoverished folks to mend and repair the used goods.
- In 1916, two years after coining the term “birth control,” Margaret Sanger began a revolution in a Brooklyn storefront. She opened America’s first birth control clinic which was the start of what is now Planned Parenthood.
- In the late 1960s, John van Hengel volunteered at a local soup kitchen and started asking for food donations. He ended up with far more food than the kitchen could use. Feeding America is now the 2nd largest nonprofit in the US.
These are just a few examples of nonprofits that have gone big, but many of the organizations making a difference today started with nothing but the passion of their founders to make a difference.
10 Steps to Start a Successful Nonprofit 501(c)3
Passion and love strong enough to change the world cannot be underestimated in starting a nonprofit. With hard work and dedication, your dreams to help others in a specific way can be realized. But what comes next? Use these steps as an outline to help you successfully form a nonprofit 501c3 organization.
1. Find an Attorney (If You Have a Budget)
If your budget allows, start with finding an attorney experienced in starting nonprofit 501c3 organizations. They’ll guide you through each step and it is less stressful in getting your application accepted by the IRS. When prepared by an attorney, the legal documents required will be easy to manage. Find an attorney with experience in working with the IRS, as important distinctions are involved in the entity paperwork. Of course, a 501(c)(3) is the federal tax exemption status of nonprofit organizations and includes public charities, private foundations, or private operating foundations. There are other 501(c) organizations as well, indicated by categories 501(c)(1) – 501(c)(28).
Note that all of these processes can be successfully managed without an attorney. There are many online resources and experts that can assist you if you have a small budget and don’t want to get professional assistance.
2. Choose a Name for the New Nonprofit 501(c)3
The name of your nonprofit must be unique and memorable. It cannot be the same as another organization on file with your state’s business or corporations office.
Your name will likely stay with you as long as your nonprofit stands and is an integral part of creating a strong nonprofit brand. The most important consideration is how to keep your nonprofit name and brand in the minds and hearts of the public. A nonprofit name needs to invoke emotion to accomplish this.
Here are some tips in choosing a name for your new nonprofit:
- Brainstorm a name which speaks to your mission
- One that no one else has
- That’s easy to spell
- Easy to pronounce
- Easy to remember
- And choose an acronym
Either your attorney or the state’s business office will check to see if the name you choose is available. You may also check online on the Secretary of State or state incorporation webpage. Often states require a corporate designator, such as an incorporated, corporation, company or limited.
3. File Articles of Incorporation with your State
The next step in starting a 501c3 nonprofit is to file papers called Articles of Incorporation with your state’s corporate office. The Articles of Incorporation require basic information regarding your new nonprofit. The articles function like a constitution, governing the nonprofit corporation. This is not a complex document yet your attorney will ensure it is done correctly. The language needs to be very clear in order to be granted tax-exempt status. Articles of incorporation officially document your nonprofit name, address, nonprofit function, and the names of the directors you choose.
4. Apply for Federal & State Tax Exemption
After you have filed the Articles of Incorporation, you are ready to submit a federal 501(c)(3) tax exemption application to the IRS. The IRS requires that you complete Package 1023 which is called the Application for Recognition of Exemption. As a 501(c)(3), you will be officially exempt from paying taxes. Also, your donors will be able to report donations made to your organization for tax purposes.
Starting a nonprofit 501c3 in some states require a separate application for a state tax exemption. Others only require that you file nonprofit articles of incorporation and have federal 501(c)(3) tax-exempt status. Check with your Secretary of State for your legal requirements.
5. Draft Nonprofit Bylaws for Starting a Nonprofit
Forming Bylaws are an important step in starting a nonprofit 501c3. They contain rules and procedures for board meetings, decision making, and elections of officers and directors. Initially, you may draft some bylaws. They are commonly adapted at the first board meeting.
6. Establish a Nonprofit Website
Your nonprofit website will be key to sharing your mission with the world. You communicate to your supporters, donors, and volunteers – your heroes. Your homepage constantly changes and communicates fundraising events, live broadcasts, stories, and photos.
This is where DoJiggy comes in! We offer managed website hosting. Our nonprofit website builder makes it easy for your organization to update and maintain your own content, while still allowing for the custom branding you need.
7. Select Your Nonprofit Board Members
When you start a charity organization, one of the most important decisions you’ll make is selecting your Board of Directors. Your board members have an important job to do for your nonprofit:
- Determining the organization’s mission and aligning goals accordingly
- Strategic planning and support of your goals
- Being involved in effective organizational planning
- Uncovering which of the nonprofit’s programs are consistent with its mission and monitoring their effectiveness
- Creative financial planning and securing adequate financial resources for the organization to fulfill its mission
- Active involvement in the development of the nonprofit’s annual budget and ensuring that proper financial controls
- Recruiting and training new and diverse board members and evaluating performance
- Overseeing and cooperating in legal and ethical standards and norms
It is required by the IRS that nonprofit 501c3 organizations have at least three board members. Adding as many additional board members as you wish is your prerogative.
8. Hold the First Board Meeting
At the first meeting of the board of directors, the directors take care of formalities such as adopting the bylaws, electing officers, and recording the receipt of federal and state tax exemptions. After the meeting is completed, the minutes of the meeting should be created and filed in the nonprofit’s records binder.
9. Apply for Necessary Licenses and Permits
Let your attorney guide you through the process of obtaining the required licenses and permits. Choosing the right ones and making sure they are done properly is of the essence. While the forms required are not complex, let a professional assist you. This is especially true once you begin fundraising of any kind, as charitable solicitation registration is the law, and the requirements vary from state to state. Starting a nonprofit 501c3 with the official documents done correctly is worth a little extra time and supervision.
10. Start Fundraising!
You’ve done it! You have officially established a 501c3 nonprofit organization. Now to accomplish your mission you’ll need funds. The best place to start is with your inner circle and current stakeholders. Ask your Board Members and others to make a monthly contribution – however small. Establishing a monthly giving program now will create a baseline of funding to cover basic costs. Read our next article on How To Start a Successful Nonprofit: Next Steps.