What are the steps for starting a nonprofit?

Setting up a nonprofit organization involves several key steps to ensure that it is legally compliant, structured appropriately, and set up for success. Here’s a general guide on how to set up a nonprofit organization in the U.S.

1. Decide on Your Mission and Vision

Before taking any formal steps, it’s essential to clearly define the mission and vision of your nonprofit. This will guide all future decisions and help you communicate your purpose to others.

• • Mission: What is the nonprofit’s primary purpose? What will it do and who will it serve?
  • Vision: What is the long-term impact you hope to achieve?

2. Choose a Name

Pick a name for your nonprofit that reflects its mission and adheres to your state’s naming rules for nonprofit organizations. The name must be unique and not already in use by another registered organization. You can check your state’s Secretary of State website to ensure your name is available.

3. Create a Board of Directors

Most states require a minimum of three directors to form a nonprofit organization, although the number may vary by state. Choose individuals who are dedicated to the mission and can help with governance and strategic direction. Some general guidelines include that:

• • Board members should understand their fiduciary duties and responsibilities.
  • Directors should be independent (i.e., not related by family or business relationships to avoid conflicts of interest).

4. Draft Your Bylaws

Bylaws are the internal rules that govern how the nonprofit will operate. Bylaws are essential for IRS approval and should cover:

• • How board members are elected and their terms.
  • Frequency and procedures for board meetings.
  • Roles and responsibilities of officers.
  • Conflict of interest policy.
  • How decisions are made and how disputes are resolved.

5. Incorporate Your Nonprofit Organization

File Articles of Incorporation with your state’s Secretary of State office. This document officially creates your nonprofit and typically includes:

• • The nonprofit’s name.
  • The nonprofit’s purpose (must be aligned with IRS requirements for tax-exempt status).
  • The name and address of the registered agent (a person or entity responsible for receiving legal documents).
  • The names and addresses of the board members.

There’s usually a filing fee associated with incorporating your nonprofit.

6. Apply for an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a federal tax identification number provided by the IRS. It’s required to:

• • Open a bank account.
  • Apply for tax-exempt status.
  • Hire employees, if applicable.

You can apply for an EIN online through the IRS website at no cost. After you receive an EIN, you can move on the the next steps.

7. Apply for 501(c)(3) Tax-Exempt Status (if applicable)

In order to be exempt from federal income tax and allow donors to make tax-deductible contributions, you’ll need to apply for 501(c)(3) status with the IRS. You can apply by filing one of the following:

• • Form 1023: This is the standard application for tax-exempt status and is required for larger or more complex nonprofits.
  • Form 1023-EZ: This is a simplified version of Form 1023 and can be used by smaller nonprofits with less than $50,000 in gross receipts and less than $250,000 in assets.

Approval for 501(c)(3) status may take several months, but once approved, your nonprofit will be exempt from federal income taxes.

Check out our post about these forms here!

8. Register with State Agencies

In addition to federal requirements, many states require nonprofits to register with state agencies, especially if they plan to solicit donations.

• • Charitable Solicitation Registration: Some states require nonprofits to register before asking for donations. This is often handled by the state’s Attorney General’s office or a charitable solicitation division.
  • State Tax Exemption: Apply for state tax-exempt status with the appropriate state department (e.g., Department of Revenue).

9. Open a Bank Account

Open a dedicated bank account for your nonprofit using your EIN. This will help keep your organization’s financials separate from personal accounts and ensure transparency. Make sure to have the Articles of Incorporation and EIN ready when opening the account.

Note: It’s important for the nonprofit’s finances to be kept separate from the personal finances of the board members or founders.

10. Comply with Ongoing State and Federal Requirements

Once your nonprofit is set up, you must comply with both state and federal requirements to maintain good standing:

• • Annual Filings: Most states require annual reports, and you may need to file Form 990 (the annual information return) with the IRS, depending on the size of your organization.
  • Recordkeeping: Keep detailed records of meetings, financial transactions, and any major decisions or changes.

11. Fundraising and Grant Applications

After your nonprofit is established, you can start fundraising to support your mission:

• • Consider applying for grants from government agencies, foundations, or corporations.
  • Organize fundraising events or seek donations from individual donors.

It’s important to have a fundraising plan in place to ensure financial sustainability.