Disclosure: This post may contain affiliate links, meaning we get a commission if you decide to make a purchase through our links, at no cost to you. Please read our disclosure for more info.
Last Updated on June 6, 2023 by Work In My Pajamas
Are you passionate about a particular cause and serving your community? Do you wish to take this passion to the next level but don’t know where to start?
You’re not alone. Every day, determined and caring people like you are inspired to give back. Starting up your own nonprofit is a lot of work but can also reap a large reward and help a lot of people in need.
Whether you wish to open a club, a charity, or an association, its good to be familiar with all the steps involved in setting up a nonprofit organization. Before beginning this journey, remember that setting up a sustainable non-profit can take years of hard work.
And just like new technology has changed the way we as humans interact, it has also changed the way individuals interact with organizations, making the world of nonprofits slightly more competitive. But not to worry because we are here to help you! Keep reading for 7 tips to help in setting up a nonprofit.
In This Post:
1. Research, Research, Research
There are over 1.5 million charitable nonprofits in the United States, meaning in order for yours to be successful, it has to serve a real need. Figure out the need for your specific nonprofit and check to see if there are other organizations or groups participating in this same kind of work.
Similar to how you would think about starting a new business, you need to assess the demand and current market for your service. Funding for nonprofits is competitive, and in order to secure that you make the cut, you need to be able to show that there is a real need for your organization and what it will provide to the community.
2. Establish a Solid Foundation
Now that you’ve established the need for your nonprofit the next step is building the structure of the organization. Come up with a mission statement for your organization.
This will communicate the purpose of your non-profit and explain how and who you will be helping. Every decision you make as an organization should be working towards supporting this mission.
This is also the time to build your team. Setting up a nonprofit is not a one-person task, you’ll need to have others who are just as determined as you to see the organization succeed. This board team will be involved in every step of the way and are a huge part of building a solid foundation.
3. Choosing a Name for Your Nonprofit
This may seem like the easiest part of your journey in setting up a nonprofit, but it’s also one of the most important things you will do. You want to come up with a name that sounds appealing but also indicates what your organization is going to do.
Many people will be hearing or seeing this name without any other context about your nonprofit, so you want a name that’s easy to remember and has an impact. Some good things to consider before landing on a name is if the name answers what the nonprofit will do and who the nonprofit helps.
Write down some action words to describe what your nonprofit will be doing (feed, clothe, teach, clean, etc.) and some words describing who you will help (kids, environment, dogs, disabled, etc.). This can help give you a good place to start.
4.Incorporation
Once you’ve set up a good foundation, built your team, and developed a name, you can begin incorporation. Look into resources that are available to your specific location, you can start by checking out this list of nonprofit resources organized by state.
Incorporation is beneficial for many reasons. It gives your organization credibility and officially registers your nonprofit as well as establishes a corporate structure that limits the liability of officers and directors.
It can help to get together with local legal counsel that is experienced with tax-exempt charitable organizations, they will be able to ensure that you are following all the correct steps in establishing yourself as an organization.
5. File for Tax-Exempt Status
Once you’ve completed the step listed above its time to file for your 501(c)(3) tax exemption through the IRS. Check out the IRS StayExempt website to gather all the background information on what’s needed to reach this tax-exempt status.
There are also organizations established to help you in this process which you can find out more about here. Filling for this status will cost you a fee, and the amounts depend on which form you need to use which is why third-party help can be useful in making sure you do this step properly.
6. Figure Out Your Revenues
Unlike starting a business where you gain revenue from products and services, nonprofits also gain revenue from three main sources. These are important to go over so you know what to expect when it comes to financial gain.
You will gain income from the private sector from event tickets and membership dues. But with this income, you often have to provide an incentive to gain members.
Private contributions are another source of income. Visit the laws surrounding this for your state since many states will require specific forms or ways of going about collecting these donations.
The third main source of income will come from government grants. It’s crucial to be ahead of the game with these grants so you aren’t stressed out at the last minute trying to get your application in.
7. Continuing Compliance
Although the initial acceptance from the IRS to establish you as a tax-exempt organization is a huge step, there is a lot of work that goes into maintaining this status. Within each state, there is an office in charge of overseeing charitable organizations. You’ll need to register your organization with this office in every state you plan to solicit.
You’ll also most likely have to file your annual financial reporting with the IRS. Track your nonprofit activities and finances to help this process go smoothly.
Be Successful Setting Up a Nonprofit
Following these tips listed above will help ensure your success as an organization. When setting up a nonprofit always remember what inspired you to do it in the first place.
It can be a long journey but the final reward of helping make an impact in your community is well worth it. For info on how to break away from the office job cycle, read this post.
