How to start a nonprofit

The order matters more than people expect. Incorporate before you apply for exemption. Get your EIN before you open a bank account. Adopt bylaws before your first real board meeting. Doing these out of order is fixable, but fixing costs more than doing it once correctly.

1. 1

   Define the mission and recruit a real board.

   The IRS and your state both care that the organization exists for an exempt purpose and is governed by a board, typically at least three members, most of them unrelated to each other. Recruit people who will actually attend meetings and sign filings, and write a mission statement specific enough that a stranger could say what you do.

2. 2

   Incorporate in your state.

   File articles of incorporation as a nonstock or nonprofit corporation with your state. The articles must contain the exempt-purpose language and the dissolution clause the IRS expects to see; missing them is the most common reason exemption applications stall. State filing fees are modest and the templates published by many state agencies include the required clauses.

3. 3

   Get an EIN.

   The IRS issues Employer Identification Numbers online at no cost. Every organization needs one, employees or not: banks require it, funders require it, and every IRS filing carries it.

4. 4

   Adopt bylaws and a conflict of interest policy.

   Bylaws are how the organization actually runs: how directors are chosen, how meetings are called, who signs. The conflict of interest policy is asked about directly on the exemption application. Adopt both at an organizational board meeting and keep the minutes; they are part of your permanent record.

5. 5

   Apply for federal tax exemption.

   Most charitable organizations apply for 501(c)(3) recognition on Form 1023. Smaller organizations that meet the eligibility limits can use the shorter Form 1023-EZ, which is faster and carries a lower user fee. Read the eligibility worksheet honestly: applying on the short form when you do not qualify creates problems later. Recognition can take from weeks to several months depending on the form and the year.

6. 6

   Register for charitable solicitation where you fundraise.

   Most states require charities to register before soliciting donations from their residents, separately from incorporation. If you will fundraise online, look at the registration rules of the states your donors are actually in, not just your own.

7. 7

   Set up the compliance calendar.

   Nearly every exempt organization files an annual return in the 990 series, and three consecutive missed years revokes exemption automatically. Add the 990 deadline, your state annual report, and your solicitation registration renewals to a calendar the whole board can see, on day one.

8. 8

   Build the funding pipeline.

   Funding is grants, contracts, and donations, and the first two are searchable. AwardsCapture puts federal grant and contract opportunities in one board and matches them to your mission and programs. Behind that sits a directory of nonprofits with their filings rendered readable, which means you can research any funder's actual giving history, not just their stated priorities, before you spend a month on an application.

9. 9

   Write the first application small.

   Your first funded grant is more valuable than its dollar amount, because it becomes the track record every later application cites. Local funders, small federal programs, and fiscal sponsorship arrangements are all legitimate first rungs. When you respond to a federal opportunity, AwardsCapture extracts the requirements into a checklist and assembles the submission package against them.

Formation is paperwork and patience. Funding is a pipeline. The organizations that thrive treat the second one as a system from the beginning, not as a scramble each spring.

Selling services to the government instead? Read How to become a federal contractor.