So you wanna start a nonprofit? Don’t do it. Just kidding. Kind of. Starting a non-profit will be one of the most trying, fulfilling, motivating, overwhelming, exhausting and beautiful things you will ever undertake. Proceed with caution, curiosity and, above all, tenacity.
The first step is to research, research, research. Develop a very clear picture of what you plan on doing and why you are going to do it. It is imperative to have a deep and powerful “why” because that will drive you and your donors. So, ask yourself: Is there a need for your nonprofit? Why does your mission differ from that of companies that are already successfully operating? If you simply want to make a difference, join in the efforts of successful companies. Donate, volunteer, work for them. But if you have a revolutionary idea that will truly make a difference, differentiate your mission and your intended execution from what already exists.
The next element to consider is how you’re going to pay for your endeavor. You will need start-up funding, but also operational finances as you continue to work day in and day out.
The third step is to figure out who is going to lead you to your success. Yes, great companies have been built in garages, but very few have been started by one individual operating as an island. Who is on your team? Who is your co-founder? Who will run operations? Do you need to hire initial employees? Perhaps even more important than who you hire is the creation of your board. Developing a diverse board that you trust will be the keystone of your continued success.
Figure out what your exact mission and vision are. Your mission statement essentially defines your nonprofit’s objectives and your specific path or method to achieving those. Your vision statement explains where you see the company in the future. This is the creative and defining step for you. Different from establishing your initial goals, putting pen to paper and writing out your identity is the beginning of your branding, marketing, and ultimately, the reason that your team will come to work every day.
The next few steps aren’t as glamorous, but are completely necessary. You need to incorporate your business at the state level. This includes registering the intended name of your nonprofit corporation and filing your Articles of Incorporation. Then you’ll need to prepare and adopt several documents and defining procedures—bylaws, a conflict of interest policy and compensation policies to name a few.
Filing for that Federal Exemption is what’s going to make you a viable option for donors, but it’s also tedious. Many companies hire an attorney for assistance, but you can also find and fill out all the forms online. There are many different forms, so make sure you research which one is right for you. By Grace filled out the 1023. I did it myself and it took me three months of careful research, rewrites and asking attorneys I trusted within my inner network. It could take a couple weeks to several months to receive your determination letter. Even after my submission, I still had the IRS reach out for more information. They aren’t just handing out tax-exempt statuses, so this is fairly common.
Filing for tax-exempt recognition at the state and local levels—which you can only do after the IRS issues your "Determination Letter" of your organization's tax-exempt status—is your next step.
Once you are officially tax-exempt on all levels, the real work and the real impact begins. Keep in mind there’s lots of paperwork and responsibility that comes with the exemption. Track your tax withholdings, file your annual reports with your state, and file Form 990s information return with the IRS. Also, hold regular board meetings and communicate effectively and frequently with your donors. But that’s all for another blog.
Have questions on starting your own 501(c)(3)? Email firstname.lastname@example.org, because we love helping aspiring entrepreneurs!
Until next time,