Starting a non-profit is a powerful way to address the causes you care about, whether it’s feeding the hungry, supporting education, or protecting the environment.

For instance, the U.S. is home to over 1.5 million non-profits, many of which began with just one person’s vision.

While launching a non-profit might seem overwhelming, the steps are clear: define your mission, meet legal requirements, and build a team to bring your vision to life.

Let’s break down the process so you can start creating meaningful change in your community. Let’s get started!

Steps to Starting A Non-Profit

Step 1: Do Your Research

Starting and running a nonprofit can be challenging, especially with over a million charitable nonprofits already operating in the United States. Many struggle to secure consistent funding.

Before you begin, it’s crucial to identify the specific needs your nonprofit will address. Are there similar organizations already serving the same area or group of people? If so, how will your nonprofit stand out?

Defining your unique strengths and the value you bring will be key to attracting donors and making a meaningful impact.

Before launching a non-profit, it's important to ask yourself a few key questions:

Is there a real need for your non-profit?

Does your community need the services you’re planning to provide? What problems will your organization solve, and who will it serve?

Are there similar organizations already doing this work?

Look for other non-profits or businesses offering the same services. If they exist, are they financially stable? Consider how your non-profit would stand out or if it makes more sense to collaborate with these organizations instead of starting from scratch.

What’s your plan to fund and sustain your non-profit?

Non-profits need more than passionate people; they need strong financial systems. You’ll need a clear plan for start-up costs, ongoing revenue, and how to manage your organization’s finances over time.

How will you prove your impact?

Funders and donors want to see results. You’ll need a way to measure and show the difference your non-profit is making to ensure continued support.

What You Can Do?

1. Consider Collaborating First

If there’s already a strong organization addressing similar issues, partnering with them might be a better way to make an impact. Sometimes expanding or supporting an existing program is more effective than starting something new.

2. Know the Costs and Requirements

Starting a non-profit involves more than just an idea. Think about:

Start-up costs, like office space, labor, and equipment.
Legal requirements, such as licenses or certifications for certain services (e.g., childcare or healthcare).
Ongoing operational expenses.
Working with experts, like your state’s non-profit association or attorneys experienced with non-profits, can help you navigate the legal and operational steps.

3. Building a Strong Foundation

After incorporation and gaining tax-exempt status, the hard work begins. You’ll need to:

Build a committed board and staff.
Set up financial systems.
Register for fundraising, apply for permits, and establish accountability policies.

Is Starting a New Non-Profit the Best Solution?

Before creating a new organization, consider other ways to achieve your goals. Could you work with an existing non-profit to expand its programs or start a new initiative under its umbrella? Start with understanding non-profit organizations.

This could save time, money, and resources while still making a meaningful impact in your community.

Step 2: Build a Solid Foundation

Just like it takes a village to raise a child, starting a nonprofit requires more than just one person.

You’ll need a team of dedicated people to help, including board members, volunteers, and advisors. However, first, you need to know the benefits of a non-profit organization.

A strong group of supporters shows that your nonprofit has community backing, which increases its chances of success.

Creating the Initial Board of Directors

Every nonprofit must have a board of directors to meet legal requirements, and most states require at least three board members.

These founding board members will play a big role in setting up the policies and practices that will shape the nonprofit’s future.

The first board is usually made up of passionate individuals who volunteer their time to help build the organization from the ground up.

They are also responsible for ensuring the nonprofit meets all legal requirements, including state and federal rules for tax-exempt status.

Challenges and Commitments

If you’re struggling to find people willing to serve on the board, it might be a sign that raising funds for the nonprofit could also be a challenge. In this case, consider alternatives like partnering with an existing nonprofit through fiscal sponsorship.

Keep in mind that being a board member requires a significant commitment. Your board will need to ensure the nonprofit -

Operates ethically
Develops strong management practices, and
Has a clear strategic and business plan to stay sustainable.

With the right team, you can build a strong foundation for your nonprofit’s success.

Step 3: Incorporation and State Forms

Once your nonprofit has a solid foundation, it’s time to start the incorporation process. Keep in mind that laws and requirements for forming a nonprofit vary by state.

Connecting with your local state association of nonprofits can provide helpful, state-specific resources.

Get Professional Guidance

While this guide provides general information, it’s not a substitute for professional advice. Consider consulting with a lawyer or CPA experienced in nonprofit law to ensure you follow all legal requirements.

DIY Option

You can also handle the process yourself. Generally, the Secretary of State in your state regulates nonprofit incorporation.

Basic Steps for Incorporation

While requirements vary, here are common steps to incorporate a nonprofit:

1. Reserve/Register Your Organization’s Name:

Ensure your nonprofit name is unique and not already in use.

2. File Articles of Incorporation:

Known as a "certificate of incorporation" in some states, this document officially registers your nonprofit. Some states may also require:

A Certificate of Disclosure
Designation of an agent (with a physical address)
Proof of your nonprofit's name
Payment of filing fees (check the state’s instructions).

3. Extra Steps in Some States:

Publish your Articles of Incorporation in a local newspaper, then submit proof to a state agency.

4. Prepare Governance Documents:

Draft and adopt bylaws.
Establish a conflict-of-interest policy.
Set up compensation policies.

After incorporation, you’ll be able to open a bank account, apply for insurance, and start the process of obtaining tax-exempt status.

Tax-Exempt Status and Ongoing Requirements

IRS Determination Letter: Apply for federal tax-exempt recognition before filing for state or local exemptions.

State Reporting: Many states require annual or bi-annual filings to maintain your nonprofit’s good standing. You may also need to register for charitable solicitation (fundraising) in your state.

Early Tax Returns: If your nonprofit earns income before receiving IRS tax-exempt status, you may need to report that income on state tax returns.

Stay Compliant

Incorporation is just the beginning. Keeping your nonprofit in good standing requires ongoing reporting, adherence to governance policies, and proper financial management.

Step 4: Filing for Federal Tax-Exempt Status.

The National Council of Nonprofits does not provide legal help for tax-exemption applications, but here’s a simplified guide to help you get started.

The IRS provides helpful tools like the StayExempt Tutorials and IRS Publication 557, which explain what it takes to become a tax-exempt 501(c)(3) public charity.

Steps to Apply for Tax-Exempt Status:

1. Get an Employer Identification Number (EIN)

Your nonprofit needs an EIN to apply for tax exemption, open a bank account, hire staff, and more. You can get your EIN by submitting Form SS-4 to the IRS.

2. Choose the Right Legal Structure

To qualify for tax exemption, your nonprofit must be structured as a trust, corporation, or association.

While unincorporated associations can apply, this structure may expose volunteers to legal liability. It’s best to consult a legal expert before choosing this option.

3. Select the Correct IRS Application Form

Form 1023-EZ: A simplified application for small organizations carrying gross receipts of $50,000 or less and assets of $250,000 or less. Before filing, complete the Eligibility Worksheet in the Form 1023-EZ instructions to see if your nonprofit qualifies. The filing fee is $275.

Form 1023: The standard application for larger organizations or those not eligible for Form 1023-EZ. The filing fee is $600.

Useful Federal Forms and Resources:

Form SS-4: Apply for your EIN.
Form 1023: Regular application for tax exemption.
Form 1023-EZ: Simplified application for small nonprofits.
Form 2848: Power of Attorney for representation before the IRS.
Form 5768: Election for nonprofits to engage in lobbying activities (known as the "501(h) Election").

Important Notes:

The IRS requires the individual filing the application (unless they are a CPA or attorney) to register with them.

The review process for tax-exempt status can take weeks or months, and the IRS may request additional information.

Keep all correspondence with the IRS as part of your application records.

By carefully following these steps and ensuring proper documentation, you can set your nonprofit up for success as a recognized tax-exempt organization.

Step 5: Ongoing Compliance

Congratulations on receiving your IRS determination letter! Now the real work of running and maintaining your nonprofit begins. Here’s what you need to do next:

1. Complete State and Local Filings

Many states and local governments require additional steps to recognize your nonprofit as tax-exempt. These might include:

Registering for state-specific fundraising approvals.
Applying for additional tax exemptions, like sales or property tax exemptions.
Securing permits or licenses related to the services you provide (e.g., health care), the clients you serve (e.g., background checks for working with children), or the location of your operations (e.g., zoning requirements).
Registering for unemployment insurance if you’ll be hiring employees.
Filing for approval if you plan to engage in lobbying or advocacy efforts.

2. Understand Donation Implications

It is important to understand - what is a non-profit organization and the tax benefits for donors who contribute to your nonprofit.

The IRS provides helpful resources on how to properly acknowledge donations, ensuring you stay compliant and transparent with your supporters.

3. Maintain Your Status

To keep your tax-exempt status, you’ll need to comply with ongoing state and federal requirements. Losing this status can harm your nonprofit’s credibility, affect donor trust, and lead to financial challenges.

Regularly review IRS resources to stay informed on maintaining compliance.

Monitor changes in state and local laws to ensure your nonprofit remains up to date with all necessary registrations and filings.

4. Join Your State Association of Nonprofits

Connecting with your state association can provide valuable support, resources, and guidance to help you navigate ongoing compliance and operations.

Disclaimer: The information on this website is for general informational purposes only and should not be considered legal, accounting, tax, investment, or financial advice. For the most accurate and up-to-date guidance, please consult a qualified professional, such as an attorney, accountant, or tax advisor.

Conclusion

Starting a non-profit is a rewarding journey that lets you make a meaningful impact on causes you care about. By defining your mission, building a strong foundation, and ensuring compliance, you can create a successful organization that benefits your community.

At Hudson & Empire, we provide expert guidance to help non-profits manage finances, ensure tax compliance, and address operational challenges. Contact us today to learn how we can support your organization and turn your vision into a lasting impact!

How to Start a Non-Profit Organization?