What No One Tells You About Starting a Nonprofit

You have a passion for a cause, and feel inspired to start a new nonprofit. That’s wonderful! Now you have quite a to-do list. Once you have done research and determined that a new nonprofit organization is necessary, start by getting expert help on all the legal ins-and-outs of nonprofit law.

Starting a Nonprofit

Where can you get QUALITY assistance?

For help filling out and filing the mountain of papers at the state and federal levels, make sure you turn to true experts. That doesn’t mean friends who are free! Your next door neighbor just won an award for her skills as a lawyer. However, being “Prosecutor of the Year” doesn’t mean she is qualified to give you advice on nonprofit law.

what no one tells you about starting a nonprofit

Traditionally, law schools have not offered courses on nonprofit law. This means most lawyers don’t have training unless they have chosen to specialize in this area of practice (known as the “law of tax-exempt organizations”). Seek help from an attorney or accountant who has direct experience working with nonprofits. You may want to consider contacting your state bar association to see if it maintains a listing of lawyers by specialization, and if so, search for those who specialize in tax-exempt organizations or nonprofit law.

RELATED: Are You Making These 5 Nonprofit Governance Mistakes?

Before starting a nonprofit, ask these five basic questions:

  • WHY is a starting a new organization the only way to accomplish the mission?

    There are over a million charitable nonprofits operating in the United States. Each needs a board of directors, funding to operate, and volunteers/employees to keep its activities going. Is starting a new organization necessary? Have you considered fiscal sponsorship? That option could allow your organization to grow initially under the umbrella of another charitable nonprofit until it’s mature enough to stand on its own.

  • WHO will be involved?

    Just as it “takes a village to raise a child,” it takes much more than a solo founder to keep a nonprofit alive. If the only people excited about this idea are the founder and his or her family members, perhaps this is a good idea for a for-profit rather than a nonprofit. Having lots of people willing to help launch a nonprofit as board members, volunteers, etc. can signal broad community support. Look around to see who supports creating a new nonprofit. RELATED: What Is the Purpose of a Nonprofit Board?

  • WHAT do you need to do?

    Determine feasibility. Consider the economic climate and funding needs for the organization. Develop a detailed business plan, considering all aspects of the proposed plan. These include mission, organizational structure, 3-year budget, marketing plan, and resource development / fundraising. Consider potential community partnerships, and the skills needed for volunteer and paid staff.

  • WHEN should you file paperwork?

    Basically, there are three steps involving paperwork, followed by ongoing reporting on an annual basis.

    • Step 1: Incorporate at the state level (completing the state forms required to create a nonprofit corporation).
    • Step 2: Secure your tax-exempt status from the federal government (applying for “tax-exempt status” with the IRS).
      What do new organizations need to know? Go to the IRS website for the basic information you need. More importantly, use the expertise of an attorney with experience working with nonprofits.
    • Step 3: File for tax-exempt recognition at the state and local levels (which you can only do AFTER the IRS issues a “Determination Letter” of your organization’s tax-exempt status).
    • Ongoing reporting: Prepare for annual filings with state entities (to maintain nonprofit corporation status and to register for fundraising purposes), annual federal reporting to the IRS (IRS Form 990), and submit any required reports to funders (whether foundations or government). You will also need to acknowledging contributions from individual donors.
  • HOW do you start and sustain a nonprofit organization? 

    This may be the most important question, and the answer depends on your business plan. If the organization can achieve its mission in less than three years, it should be a program housed at an existing organization.

Starting a nonprofit is not an endeavor to be taken lightly. However, if you have the passion and the community support, it can be a rewarding experience. Follow these tips to get started on the right foot, and best of luck!
To learn more about starting a Nonprofit board, watch our webinar titled Start a Nonprofit Board from Scratch.

Want to know how your nonprofit board of directors and staff can be more productive and efficient through the use of technology? With Boardable’s board software, you can centralize board information and communications, where everything (and everyone) is just a couple of clicks away. Click below to get started with Boardable.

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