How to Start a Nonprofit (in 10 steps)
We’ve been there, and we know that starting a nonprofit can be a daunting process. If you can fill out a few forms, do some research, and deal with the IRS, you’re well on your way to being able to start a nonprofit and serving your community.
Do Your Research
When we say do your research, we mean that you need to be able to answer questions like:
Do people actually want the services you’re going to provide? Will they use them? (Hint: ask them).
Are you duplicating the efforts of another nearby nonprofit?
How are you going to fund your nonprofit? Who will your supporters be?
What’s your long term goal? How are you going to solve the problem you’ve identified?
How are you going to measure your impact? How are you going to track progress towards your goals?
Here’s a link to a free nonprofit business plan template. It’s a good idea to fill this out before moving forward.
Define Your Mission, Vision, and Values
You might be thinking:
I already have this figured out. Shouldn’t defining my nonprofit’s mission, vision, and goals be the first step?
That’s a fair question. We’re including this as step two because your mission, vision, and goals should be informed by the research that you conducted in step one. Instead of coming to a community with a preconceived solution, we recommend that you learn as much as you can about the people you want to serve, and work with them to determine what programs will be most effective. At Sable, we did six months of market research to find out how best to help our partners, and a full year of a pilot program to make sure our mission, vision, and values aligned with the people we want to help. It really helped us, and we think it will help you too.
Here's a guide to crafting your mission, vision, and values, and examples.
Choose a Name
You probably already have a name in mind, so we’ll keep this step brief. First, google it to make sure there’s not already a similarly named nonprofit (or for-profit). Next, you should check with your state’s secretary of state to make sure the name is available. You can also use the IRS tax exempt organization search tool.
Create Your Nonprofit's Governance Structure
Decide on the structure of your organization's leadership, such as a board of directors or a steering committee. There’s more than one correct way to structure your board’s governance structure, and requirements will vary by state. For example, in Sable’s home state of Texas, nonprofits are required to have a minimum of three board members and designate officers. Your state might have different requirements. There are also alternative models for governance, like the minimally viable board, co-executive directorships, and working boards. The point is, take some time to discuss with your leadership the best fit for your organization.
File Articles of Incorporation
This is typically done through your state government, and thus state laws around this step can vary. When in doubt ask a lawyer. Or google. This step sounds complicated – in most cases it’s not. Articles of incorporation will typically include the designation of a registered agent (someone who can be physically served legal documents on behalf of the nonprofit), registering your nonprofit’s name, fees, and other documents depending on what state you’re in. It might also require including information about your board members, mission, and address. This should cost between $8 and roughly $200 depending on the state that you live in.
Apply for an EIN (Employer Identification Number)
After receiving confirmation that your articles of incorporation have been successfully processed, you will need to fill out IRS Form SS-4 - Application for Employer Identification Number. This is a two page document that allows the IRS to identify your nonprofit. After receiving your EIN you will be able to open a bank account and apply for 501(c)(3) status. Only one person needs to fill this document out. Though turnaround time is rumored to be fast for this document, it’s still a good idea to allow a few weeks to complete this. Form SS-4 doesn’t cost anything to file.
You can check out Form SS-4 here.
Apply for 501(c)(3) Status
After receiving confirmation that all prior documents have been processed successfully, apply for 501(c)(3) status by filling our IRS Form 1023-EZ. Form 1023-EZ is an abbreviated version of the traditional 501(c)(3) application form, 1023. Most organizations apply for nonprofit status using from 1023-EZ, the major benefit is that it’s a shorter, simpler form, with a faster processing time. Nonprofits that predict revenue of less than $50,000 in their first year should use form 1023-EZ. It can take 2-4 weeks to process. Once you receive your EIN you should save it in several places that are highly visible to you and your team, because many government entities, donors, and many other groups will want to be able to reference your EIN. Form 1023-EZ costs $275 to file.
Information about Form 1023-EZ can be found here.
Apply for State Tax Exemptions
After receiving confirmation of your Federal tax-exempt status, you’ll need to apply for state tax exemptions. Examples of state taxes that you might want to exempt your organization from include franchise and sales tax. These taxes will vary widely by state so be sure to check with your state’s comptroller. Filing costs will vary.
Avoid Scams
Once your nonprofit is official, information about it becomes publicly available. Scammers will get access to lists of new nonprofits, and send them scams and spam to your registered address and email. Scams include letters claiming that you need a labor law compliance poster for $89, and other persistent and “urgent” demands that you send money to people. Don’t fall for it. Google is your best friend if you’re uncertain. These are pretty easy to spot, but we haven’t seen anyone else mention it online and thought we should call it out.
Get Free Stuff for Your Nonprofit
A lot of companies offer free and discounted services and software for your nonprofit. We made a list of free stuff for your nonprofit here.