How to Start a Nonprofit – Demystified.

A simple guide to starting a nonprofit organization.

If you are one of those among us who are passionate about helping or serving others in your community, then you may have considered starting a nonprofit.

What is a Nonprofit organization?

A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is an institution that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit. NPOs use the surplus of its revenues to further its objective, rather than distributing its income to the organization’s shareholders, leaders, or members.

nonprofit
Nonprofit organizations issues and concepts word cloud illustration. Word collage concept.
  1. Choose your niche – What kind of service or assistance will you provide to the community.
    For example, suppose you want to help pregnant teens in your city. There are many ways you can help them, such as by providing prenatal classes.

    It’s important to know what services are already available in your community. You need to be sure your efforts aren’t duplicating those of someone else.

  2. Register the name of your nonprofit. Before committing to a name for your organization, do a search with your Secretary of State’s office to see if the name you chose is available. If so, register the name with them. This will cost approximately $25. Registering the name of your NPO will reserve the name until you file your articles of incorporation.

  3. Next, you’ll need to appoint your board of directors. This is necessary because you will need to list their names and addresses when you file for incorporation and your tax-exempt forms. They will also help you to create your bylaws. These are required for incorporation.

    A few things to know about board members:
    They cannot be paid for their services.
    They should have the experience and expertise to meet your operational needs.

  4. Creating Your bylaws. The bylaws are a legal agreement between the organization and its board members that state how the business will be conducted and how decisions will be made. They are created by the founder and the board members at the first board meeting.

    They typically include the following:
    The Purpose of the NPO. i.e, what’s the mission and what services will it provide.
    When will the annual meeting be conducted?
    The official date your bylaws will come into effect.

  5. Filing your articles of incorporation. In order to get federal tax-exempt status, your organization needs to be formed either as a corporation or a state-registered unincorporated association. Your articles of incorporation are filed with your state office. Each state may have slightly different requirements on what you must file but generally, most states will ask for the following:
    Your corporation’s name; Address; Name and address of your registered agent in the event of legal issues; Name and address of the person or people incorporating the nonprofit; A statement of purpose; Members vs non-members; Type of nonprofit; Effective date.

    The cost to file can range from The cost to file your articles of incorporation can range $100 to $250.

  6. Get a federal employer identification number (EIN). Get this even if you don’t have any employees, your organization must have its own EIN to apply for tax-exempt status.

    You can get an EIN online by using the IRS’s EIN Online Assistant. There is no charge either to have an EIN issued or to use the system. The system is available Monday through Friday from 7:00 a.m. to 10:00 p.m. Eastern Time.

    Please note: when filling out your EIN questionnaire, you’ll have to do it in a 15-minute time window.

  7. Applying for your Tax-Exempt Status. Typically you must either fill out Form 1023 or Form 1023-EZ to apply for tax-exempt status. The 1023-EZ is a simplified version of Form 1023. You typically fill out a 1023-EZ if you’re a small organization receiving less than $50,000 a year and with assets of $250,000 or less.


    Form 1023 is $600 and Form 1023-EZ is $275
    Form 1023 is up to 28 pages long and can take several hours to fill out – be meticulous!

  8. Apply for state and local tax exemptions. Once the IRS has recognized your organization’s tax-exempt status, you can apply to be recognized by state and local authorities as well.

When you are ready to seek grant funding for your nonprofit. Log in to GrantWatch.com to find over 20,000 grants for nonprofits.

You can also find additional resources here.

One thought on “How to Start a Nonprofit – Demystified.

%d bloggers like this: