5 Tips for Starting a Nonprofit

The term nonprofit confuses some business owners. Just because a business does not make a profit, does not necessarily qualify it as an official nonprofit. To become a nonprofit, you’ll need to incorporate your organization, apply for tax-exempt status, and register in your state to collect donations.

Before starting a nonprofit, you must consider a number of points. A nonprofit’s income is different than that of a for-profit business. A for-profit generates its revenue to benefit the private interests of the business or its shareholders. A nonprofit, on the other hand, does not exist to make money; rather, its goal is to make a social or charitable impact.

Nonprofits rely heavily on these key contributions:
  • Donations
  • Fundraisers
  • Grants (monetary grants and/or in-kind grants)
  • Selling Products or Services (charity gala tickets, or girl scout cookies, for example)

A number of steps are involved in registering a nonprofit, including appointing board members, obtaining an EIN number, filing articles of incorporation, applying for tax-exempt status, and setting up a Unique Entity Identifier (UEI). This process can be quite lengthy and costly, and grants are not available to support these steps. In other words, costs related to setting up a nonprofit are all out-of-pocket expenses.

5 Tips Once You Register as a Nonprofit

1. When you are finally registered as a nonprofit, you can start your grant search! When looking for grants, you may regularly come across certain keywords and funding terms, such as LOI (letter of intent) or RFP (request for proposal). It is best to familiarize yourself with the nonprofit glossary of terminology, so you can better understand the fundamentals of applying for a grant.

The 4 types of grant funders you should be aware of are:

2. Every grant has a different application process. Some applications are simple and designed to be completed without the need for a grant writer. However, larger grants require a more extensive application process. Research shows that new nonprofits are more likely to be awarded micro-grants and in-kind grants. Funders first want to see how new organizations managed previously awarded grants. Once you have a few smaller grants under your belt, you can start working your way up to larger grant proposals.

3. Once you receive a grant you must use the grant as instructed. Read the fine print. Failure to follow funding criteria may lead to the grant being rescinded and you will have to pay the money back. When starting your grant search, keep an eye out for the components of your programs that are eligible for funding.

4. Before applying for grants, we recommend reviewing our grant application toolkit. Your organization may also wish to join your local state nonprofit association for additional resources and networking services.

5. If you are not comfortable completing the grant application process on your own, we recommend hiring a grant writer. You can also view our sample grant document collection, which includes examples of grant proposals and other documents you may need when preparing a funding proposal. Overall, pay careful attention to the grant funder’s directions – they are the roadmap to success.

Starting a nonprofit can be a long journey, but your nonprofit organization can have a huge impact on the people and communities you serve. For more free grant resources, visit the GrantWatch website.

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