How to Start a Nonprofit Organization

How to Start a Nonprofit in 10 Steps

Use this detailed 10-step guide on how to start a nonprofit organization. We have discussed & explained all the steps, from validating your idea to ongoing legal compliance.

Step 1: Why do you need a Nonprofit?

There are about 1.5 million nonprofits in the U.S. The sad fact is that most nonprofits fail or never take off.  

Why? Because most nonprofit business ideas are not scrutinized very well. 

Before starting a nonprofit, see if you are solving a problem in an area where no one is solving the same problem. 

You will need to look into the demographics, population, and relevant data to determine if your idea is valid. 

Even if a for-profit business is solving the same problem you are solving; you have competition. 

See who else is doing the same work in your target area. For example, you are planning to offer three square meals to the poor people in an area. You will need to see if there is a sizeable population of your target group and if there is still considerable scope for work.  

If you see don’t considerable demand for your services, see if you can work for an existing nonprofit organization.

If only a few people need your help, consider helping without a nonprofit. You can collect funding from family, friends, and relatives and help the deserving community. 

It is better to start a nonprofit with an idea where you see a pressing need for a solution to a problem. You will probably successfully run and scale your nonprofit organization where you have low or no competition. 

Step 2: Establish a solid foundation

Build a solid foundation for your nonprofit organization. A solid foundation will help you face the hardships at the start and scale successfully in the long run. 

A solid foundation starts with correctly naming your nonprofit organization.

Name your Nonprofit Organization 

A good nonprofit organization name is the one that describes what you do and it connects to the people you will serve. 

Some states require a corporate designator with a nonprofit name, like a corporation, company, etc. Check state laws for nonprofit organization name policies and name accordingly. 

Confirm the name availability with the Secretary of State’s office. Also, check for patents and trademarks for your desired name with U.S. Patents and Trademarks. 

You may be able to reserve a name for a few weeks in some states. California gives 60 days. Check your state’s nonprofit name reserve policy with the Secretary of State’s office. 

We also advise that you check for the exact domain name. A domain name with a nonprofit’s registered name will help you market and gain support for your cause online. 

Write Mission Statement 

Want to know how to write a mission statement for your nonprofit? Follow this easy 4-step process.

• Narrow down and say exactly what your nonprofit organization will do.
• Make the mission statement descriptive and relatable to the community you wish to serve
• Keep it short and sweet. Only 2,3 short sentences are enough
• Avoid jargon, buzz words, generalities, and any word that can make it ‘not easy’.

Write a Business Plan for your Nonprofit

Writing a business plan for your nonprofit will help you see the future and determine the right direction.

You know a thing or two about the market for your nonprofit. You will need to do more research about your target population for writing a business plan. Here, you will prove to potential donors that actual demand for your services exists. 

Use our Business plan template for nonprofit organizations and make a perfect nonprofit business plan in a short time.

In a hurry, hire our business plan writer for creating a nonprofit business plan. 

Step 3: Why incorporate a Nonprofit Organization

You need to incorporate your nonprofit to do good. 

Incorporating your nonprofit organization will:

• Create formal structure and credibility for your organization 
• Limits liability for directors and officers 
• Enable you to make documents as a corporation needed for IRS 

The requirements, processes, and fees will vary from state to state. Check with the Secretary of State’s office for details.

It is worth noting that incorporating a nonprofit does not make it 501(c)3 exempt. You will need to apply for a 501c3 exemption separately.

Step 4: Appoint a board of directors

Let’s briefly discuss how to find members and appoint a board of directors.

Look for people who support your cause and who can contribute to it in any way. Can you spot some sincere advisors for your nonprofit? If yes, start selecting board members from them.  

We suggest the following when you are looking for members for your nonprofit board of directors.

• Socially active people with a wide network
• Multi-skilled and people with expertise in management, finance, or legal 
• People who can make donations or raise funds for your nonprofit.

The board members are typically unpaid. We suggest noting this down in the job description for the board members. 

Tell the board members your expectations from them both in terms of time and donations.

Step 5: Take the initial board actions

Once you have established a board of directors for your nonprofit organization, the board will need to take some initial actions. These actions include:

• Set nonprofit bylaws 
• Adopt a conflict of interest policy 
• Set the exact number of authorized members for the board of directors 
• Adopt fiscal year for accounting 
• Approve opening a bank account
• Pass applying for tax-exempt status 
• Determine and fix salary for officers and staff members

If you have already taken some of the above steps, proceed with completing the remaining.

Step 6: Establish bylaws and conflict of Interest Policy

The bylaws are governing principles for your nonprofit. 

The bylaws will govern your nonprofit organization. A nonprofit organization is accountable to its bylaws as well as the state laws and IRS laws. 

Bylaws serve as a guide for the board of directors to make decisions. Nonprofit organization bylaws are required to apply for a 501c3 exemption. 

Next, create a policy for the conflict of interest. Check if your state has any requirements for the conflict of interest policy and add those to the policy. 

A conflict of interest policy protects your leadership and aids nonprofit organization governance. 

Call the first meeting of the board of directors of your nonprofit. Here,  elect officers for your nonprofit organization, and review and approve bylaws and conflict of interest policy. 

Step 7: Secure startup funding

You are almost done with your nonprofit organization formation. It is time to start working.

You need resources and funds to do good. Start with making charitable solicitations. 

Charitable solicitations are nonprofit organizations’ appeals for funds. The nonprofit organizations solicit fund requests in newspapers, the internet, social media, etc.

They introduce the cause, the way they will work for it, introduce their team, and request funding. Charitable solicitations or fundraising have become mostly online and you need a small budget for a fundraising campaign.

Establish a system for keeping records of all the funds you receive and the donors. It is necessary for accounting purposes and securing recurring funding from donors.

We recommend that you invest in nonprofit software or donor management software. A donor management software will help you organize donor data, see donor tendencies and patterns, and increase the chances of recurring donations.