Starting a nonprofit in Washington, D.C., is both exciting and impactful. This step-by-step guide is designed to help you navigate the process of establishing a nonprofit in the nation’s capital. From naming your organization to securing tax exemptions and filing necessary documents, this comprehensive overview will provide the essential steps to turn your vision into reality.
Washington D.C. has over 14,000 nonprofits, more than any other city in the United States. These organizations have a significant social and economic impact on the city, employing 26% of the city’s workforce and generating nearly $78 billion in annual revenue. With its diverse community and significant presence of advocacy and service organizations, D.C. offers a unique environment to launch a new organization. This article delves into how to form a strong foundation for your organization and how to file required state and federal documents.
Before you file any state and federal documentation, several steps must be taken to lay a solid foundation for your organization. Be sure to follow these steps and take advantage of the additional resources available.
There are no word or abbreviation requirements for Washington D.C. nonprofits, but you must ensure that your nonprofit’s name is unique compared to other corporations in the area. Visit DC.gov to see what names are available. If you still struggle to find a name, we’ve created a naming checklist to help you get started.
Now that you’ve chosen a name, it’s time to create a compelling mission. The IRS requires 501(c)(3) nonprofit organizations to benefit the public with one of the following purposes:
Your nonprofit’s purpose gives you a direction, but a unique mission statement will help you share your purpose with the public. A mission statement should include who you’ll help, why they need your help, and how you’ll do it.
When filling out your organization’s purpose on state and federal documents, it’s critical to use the same verbiage. That’s why deciding on a mission statement in the beginning can help. Visit our article on how to create your organization’s mission statement here.
Your mission statement will also help you to promote your nonprofit and influence donors. After you finish your mission statement, a nonprofit business plan is one of the best ways to do this. A business plan can help you:
Although some may consider business plans unnecessary and old-fashioned, this tool will make filing necessary state and federal paperwork easier and help you find critical startup funds.
The first section of your nonprofit business plan will lay out the organization’s programs and services. How will you fulfill your mission? What makes you different from other organizations with the same purpose? Answering these questions will have a significant impact on funders. Remember, people’s attention spans are limited, so it’s best to include images and infographics when explaining complicated ideas.
Your programs and services are critical, but you must also know your target market. Your marketing plan is where you should provide details on two types of markets: donors and beneficiaries. You’ll need information on their demographics, interests, and giving ability. Your marketing plan should include communication plans for potential donors, foundations, partners, etc.
The next section will help you create your organization’s bylaws, which are required when applying for tax exemption with the IRS. Your operational plan should include day-to-day activities, necessary legal requirements, and any insurance you may need. An organizational chart will help you provide details on the roles and responsibilities of your nonprofit board and staff.
The effect your nonprofit has on your community is its greatest appeal to funders. In the beginning, your organization’s impact is entirely in your mind. It’s vital to spend time on this section of your business plan and elaborate on how your organization can reach its goals.
Typically, business plan financials will include bank statements and reports. Since you don’t have any, you’ll need to research your competitors. Visit GuideStar and research similar nonprofits’ tax documents for examples of revenues and expenses. This information will give you a solid foundation for your organization’s budgets.
An Executive Summary is the first thing the funders read, but it should be the last thing you write. This section gives an overview of your business plan and describes your organization’s mission plan, target market, and how you’ll meet the needs of your community.
This section provides a space for additional documentation you may need, including:
The next step is to choose your nonprofit’s Incorporator and Board of Directors. The Incorporator is responsible for signing the articles of incorporation. You can have one or more than one Incorporator. Washington D.C. nonprofits must also have a minimum of three directors. There is no residency or membership requirement, and board member terms are one to five years. The Internal Revenue Service (IRS) also requires nonprofits to have three members when applying for tax exemption, but they recommend more to ensure efficient operations and fundraising.
Washington D.C. nonprofits must also have at least two officers: one responsible for managing the corporation and the other in charge of finances. One officer must also prepare the minutes of board meetings. In most cases, nonprofits will have a President, Vice President, Secretary, and Treasurer to cover all these needs. Washington D.C. allows two or more offices to be held by the same individual.
Pro Tip: These regulations are meant to help you get started, but there is much more to building an effective board of directors. We’ve written several articles to help you build a board and recruit more members.
All nonprofits must also have a Registered Agent to receive all legal documents for the organization. An individual or a company can do this, but the company must be in Washington and hold regular business hours. Several companies offer this service.
After choosing your organization’s leadership and building your foundation, you must file articles of incorporation with the District of Columbia online, by mail, or in person. The filing fee is $80 plus a $50 or $100 expedited fee. Turnaround is 15 business days or three days for expedited.
Before you begin, you will need:
After filing your articles of incorporation, you must file for an employer identification number with the IRS. You can file Form SS-4 immediately online or by mail. Corporations will receive a certificate of acknowledgment from the secretary of state’s office.
Before filing for tax exemption with the IRS, you must hold your nonprofit’s first board meeting. This board meeting is an opportunity to elect your officers, assign board members to committees, and start onboarding and training. It’s also time to finalize and adopt the organization’s bylaws and conflict of interest policy and approve opening a bank account.
Your nonprofit bylaws are a roadmap for your board of directors. Nonprofit bylaws must include the following:
The IRS does not allow any board or staff member to benefit financially from an exempt nonprofit’s earnings. Your organization’s conflict of interest policy will provide rules to follow when individuals in leadership have conflicting priorities.
Nonprofits that benefit the public can apply with the IRS as 501(c)(3) organizations and file either Form 1023-EZ or Form 1023. Organizations that earn under $50,000 for the first three years can file Form 1023-EZ for $275. There is an eligibility worksheet to determine if your organization qualifies. All other 501(c)(3) nonprofits must file Form 1023 and pay $600. It can take up to six months to receive your determination letter from the IRS.
Nonprofits that primarily benefit their members may also qualify for some benefits from the IRS. These organizations must use Form 1024 and pay $600 to become 501(c)(4) organizations with the IRS.
Most nonprofits with federal tax exemption qualify for District tax-exempt status for income, sales, and personal property taxes. Nonprofits must file Form FR-164 by mail to receive this exemption.
The following nonprofits are exempt from registering before soliciting donations.
Other nonprofits that solicit donations must get a charitable solicitation license from the D.C. Department of Consumer and Regulatory Affairs (DCRA). Nonprofits must apply for a Basic Business License (BBL) from DCRA under the “Charitable Solicitation” category before any oral, mailed, or electronic fundraising. Nonprofits can only apply for this license after incorporating and obtaining tax-exempt status from the IRS. The application fee for BBL is $412.50 for two years.
All Washington DC nonprofits must file biennial reports by mail or online after their first year by April 1st. Reports are due April 1 every two years afterward. Before filing your annual report, ensure you have the following information:
Pro Tip: Nonprofits can use their annual reports as a fundraising tool. Check out Donorbox’s guide to a nonprofit annual report to see how to use this tool to raise more funds for your new nonprofit.
Starting a nonprofit in Washington D.C. is a detailed process, but with careful planning and adherence to local and federal laws and regulations, you can avoid several pitfalls and even have some fun. As you move through the process, leverage the available resources we’ve provided and stay engaged with your fellow nonprofit leaders whenever you can.
Your commitment to creating change in Washington D.C. can lead to meaningful outcomes, and we’re here to support you every step of the way. Explore further resources on our website and join a network of organizations dedicated to making a difference.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor