While it can be confusing, starting a nonprofit is also incredibly rewarding – and not too complicated with the right steps in mind. Finding the right support to help you walk through the process will ensure your success. Read this detailed guide to learn the 10 steps to start a nonprofit, with detailed tips and resources to help you get started.
![How to Start a Nonprofit Organization [10-Step Guide]](https://donorbox.org/nonprofit-blog/wp-content/uploads/2021/04/How-to-Start-a-Nonprofit-Organization.png)
If you’re looking to start a nonprofit organization, it is by no means an easy ordeal.
Just like with anything that’s worthwhile, starting a nonprofit requires critical thinking, commitment, patience, and a lot of hard work.
While the process itself can be quite intimidating and at times overwhelming in its complexity, a methodical step-by-step approach can help ensure success.
We’re aware that starting a nonprofit organization takes courage, so we definitely applaud your commitment to doing good!
To help you out, we’ve written up a detailed guide containing the key steps you need to take to start a nonprofit organization in a systematic, organized, and stress-free way.
A nonprofit organization is a type of business organization that must operate and provide its services without the primary goal of making money. Nonprofit organizations serve the public interest and are given tax-exempt status by the Internal Revenue Service (IRS).
Generally, public charities are the largest type of 501(c)(3), with 1.5 million registered in the U.S.
Nonprofit organizations that do not fall under 501(c)(3) are classified into many categories such as: 501(c)(4) social welfare groups, 501(c)(5) labor and agricultural organizations, 501(c)(6), 501(c)(7) recreational clubs, and more.
Before we dive into how to start a nonprofit, make sure you read this in-depth checklist while starting a nonprofit. Now that we have a better understanding of what a nonprofit organization is, it’s time to learn how to start one.
Here’s a short video on Starting a Nonprofit Organization in 10 Steps:
Donorbox also has a free checklist to help you get started right away – download it for free as you embark on this incredible journey!
Now, this might seem like an odd thing to start the process with – but asking yourself this question at the very start will be essential to your success. Due to the sheer number of nonprofits out there, it’s likely there’s another organization already tackling the cause or issue you want to focus on.
However, if your organization is in no way differentiating itself and clearly positioning a solution to an existing problem – funding will be hard to come by. Essentially, it will be harder to get support if you are simply duplicating existing services rather than improving or adding to them in a meaningful way.
There are also different ways to serve a mission you care about. Starting a 501(c)(3) registered nonprofit organization is a complicated process, and alternatives might be easier. Plus, estimates vary, but most experts agree that less than half of nonprofit startups survive beyond five years. Of those that survive, perhaps one-third are in financial distress.
You may also want to give this article a read: Not-for-Profit vs. Nonprofit: What’s The Difference?
Think about your intended demographic –the population you wish to serve. You don’t necessarily have to go into too many details just yet. Make sure to establish what that population needs. Think about your intended solution and whether you’ll truly be adding value.
Find demographic or population data that shows a need for your services, and confirm if and how that need is not being met.
Identify nonprofit or for-profit organizations that are already serving the same needs or population(s) that you wish to serve.
Consider other alternatives to creating your own nonprofit organization: joining an existing organization in some capacity, becoming a consultant, starting a donor-advised fund, or seeking fiscal sponsorship.
Triple-check with yourself and any others you’re working with. Reflect on the following questions:
Pro tip 1: To help you out, you could also perform a Nonprofit Needs Assessment with the population in question.
Pro tip 2: Throughout the research process, be sure to save all of the qualitative and quantitative data you accumulate. It will come in handy as your “base data” when you get into monitoring and evaluating your organization’s work in the future.
Your nonprofit must have a solid foundation and clarity. A clear vision and value make for a strong and well-run organization. Here is what you will need to take up:
In the beginning, you’ll also need to choose a name for your nonprofit. There are many ways in which you could go about naming your nonprofit organization. However, it’s safe to say you should select a name that’s unique and somehow related to the main activities of your nonprofit. This decision will set the tone and influence your nonprofit’s brand for years to come, so it’s smart to take some time to think through this decision.
Note: It might be a good idea to check the availability of web domains since that may impact the name you decide on.
Many states require that nonprofits have a corporate designator, such as Incorporated, Corporation, Company, Limited, or their abbreviations (Inc., Corp., Co., and Ltd respectively). Check your state’s incorporation web page to see if a corporate designator is required for your nonprofit.
When you have selected your name, you need to check with your Secretary of State to see if it is available and the U.S. Department of Commerce website to be sure the name you want is not trademarked.
As mentioned previously, in order to attract funding, you will need to demonstrate that there is sufficient need for your organization’s services and that your organization is equipped to address that need.
Once you’ve pinpointed the need, the solution, and the population (this is likely to have happened in Step 1 already), it’s time to transcribe those into a clear and powerful mission statement.
A good mission statement is very important. It can help your nonprofit further clarify your purpose and can be very motivating for staff and volunteers. It sends out a powerful message about what you stand for, and if clearly written and communicated – it focuses your energy and attention and helps you make decisions further down the line.
We’ve written an entire article about how to write an awesome nonprofit mission statement, but here are a few key guidelines to follow:
A good mission statement helps you build a solid foundation upon which you can create a plan and is your guiding light in attracting the right people to your organization.
Your vision is the future you intend to create; your grand plan—how you’re going to change the world. Your organization’s vision statement shares with supporters your grand plan and how you’re going to change the world.
Here are some examples of great nonprofit vision statements:
Nonprofit organizational values are the highest values that guide an organization’s actions, unite its employees, and define its brand. They are abstract ideas that guide organizational thinking and actions. For example, Goodwill‘s values are respect, stewardship, ethics, learning, and innovation. These values guide their decision-making as a company.
Don’t skip this step! Your mission, vision, and values will be key to making many important decisions that have a long-term impact on your organization.
Some nonprofit founders choose to hire or recruit volunteers before writing up a plan, but we’d recommend going the other way around. Only when you have created a nonprofit business plan will you be able to estimate income, costs, and the talent that you will need and can afford.
Moreover, once the plan is created, excerpts can be pulled from it to insert into the federal Form 1023 application for tax-exempt status.
Accordingly, invest time upfront into developing a detailed plan. Such a plan will provide the structure and the discipline to think through the critically important strategic and operational issues.
A good nonprofit business plan sets up a roadmap for the next three to five years of your work. Regardless of your size or financial status, your nonprofit business plan will effectively create a blueprint for how your nonprofit will be run, who will be responsible for what, and how you plan to achieve your goals.
For more insight, check out this guide to writing a nonprofit business plan – with a free template!
Good people are key to running a successful nonprofit organization.
You’ll need to find partners who share the zest for your mission. Creating a reliable leadership structure and a network composed of passionate, committed individuals is the only way to ensure that your nonprofit organization will thrive.
Let’s look at three key groups of people for any nonprofit.
Hiring great Board members is one of the most important processes for a new nonprofit. Your Board will ultimately be responsible for regulatory compliance, strategic decision-making, supporting everyday operations, making hires, and a wide range of similar tasks.
Think about what knowledge, skills, abilities, and other characteristics must a candidate have to be the ideal executive director for your nonprofit, and which of those characteristics matter most to you?
Anyone you ask to be part of the Board will want to know what’s expected of them from the start, so you should begin by deciding whether you want your Board to be a hands-on supporting group that guides your organization (i.e. a working Board), or do you want the board to more consult and advise (i.e. a Governing Board).
Before you start recruiting board members, check out our article on the key responsibilities of nonprofit board members.
Note: Board members cannot be paid. You will be required to declare this in your bylaws and 1023 Application. A founder can get paid if acting in a staff role, such as Director or President. If they are on paid staff, they can only be on the board as a non-voting member.
Some of the roles nonprofits usually hire for at the start are Membership Manager, Communications Manager, Fundraising Manager, or Events Manager.
Which roles you choose to hire for will very much depend on your operational plan and the type of your nonprofit. If one of your main activities is organizing events, then an Event Manager is a role you should consider hiring for. Likewise, if your nonprofit is a club or a society, a Membership Manager might be a necessary role to hire for.
Staff members are usually paid, unlike the Board and volunteers. Because of that, you’ll have to determine how much you can spend on salaries. Think of different benefits you can offer to your staff.
To hire the best team, write up clear job descriptions with outlined measures of success, key responsibilities, and key learnings/growth paths. Your mission should be embedded throughout so that you hire team members who are truly passionate about your work.
Many nonprofit organizations rely on volunteers to run their operations. Before recruiting volunteers, think about:
All these questions will help you create volunteer role descriptions and start promoting the opportunities. Don’t forget to share your mission with volunteers and make the sign-up easy!
Read more about how to recruit and keep great volunteers.
Pro tip: Before officially hiring (and even if you don’t hire), your nonprofit needs an Employer Identification Number (EIN). You will also need EIN to open a bank account in your organization’s name, apply for tax-exempt status with the IRS, and fill out many of the necessary registration forms that the local government requires. To apply for an EIN, you can visit the IRS website and complete it online, or download the form they provide and mail it in.
Note: You can also do this in step two if it works better for you – right after you’ve pinpointed your mission, vision, and values.
When you have your mission, vision, and values, you’ll need to develop strategies that communicate those outwardly. Internally, it’s also important that everyone has a clear understanding of what your organization stands for and why. Everyone should be on the same page about your goals and priorities so they can portray a consistent brand identity.
For a deep dive into how to execute a branding strategy as a nonprofit, check out this article.
Good nonprofit branding helps unite all of your nonprofit stakeholders, helps you stand out and get your message across, and increases the trust of your audience. Furthermore, it’s essential to successful fundraising and increased engagement.
A brand is more than its visual identity: the name, the logo, and graphic design. A brand is a construct held in the minds of those aware of it. And brand management is the work of managing those associations.
When building a brand, it’s very important to refer back to your demographics – so you can tailor your communication to meet their exact needs.
Come up with an outstanding logo for your organization – simple but compelling, moving and relatable, memorable, and communicating who you are.
Pro tip: To help with consistency, create a simple nonprofit branding guide that outlines your main design elements, the typography, the logo, and other elements of the brand. Make sure the guide includes rules for what’s allowed and what isn’t when it comes to using those elements online and offline. For example, you could make it clear that your logo is not to be stretched or used on specific backgrounds or contexts.
Learn how you can easily customize your Donorbox donation form to match your nonprofit’s brand in this blog!
Legally incorporating your nonprofit organization is actually a multi-step process that consists of:
We’ve written in-depth about registering and starting a 501(c) (3) organization in the United States. Please refer to this article for more details.
In general, the 501(c)(3) label is applied to charitable bodies, but organizations with this exemption are limited in how much lobbying they can engage in and are prohibited from functioning for the benefit of private interests. No portion of earnings can be used to benefit a private shareholder.
Appointing a board, which we briefly touched upon in the step above, is one of the most important formalities of incorporation.
For nonprofit professionals, identifying funding sources and deciding on a funding model for their organization can be one of the most challenging tasks at hand.
A nonprofit with weak funding at the beginning is unlikely to sustain itself long enough to get a robust fundraising program going.
The most common way to secure startup funding for nonprofits is by applying for grants.
Grants are typically awarded to a nonprofit organization for a distinct program or purpose. A grantmaker generally focuses its giving on a specific population, certain types of nonprofits, or particular types of support (operating support, capital support, or program development).
While grants can fuel you at the start more easily than many other funding sources, applying for them can be very time-consuming. It first takes time to develop grant-writing skills that actually win grant proposals, then it takes time to write a winning application, and then it can take quite a while for you to see the funds in your bank account. Read our top tips and sources to find grants in this blog.
Securing some initial funding early on is the best way for your nonprofit to start pursuing its mission, whatever funding model you choose later on. There are many startup accelerators for nonprofits that can help in investing, in-kind sponsorship, and more.
Once you are all official, you get to start doing the work you’re passionate about. This passion led you through a tedious process of starting a nonprofit, but you made it to the other side—congratulations! It’s time to move into early operations:
Building a professional network for your nonprofit can have some major benefits early on. Networking will help to increase visibility for your work, attract new donors, staff, and volunteers, and connect your nonprofit with the essential resources it needs to get started.
You might want to start connecting with other nonprofits in your area or with nonprofits in the wider region with missions similar to yours, with multiple digital outlets, such as blogs or news channels, and other relevant media outlets.
If you haven’t already, now is the time to create a website. Keep your website updated frequently with new blog articles, pages, photos, and updates.
If you’re interested in how to start blogging, we’ve written an article about how to start a successful nonprofit blog.
There are many website builders out there — from options like WordPress, Wix, Weebly, and Squarespace — to custom builders.
It can be tempting to let your marketing develop organically, but doing so presents more problems than benefits. If you don’t have a strong marketing strategy early on in developing your nonprofit, you can find yourself constantly dealing with an inconsistent and inaccurate public perception of your nonprofit, difficulty when fundraising, and a lot of wasted time and effort.
Create a marketing and content plan. Consider how you will communicate with your audiences (emails, newspapers, letters, social media, etc). If you’ve done this while creating your nonprofit business plan, add in more details now.
Social media is free! So, it’s ideal for a new startup nonprofit to use it to convey their mission and talk about their work. Share relevant content, let people know about your events, share fundraising initiatives, and direct followers to your online donation page.
You could also consider running an email campaign with regular newsletters that let your readers know about the great work you’re doing. Be sure to collect email addresses and other relevant data in a proper way from the beginning.
If you haven’t tackled hiring and onboarding yet, no worries; now is the time. Draft job ads that clearly and concisely describe what you’re looking for in employees, and start promoting them. In addition, create volunteer applications, employee onboarding manuals, and similar documents to onboard staff and volunteers.
Pro tip: Once you have a team in place, your job is not done! You also need to make sure the team you put so much effort into recruiting stays with your organization. For that, develop a retention strategy. However, the document does not have to be elaborate. Simply write down the nonprofit’s employee retention goals, strategies, and activities for the year.
Familiarize yourself with the vast array of systems and tools at your disposal – from fundraising platforms to CRMs to task managers and more. Remember that you don’t need every tool on the face of Earth to do good work, but investing in a key few can help you hit the ground running.
Here are a few of our top picks:
Although there are many powerful technologies and tools out there, make sure you keep subscriptions manageable to avoid unexpectedly high costs.
Online fundraising is one of the easiest and fastest ways to start bringing in funds. There are many donation software options out there, and not using one can make online fundraising quite inefficient or even impossible. It’s important to choose one that is easy to set up and manage, doesn’t break the bank, and offers tons of tools and features to help you grow.
Donorbox is trusted by more than 400,000 organizations to help boost their fundraising. With powerful features like –
And so much more! Read up on all of Donorbox’s features here.
Check out how this organization built a beautiful, branded donation page with a compelling video that shares more about its mission.
Although starting a nonprofit is a complex endeavor that already includes lots of work and moving parts, there’s something to say about laying a foundation for the future in these early days.
For example, consider how your staffing and leadership strategies will adapt to your growth. Have strategic plans in place for officially growing your board, recruiting more volunteers, instituting membership programs, and creating new staff positions.
First of all, however, you need to make sure you’re aware of everything you need to do to maintain compliance.
You will also need to align with external regulations that impact your industry. If you handle personal health data, you’ll need to consider HIPAA compliance. And, if you process payments with credit or debit cards, you’ll need to think about PCI compliance.
During this step, you might want to think about milestones that will indicate an opportunity to scale your nonprofit. Once you’ve operated for a bit, it’s important to take some time to think about concrete growth goals.
Pro tip: If you haven’t already created them during your planning, create a set of key performance indicators and milestones for your nonprofit. These will provide important performance information that will enable you to have a clear picture of where you’re at. Without them, it will be hard to evaluate and track progress later on – as you will have nothing to measure your results against and you won’t know what ‘successful’ is to your nonprofit.
Each state has its own requirements and regulations, so you must visit your local Secretary of State’s office to find the necessary paperwork to get started. We’ve written several articles on how to start a nonprofit in your state.
You can start a nonprofit organization with as little as $750 or as much as $2000. Generally, your expenses will be divided into these categories:
Nonprofit salary is considered a part of the operating expenses of the organization. You must raise funds through fundraisers or by applying for grants. Your nonprofit can also earn money through other business ventures and by coming up with income generators like auctions of donated items, renting a property, selling donated merchandise, making investments, and more.
Depending on the state that you’re in, having Articles of Incorporation approved by the state government may take a few weeks. Once that’s done, you’ll have to apply for recognition of its 501(c)(3) status by the Internal Revenue Service. If you file Form 1023, the average IRS processing time is 3-6 months. It can also take up to 12 months in some cases. However, with the 1023-EZ form, the processing time is typically 2-3 weeks.
An LLC can be granted nonprofit status, however, it should be completely owned by a single tax-exempt nonprofit organization. The LLC should also meet the requirements as per the IRS mandate for Limited Liability Companies as Exempt Organization Update.
Foundations are typically funded by a family or a corporate entity, but nonprofits are funded through their revenues and fundraising. Foundations take the money they started out with, invest it, and then distribute the money made from those investments. Most foundations will also donate these funds to other nonprofits in the form of gifts or grants. Whereas, the extra money a nonprofit makes is used as operating costs to fund the organization’s mission. However, this isn’t necessarily true in the case of a foundation.
A nonprofit is a business, but starting it can be quite intense, requiring time, clarity, and money. However, it’s not hard to start a nonprofit. Although there are several steps to start a nonprofit, the barriers to entry are relatively few.
Nonprofits are exempt from federal income taxes under section 501(C) of the IRS. However, there are certain circumstances where they may need to make payments. For instance, if your nonprofit earns any income from unrelated activities, it will owe income taxes on that amount. Also, any nonprofit that hires employees will need to pay employee taxes like Social Security and Medicare, among others.
With many of the basic start-up questions dealt with, you’re now ready to grow and focus on long-term operations. Don’t forget to keep your mission at the forefront of every conversation you have around services, finances, and hiring.
Keep reviewing your business plan, especially the financials, regularly. Keep an eye out on your milestones so you know you’re on track. Plus, you can always recalibrate if you ever find that you’re not meeting your goals. You’re a pioneer of social change – you can do this!
At Donorbox, we prioritize solutions that help our nonprofits increase their donations. We know that funding is key when starting a nonprofit. Also, effective donation forms are a vital part of nonprofit sustainability. That’s why Donorbox is build to provide a seamless solution for both you and your donors.
Check out our Nonprofit Blog for more free resources. Subscribe to our newsletter to received curated blog content to your inbox every month.
Raviraj heads the sales and marketing team at Donorbox. His growth-hacking abilities have helped Donorbox boost fundraising efforts for thousands of nonprofit organizations.
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