Starting a nonprofit organization can be an incredibly rewarding way to make a difference and give back to your community. However, the process also involves hard work, dedication, and careful planning. Here is a step-by-step guide to starting a successful nonprofit in 2023.

Selecting a Cause

The first step is deciding on a cause or issue you feel passionate about addressing. Consider a need that is not being met or is underserved in your local area. Some popular nonprofit causes include:

Providing healthcare, education, housing, or other services to low-income or disadvantaged populations
Advocating for human rights, civil rights, or social justice reforms
Protecting the environment and wildlife
Promoting youth development, mentoring, or after-school programs
Supporting arts, culture, and humanities
Animal welfare and rescue

Do thorough research to ensure there are no other major nonprofits already addressing the same cause in your community. Your new nonprofit will need to differentiate itself.

Forming a Board of Directors

Every nonprofit needs an engaged board of directors to oversee operations, set policies, and ensure the organization meets all legal and fiduciary responsibilities. Start by recruiting committed individuals who have skills and experience relevant to your mission.

Look for board members with backgrounds in areas like:

Leadership and management
Legal expertise
Financial management
Fundraising and development
Marketing and communications
Domain expertise related to your cause

A diverse board with different skill sets is ideal. Board members should be prepared to actively participate and take on responsibilities.

Choosing a Structure

You will need to choose a structure for your nonprofit organization. Common options include:

501(c)(3) Public Charity

This is the most common tax-exempt structure for nonprofits. Donations are tax deductible. To qualify, your nonprofit must provide a clear public benefit and avoid political lobbying.

501(c)(4) Social Welfare Organization

These nonprofits promote social causes and can engage in more political lobbying and advocacy. Donations are not tax deductible.

501(c)(6) Business League

Groups like chambers of commerce and trade associations often choose this structure. Membership dues are not tax deductible.

Consult with an attorney to determine the best structure based on your mission and activities.

Drafting Bylaws and Articles of Incorporation

Your new nonprofit needs bylaws that outline operational procedures, board governance, membership structure, and other details. Articles of incorporation formally create the nonprofit entity under state laws.

Bylaws should cover topics like:

Board member duties and election process
Board officer positions and responsibilities
Frequency of board meetings
Member classes and rights (if applicable)
Procedures for adopting and changing bylaws

Draft custom bylaws with an attorney. Your articles of incorporation will be simpler, focusing on your nonprofit’s name and structure.

Filing for Tax-Exempt Status

To be recognized as tax-exempt, you must apply to the IRS by filing either Form 1023 or 1023-EZ, depending on your annual revenues. This step makes your nonprofit eligible for grants, tax-deductible contributions, and other benefits.

The IRS application process involves providing details about your:

Organization structure and activities
Bylaws and governing documents
Financial projections
Conflict of interest policy
Board members and key staff

Fundraising Planning

A critical task for any new nonprofit is developing a fundraising strategy to sustain operations. Consider funding sources like:

Individual donations from website appeals, email campaigns, events, etc.
Grants from government agencies, family foundations, corporate foundations
Corporate sponsorships of events or programs
Fundraising events like galas, fun runs, tournaments, etc.
Fee-based services and products (if applicable)

Build a fundraising plan that utilizes diverse recurring revenue streams. Take advantage of fundraising software and tools to organize contacts, accept online donations, and track results.

Establishing Accounting Systems

Proper financial systems and controls are essential right from the start. Be sure to:

Set up budget tracking and accounting software
Develop internal control policies
Implement procedures for spending approvals and reimbursements
Establish processes for payroll, vendor payments, invoicing, etc.
Follow all state and federal financial reporting requirements

Accurate recordkeeping and reporting will keep your nonprofit in good standing as it grows. Consider hiring an accountant or bookkeeper.

Filing for State and Local Permits

Depending on your location and activities, you may need to register with state agencies and/or apply for local operational permits. Common requirements include:

State tax exemptions
Solicitation registration for fundraising
Sales permits if selling products
Food permits for meal services
Licenses and permits for childcare, healthcare, etc.

Research requirements for your region and stay compliant by filing necessary paperwork. This protects your tax status and ability to operate.

Launching and Managing Your Nonprofit

Once you have completed all the essential steps of forming a nonprofit, it is time to launch your operations and begin providing services. Here are some tips for managing your nonprofit successfully:

Create a Detailed Business Plan

Expanding your early strategic plans into a comprehensive roadmap will help guide your nonprofit and keep efforts focused. Include sections on:

Background on your cause and target population
Programs, activities, and services you will provide
Market analysis of needs and competition
Marketing and outreach strategies
Staffing requirements and organizational chart
Projected budget and operating costs
Fundraising goals and key revenue sources
Methods for measuring impact and success

Review and update your business plan regularly.

Develop Strong Community Partnerships

Collaborate with other organizations and agencies that share your mission. Coordinating efforts and resources can help maximize your impact.

Partner with local government agencies, community organizations, religious institutions, schools, businesses, and media outlets. Getting established in the community and building your reputation will make fundraising easier.

Focus on Marketing and Outreach

Get the word out about your new nonprofit through:

A professional website with your mission, programs, donation options, etc.
Social media pages and engagement
Press releases to local media
Speaking engagements at community events
Networking with community leaders and stakeholders
Collateral materials like brochures, flyers and signage

Consistent marketing and PR will help you connect to donors, volunteers, and clients.

Build a Talented and Dedicated Staff

Your staff and volunteers will make or break your nonprofit. Surround yourself with passionate people who believe in the mission. Offer fair pay and benefits to attract committed employees.

Clearly define roles and responsibilities. Provide training on policies, procedures, and programs. Empower staff to contribute ideas and innovations. Maintain open communication and feedback loops.

Track Finances Closely

Careful financial oversight is essential. Monitor budgets frequently. Keep clear documentation of donations, grants, expenses, payroll, etc. Follow all state and federal reporting rules and requirements.

Leverage accounting software and tools to maintain organized records. Schedule regular audits by an independent accountant. Make financial transparency a priority.

Measure and Report Your Impact

Collect meaningful data and metrics to quantify your results and demonstrate success. Showing measurable outcomes is key for grant applications and donor retention.

Gather qualitative and quantitative data through surveys, interviews, pre- and post-participation assessments, and tracking usage and participation rates. Highlight accomplishments through an annual report.

Conclusion

Launching a nonprofit organization is a big undertaking, but also incredibly rewarding. Stay focused on your mission of driving positive change as you work through all the planning, legal, and operational steps. Develop a strategic plan and surround yourself with a talented team. With passion, persistence, and purpose, your nonprofit can grow successfully as you make your vision for social good a reality in the community.

Frequently Asked Questions

What are the basic steps to start a nonprofit?

The key steps are choosing a cause, forming a board, selecting a structure, filing paperwork to incorporate and get tax-exempt status, drafting bylaws, developing a fundraising strategy, establishing accounting systems, and obtaining necessary licenses and permits.

What legal structure should my nonprofit be?

Most nonprofits choose either 501(c)(3) or 501(c)(4) status. 501(c)(3) organizations are tax-exempt public charities, while 501(c)(4)s are social welfare organizations. Consult an attorney to determine the best fit.

How long does it take to get 501(c)(3) status approval?

The IRS application process for 501(c)(3) tax exemption can take anywhere from 3 to 12 months. Nonprofits can operate while their application is pending.

What are some examples of 501(c)(3) organizations?

Common 501(c)(3) nonprofits include food banks, homeless shelters, libraries, museums, youth centers, animal shelters, environmental groups, clinics, and religious institutions.

Should I pay board members at a nonprofit?

Most nonprofit board members serve as unpaid volunteers. However, it may be appropriate to provide modest compensation for lower-income members to ensure a diverse board.

How much should a nonprofit CEO or Executive Director be paid?

There are no fixed rules, but nonprofit CEO salary averages $60-150K based on the organization’s budget size. The board sets reasonable compensation using industry data and benchmarks.