7 Things to Consider When Starting A Nonprofit — Linda Handley
Building a nonprofit organization is a transformative and purposeful journey. As you navigate the process of creating meaningful change, several key steps are essential for establishing a strong foundation. In this guide, we cover the first seven critical considerations: defining your mission, shaping your organization’s identity, creating a business plan, forming a strategic and dedicated board, incorporating, obtaining tax-exempt status, and ensuring ongoing compliance. Join us as we explore this enlightening path, empowering you not only to start a nonprofit but also to make a lasting impact in your community.
1. Establish & Determine Your Mission
Spend the time to convey your passion with a concise and persuasive mission statement. This statement will serve as a guiding principle for all of your nonprofit operations because it’s oriented toward the outcomes.
During the refinement stage, it’s important to involve stakeholders, potential beneficiaries, and those interested in supporting your mission. This collaboration helps ensure that your vision resonates with the community you aim to serve. As your nonprofit grows, consider revisiting and updating your mission statement to reflect its evolving needs and goals.
2. Chose an appropriate Name
The name of your nonprofit is more than just a title; it’s a vital part of its identity. Once you’ve chosen a name, thoroughly research it to ensure it’s unique and aligns with your mission. The best place to verify this is the state corporation office, often called the Secretary of State’s Office, where you can check if your desired name is already registered.
When selecting a name, consider how it will be used and its impact on branding and recognition. Choose a name that is easy to remember and clearly reflects the mission, values, or goals of your nonprofit.
3. Write a Business Plan
A business plan serves as a blueprint, guiding your nonprofit toward achieving its key milestones. This comprehensive document details your organization’s structure, objectives, strategies, and financial projections. While it’s crucial for attracting donors and securing government funding, a well-crafted business plan also plays a significant role in recruiting volunteers and forming a strong board of directors.
4. Set up a Board
The Board of directors is yet another important determinant for the success of a nonprofit organization. In the development stage, attention should be paid to developing a broad and high-quality board that matches your mission. To choose your Board of directors, try to find others who have an equivalent passion and talent that are willing to contribute their time for at least three years and with some previous experience being part of the boards without any conflicts.
Some states require that directors must be appointed before filing articles of incorporation, board selection should take place much earlier.
5. The Incorporation Process
Incorporating a nonprofit is a crucial step that not only enhances its legitimacy but also grants access to specific legal and tax benefits unique to nonprofits. The incorporation process typically involves the following steps:
- Choosing a business name.
- Applying for an Employer Identification Number (EIN) from the IRS.
- Drafting the articles of incorporation.
- Creating the bylaws and electing a Board of Directors.
The business name must be legally available in your state and distinct from administrative processes like obtaining an EIN. The articles of incorporation and bylaws lay the foundation for your organization’s operations. It’s essential to establish a well-balanced Board of Directors, consisting not only of professionals but also individuals who bring enthusiasm and expertise to support the organization’s mission.
6. Obtain 501(c)(3) Tax-Exempt Status
Obtaining 501(c)(3) tax-exempt status is a crucial step in the development of your nonprofit, providing tax benefits and increasing your ability to attract donations. To apply, you must complete Form 1023-EZ or the more detailed Form 1023 with the IRS, providing thorough information about your organization.
The IRS may conduct a detailed review of your application, which is why it’s essential to be honest and transparent in your submissions. Once approved, your nonprofit will qualify for tax-exempt status, which not only attracts more donors but also strengthens your organization’s financial foundation.
7. Remain Compliant
When the 501(c)(3) status has been achieved, your work does not stop there; it only starts from that point with a continuing obligation to ensure compliance. Keep a vigilant watch on the IRS standards, including the filing of Form 990 annually.
More specifically, the requirements for compliance vary in the different states, hence the need to understand regional laws. Ensure you stay updated on the new rules and laws, and consult a lawyer if need be.
Conclusion
Starting a nonprofit is a mission-driven endeavor that requires thoughtful strategic planning and development. By clearly defining your mission, carving out a unique niche in your target market, thoroughly preparing your business plan, recruiting committed board members, and completing the incorporation process, you will be well-equipped to navigate this journey with confidence. Once you’ve established a solid foundation, the next steps involve filing for tax-exempt status and ensuring ongoing compliance. Ultimately, success is measured not just by the progress you make but by the positive impact your nonprofit has on the community.
Linda Handley is a community builder, funding expert, speaker, and online educator.
She loves collaborating with nonprofits and creative entrepreneurs to build nonprofit strategies and plans. Her focus is on helping organizations grow and expand their impact.
Originally published at https://www.lindahandley.com on October 16, 2024.