Guest post by Donorly

Creating your own nonprofit organization holds a lot of appeal. When you operate a nonprofit, you can make a measurable difference toward a cause that’s close to your heart, engage your community in meaningful ways, and inspire positive action from supporters.

However, starting a nonprofit is a major commitment. There are many important considerations to keep in mind, and you may not be aware of all the legal steps it takes to found a nonprofit. In this quick guide, we’ll cover four things you should know before making your decision:

Your Nonprofit’s Feasibility
A Clear Mission
Initial Sources of Funding
The Role of Your Board
Legal Requirements

Taking time to think through your decision and make preparations now can save you from stress and confusion later. Let’s dive into these considerations to make sure you’re ready to start a nonprofit.

Your Nonprofit’s Feasibility

According to Donorly’s guide to starting a nonprofit, the first thing you need to address is whether or not your idea is feasible and needed. Do research to make sure there’s an established need in your community for your proposed nonprofit. Check that there isn’t another organization that already exists that serves the same need. If there is, it may not be worthwhile to move forward—you may need to find some other way to give back to the community.

If there is a clear need for your nonprofit, the next step is to determine if it’s feasible. Do you have enough resources, support, and time to make your nonprofit a reality?

For example, consider the costs you’ll need to cover before you can even begin fundraising, such as:

Incorporating your organization: The total costs of incorporating and registering your nonprofit across various states could add up to hundreds or thousands of dollars.
Leasing a space: Consider the costs of a lease for office space, along with utilities, office furniture, and supplies. Even if you work remotely, there may be a need for software, tools, association memberships, technology, and other operational tools.
Hiring staff: Even if you start with a small team, you’ll eventually need substantial room in your budget to cover your staff’s pay, payroll and accounting services, and benefits.
Initial marketing: In order to get the word out about your new nonprofit, you’ll likely need to spend some time and funds on spreading the word early on, which may also include attending events and networking expenses

Along with the funds to cover costs, you’ll need to have enough people to establish an initial support base. This includes people willing to serve as board members, volunteers, and your first donors. Plus, you need to personally have enough time to commit to starting and running the organization, which could be a full-time job.

A Clear Mission

While you may have a general idea of the cause you want to support or the issue in your community you’d like to solve, you should take time to clarify exactly what your mission would be before moving any further.

To establish a clear mission statement, ask yourself questions like:

Why do you want to start a nonprofit?
What specific issue do you want to raise awareness of and help solve?
Who exactly will your nonprofit serve?
What action will your organization take to help this community?

Using your answers as a guide, develop a single sentence that describes who you serve, why, and how you aim to help. Ensure that your mission statement is actionable, relevant, and straightforward.

Initial Sources of Funding

Starting and running a brand new nonprofit takes money, so it’s worthwhile to think ahead and determine how you can secure a few initial sources of funding to get your nonprofit off the ground. Most often, this takes the form of:

Fiscal sponsorships: While you can’t accept tax-deductible donations until your nonprofit is registered as a 501(c)(3), you can recruit the help of a fiscal sponsor. This is another organization that fundraises on your behalf and essentially offers the funds to you as a supervised grant.
Help from your personal network: Look to friends, family, and existing personal supporters who may be willing to help your organization get started.

Once your nonprofit is fully established and legally allowed to request donations, you’ll have many more fundraising opportunities available. This doesn’t mean that it’ll be easy, though! Be sure to develop audience-informed fundraising strategies to effectively raise the money your organization needs.

The Role of Your Board

As mentioned earlier, you’ll need a few people willing to support your nonprofit by serving as board members. The board of directors you recruit will serve as your nonprofit’s leadership and governing body, so it’s hard to understate their importance.

eCardWidget’s board member appreciation guide explains that a nonprofit’s board handles everything from managing the strategic plan to supervising budgets and programs to ensuring ethical and legal integrity. Because these responsibilities are so important to your organization’s success, you should choose board members carefully.

As you recruit people to serve on your new nonprofit’s board, consider their:

Commitment to your mission: Every board member should feel personally aligned with your nonprofit’s mission. When deciding who should serve on your board, ask them why they’re interested in the position and if they have any experience supporting similar causes.
Diversity: Diversity, equity, and inclusion (DEI) is a major priority in the nonprofit sector, especially in terms of nonprofit boards. Make sure that your board is diverse and reflective of the community you aim to serve. This will help eliminate bias, ensure your beneficiaries and supporters feel well-represented, and lead to more ethical decisions.
Skills and experience: The board has a variety of responsibilities that require different skill sets. Try to create a balance of members with experience in financial management, marketing, and fundraising. Look for anyone with skills that might differentiate them and bring something new and valuable to the table.

After choosing enough people to fill all necessary roles on your board, provide training that covers nonprofit basics like fundraising strategies and budgeting. Your board will be fundamental in your nonprofit’s foundation and first campaigns, so make sure they all feel prepared to handle their responsibilities.

Legal Requirements

Finally, you’ll need a solid grasp of the legal requirements, procedures, and tax regulations involved in starting and operating a nonprofit. Legally establishing your organization is a lengthy process that includes:

Filing articles of incorporation in your home state to officially register your organization.
Applying for a federal EIN number that the IRS will use to identify your nonprofit.
Filing for federal tax-exempt status as a 501(c)(3) organization using Form 1023.
Filling out charitable solicitations registration in every state you intend to fundraise in/accept funds from.

Along with these initial legal procedures, be prepared to abide by all the nonprofit legal requirements and federal reporting guidelines going forward. For instance, you’ll need to file an annual IRS Form 990 that details where all of your organization’s funding came from and how you spent it the previous year.

Filing the right forms and maintaining proper compliance can be complicated. To take work off your plate and ensure you’re not missing anything, consider reaching out to a nonprofit consultant who’s well-versed in all the requirements.

If your thinking aligns with all of these points and you feel prepared to get started, congratulations! You’re well on your way to starting a nonprofit. If you’re not fully sure yet, don’t be afraid to take more time to get familiar with nonprofit operations before moving forward. Volunteer with local organizations, and ask plenty of questions. Even if you don’t end up starting your own nonprofit, you may find an organization that you love working with!