I am often asked how to start a nonprofit organization. Much to the dismay of those who ask the question, there are actually two broad areas covered by this question. Today, we will cover the how of starting a nonprofit and next week we will discuss the bigger question of why and who.
The process of starting a nonprofit is one with multiple steps. After identifying individuals who will serve on your board of directors (to be discussed next week), the next step is to write your Articles of Incorporation. Each state has slightly different requirements for the Articles; these requirements can be found on the website page of the office within the state government that handles nonprofit registrations. Usually, this is the same office that handles business registrations and is often the Secretary of State. Most states have a fee associated with filing the Articles. All states require that the organization have a resident agent; this is someone who lives in the state where you are registering who will receive information and notices from the state. Once the Articles are approved by the State, you will receive a certified copy; hold onto these, you will need them in the next step. It should be noted that prior to submitting the Articles, you will want to ensure that they meet the IRS guidelines as well as those of the state. It is also important to make sure that the Articles accurately reflect your new organization as it is very difficult to make changes to them once they have been filed with the IRS.
While you are waiting for the certified copy of the Articles to be returned to you, you can apply for an Employer Identification number (EIN) with the IRS. This can be done on-line; you will want to make sure that you are actually on an IRS web-page and not a third-party site that wants to charge you for filing. There is no fee associated with obtaining an EIN.
Next, you will need to begin the process of filing with the IRS. This step is necessary to obtain your 501(c)(3) status. You will need to complete the IRS Form 1023 and any required attachments. The attachments that are required for your organization will be dependent upon the functions of the nonprofit. As part of the packet that will be sent to the IRS, the following will need to be included:
- By-Laws for the organization
- Activities/Services – what will the nonprofit do?
- Projected budget for the next three years
- Fundraising activities that the organization will engage in
- Conflict of Interest policy
Once this packet is together, it will need to be sent to the IRS along with a check for filing. The fee is $450 or $800 depending on the size of the projected budget. Then, the waiting begins. It is currently taking 6-9 months for approvals to be received; however, I have known of instances where it has taken more than 2 years for the approval to come.
If this process seems overwhelming to you, feel free to contact us, we can help.