I am often asked how to start a nonprofit organization. Much to the dismay of those asking the question, the answer is actually covered in two broad areas. Today, we will cover the how of starting a nonprofit. Next week, we will discuss the bigger questions of why and who.
The process of starting a nonprofit is one with multiple steps. After identifying individuals to 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; specific guidelines can be found on the state government website, on the page associated with the state office responsible for overseeing nonprofit registrations. Usually, the same office also handles business registrations and is often the Secretary of State. Most states have a fee associated with filing the Articles.
All states require organizations to list a resident agent; a resident of the state in which you are registering, to receive information and notices from the state. Once the Articles are approved by the State, you will receive a certified copy; hold onto this, you will need them in the next step. In addition to verifying state requirements, you must ensure the Articles meet the IRS guidelines as well. It is important that the Articles accurately reflect your new organization. Once filed with the IRS, making changes to your Articles is very difficult.
While waiting for the certified copy of the Articles to be returned, you can apply to the IRS for an Employer Identification number (EIN). Apply online directly to the IRS webpage; don’t be fooled by third-party sites charging a fee. There is no fee associated with obtaining an EIN.
Next, you can begin the filing process with the IRS to obtain your 501(c)(3) status. You will need to complete the IRS Form 1023 and any required attachments. Depending on the functions of the nonprofit, the required attachments will differ. All organizations will include the following documents in their IRS packets:
- By-Laws for the organization
- Activities/Services – what will the nonprofit do?
- Projected budget for the next three years
- Fundraising activities the organization will engage in
- Conflict of Interest policy
Once completed, send the packet and a check for filing fees to the IRS. The fee is $275 or $600 depending on the size of the projected budget. Then, the waiting begins. Currently, approvals are taking about 3-4 months; however, I know of instances where it has taken more than 2 years to get the approval.
If you feel overwhelmed by this process, contact us, we can help.
Also, we will soon be releasing our Nonprofit Start-Up Planner! We give you the details of the process of starting a nonprofit, step-by-step. Get the benefit of all our knowledge and experience without the cost.
Send us an email to be placed on the waiting list for the Nonprofit Start-Up Planner.