Are you interested in starting your own nonprofit organization? If so, you probably have many questions, and may be unsure of where to start. In this two-part series, we will provide you with six steps to starting a nonprofit organization, that can take you from idea to actualization.
Part one of this series will cover the first three basic steps you need to take in order to achieve startup success – planning, governance, and incorporation. Part two will cover tax status, compliance, and marketing plans.
Six Steps to Starting a Nonprofit Organization: Steps 1-3
Step One: Planning
Planning begins almost the moment you first decide that you want to start a nonprofit. You have the idea in mind, but next you have to consider some very important factors that will be the backbone of your business, such as:
- The objective of the nonprofit – What are the goals, mission, and values of the business?
- Who your target audience is – Who do you want to reach with the products or services offered?
- What resources will you need – Do you need an office space, staff, website, or other specialized input?
- What sort of capital is required – How much money do you expect starting your nonprofit will cost? Figure in the cost of supplies, office space, staffing, and any licenses or permits you may have to have.
Part of the planning process for starting any business is creating a business plan or proposal that outlines the business and answers these questions. The business plan can be completed on your own, or with the help of financial and legal advisors. Your business plan will also be used for managing your taxes, and pursuing investors.
Do not let the business plan overwhelm you. Write down your ideas and thoughts, interactions with interested parties, etc. as you plan and brainstorm. Creating a business plan often is a process that extends throughout the business formation process.
Step Two: Governance
After you decide the goals and direction of your nonprofit and start compiling your business plan, the next step is determining who will make up the governing body, or board of directors, for your nonprofit organization. A board of directors is comprised of individuals who are invested, in some way, to the future of the business.
The board of directors is responsible for the legal and fiduciary aspects of the nonprofit, including balancing budgets, evaluating policies, reviewing resources, and ensuring compliance with applicable local, state, and federal laws and regulations.
The board of directors is accountable to the public, and to any investors or donors who support the nonprofit. It is important that members of the board of directors are chosen with a great deal of care, and are aware of their responsibilities.
Step Three: Incorporation
The next step in starting a nonprofit is incorporation. Incorporation is the legal process by which you establish a business, which gives you credibility, IRS standing as a nonprofit, and allows you to structure your nonprofit formally. Incorporation also assigns you an IRS Employer Identification Number (EIN), which you will need when filing taxes or hiring/paying employees.
Incorporating your nonprofit can be done in a variety of ways, depending on the nature of the products or services you plan to offer. It is advisable to speak to an attorney prior to filing incorporation documents so you can be certain that you choose the best form of incorporation. Legal structures of incorporation include:
- Nonprofit Corporation
- Nonprofit LLC
- Unincorporated Nonprofit Association
In order to incorporate, you will need to contact your Secretary of State’s (SOS) office, and prepare the following information:
- Purpose of the nonprofit
- Name of person incorporating
- Name of initial board of directors
- Name and address of registered agent(s)
- Statement membership
The exact process of incorporation varies by state, so contacting your SOS office is the best way to find out exactly what you need to do, and can expect.
Learning More about Steps 1-3
Now that you have a mission, have established a board of directors, and have prepared your documents for incorporation, you may be ready to move on to steps 4-6! At Daic Law, we can help guide you through the process of starting a nonprofit organization, and are here to help make sure your nonprofit dreams can be a reality.