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Six Steps to Starting a Nonprofit Organization: Part Two

Nonprofit Organization

In part one of our two part series on starting a nonprofit organization we covered steps one through three – planning, governance, and incorporation. Now that you have the foundation you need for starting your own  nonprofit, it is time to take a look at a few factors that will be crucial throughout the life of your business. For part two, we will cover steps four through six – tax status, compliance, and marketing plans.

Six Steps to Starting a Nonprofit Organization

In our previous post, we discussed the first three steps to starting a nonprofit organization. In this post, we discuss steps 4-6. If you have any questions, give us a call!

Step Four: Tax Status

Most nonprofit organizations have a tax-exempt status, known as 501(c)3 status. The 501(c)3 status covers exemptions for private foundations and public charities as defined in this section of Internal Revenue Code (IRC). In order to obtain 501(c)3 status, you will need to compile certain documentation and follow Internal Revenue Service (IRS) procedures.

Documentation Needed:

  • Certified copy of certificate of formation
  • Copy of the organization’s bylaws
  • Financial statements and proposed budgets for preceding three years, and next two years
  • Name and contact information of all officers and directors
  • Statement detailing claiming status as a public charity or private organization

IRS Procedures:

  • Review IRS Publication 557 – “Tax-Exempt Status for Your Organization”
  • Review IRS Publication 4220 – “Applying for 501(c)(3) Tax-Exempt Status”
  • Complete IRS Form 1023 – “Regular Application for Tax-Exemption”

If you are planning to apply for tax-exempt status on your own, and you are not an attorney or CPA, you will need to register with the IRS prior to submitting an application. Once your application is submitted, the IRS will process it and send you a determination letter. This process can take a few weeks or several months, and the IRS may request additional information or documentation.

Step Five: Compliance

The next thing you will need to do is register with the agency in your state that regulates charitable organizations and solicitations. As a nonprofit organization, you are required to comply with the rules and procedures of this agency – generally the Attorney General’s office.

Compliance topics that may apply to your business includes:

  • Local or state registration prior to initiating any fundraising or lobbying
  • Securing and maintaining applicable licenses or permits required based on your organization, such as:
    • Type of goods or services provided
    • Nature of clients served
    • Nature of employees hired
    • Location and zoning

Once you receive tax-exempt status from the IRS, you may also need to file similar documents for individual tax-exemptions, such as property taxes and sales tax. Registration or tax-exempt status with local or state organizations may need to be updated or reevaluated annually in order to maintain your status. Compliance with such requirements is crucial.

Step Six: Marketing Plans

Now that you have your tax-exempt status and have filed all the necessary documents with your local and state agencies, the next step is developing a marketing plan that will get your business the attention it deserves and reach your target audience. Here are some helpful tips for developing your first marketing plan:

  • Develop the Story – Before you set off with websites and brochures, develop the story that you want to portray. Most nonprofit organizations have a story – an origin that is inspiring, touching, and relatable. Develop this story to show your audience and potential investors what inspired you to start your business in the first place.
  • Decide on the End Goal – What is the end goal you want to establish for your marketing plans? Are you trying to attract investors, spread awareness of a specific cause, recruit volunteers, or attract consumers? The end goal of your marketing plans may change as your business grows and you need to target different audiences. The first marketing plan you develop, however, should be focused on helping you establish your business in the market.
  • Plan Campaigns – Along with the end goal, you also need to have a budget set for ongoing marketing, set benchmarks and goals, and be realistic in your initial efforts. Marketing is an ongoing endeavor for the life of your business.
  • Execution – Once your marketing plan is in order, the next step is executing it. Some helpful steps in the execution process include:
    • Building a website
    • Create business cards, promotional flyers, and volunteering information
    • Join local organizations for nonprofits and small businesses
    • Keep records of how many people engage in your website, contact your office, inquire about fundraising, or engage your products or services

 Moving Forward

It is our hope at Daic Law that you will find our two part series on starting a nonprofit organization helpful in your endeavors. If you have any questions about forming a business, the legal elements involved, or obtaining tax-exempt status, we would be happy to offer our assistance. Contact our office to learn more! Reach out by telephone at 877-893-6040, or email us at


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