How to Start a Nonprofit Organization -- Guidelines and Resources for Entrepreneurs

© Copyright Carter McNamara, MBA, PhD, Authenticity Consulting, LLC,;
Adapted from the Field Guide to Developing, Operating and Restoring Your Nonprofit Board.

This topic in the Library provides comprehensive advice and materials for anyone who is considering starting a nonprofit organization. The reader can use the free information in this Library topic, along with other Library topics that are referenced later on below. If you need more help, see our coaching services.

Sections of This Topic Include

Each of the links listed immediately below is a link to a section later on, farther down below, in this Web page.

Starting Your Nonprofit

Should You Really Start a New Nonprofit?
What Do You Mean by "Starting a Nonprofit"?
Feasibility Study -- "Should I Really Start a New Nonprofit?"
Consider Fiscal Sponsorship (another nonprofit to support your tax-exempt status, finances, etc.)
Do You Need a Lawyer to Start Your Nonprofit?
Nonprofit Incubators (help new nonprofits by sharing facilities, equipment, etc.)
Checklists to Help You Register Your New Nonprofit
Table of Reminders for Registering Your New Nonprofit
Something to Avoid: Founder's Syndrome
Starting a Self-Sustainable Nonprofit

Shutting Down a Nonprofit

Shutting Down a Nonprofit

Major Resources

Free Booklets -- "Guide to Management, Leadership and Supervision" and "Program Design & Marketing"
Free Nonprofit Micro-eMBA -- (self-paced, online nonprofit dev. program)

General Resources

Sources of Assistance to Help You Develop Your Nonprofit

Also see
Related Library Topics

Also See the Library's Blogs Related to Starting a Nonprofit

In addition to the articles on this current page, also see the following blogs that have posts related to Starting a Nonprofit. Scan down the blog's page to see various posts. Also see the section "Recent Blog Posts" in the sidebar of the blog or click on "next" near the bottom of a post in the blog. The blog also links to numerous free related resources.

Library's Business Planning Blog
Library's Building a Business Blog
Library's Consulting and Organizational Development Blog
Library's Leadership Blog
Library's Nonprofit Capacity Building Blog
Library's Strategic Planning Blog
Library's Supervision Blog


STARTING YOUR NONPROFIT

Should You Really Start a New Nonprofit?

There is a great deal of misunderstanding about the benefits of starting a nonprofit. Particularly in times of a poor or rough economy, people think they can start a nonprofit to quickly generate income. Or, when people see a strong, unmet need in the community, they often focus only on the singular solution to start a new nonprofit. The following article gives a very useful description of the realities of starting yet another new nonprofit.
New Year's Resolution -- No New Nonprofits Unless ...
Ask Yourself These Questions Before You Start a Nonprofit
8 Alternatives to Starting a Nonprofit

Also see the article:
Should I Start a For-Profit or a Nonprofit?

Before starting a nonprofit business, there is some preliminary "business" thinking that you really should do. Doing this thinking now can save you -- and maybe your employees and clients -- a great deal of anguish.
Entrepreneurs -- Are You Really Ready to Start a New Organization?

What Do You Mean by "Starting a Nonprofit"?

Get Clear About the Purpose (the Mission) for Your New Organization

Perhaps the best way to really clarify to yourself what you intend to accomplish by starting a new nonprofit is to write a basic mission statement for your organization. You'll soon need this mission statement anyway if you plan to incorporate your nonprofit (more about incorporation a little later on). The following guidelines may be helpful to you when writing your first, basic mission statement.

1. At is most basic, the mission statement describes the overall purpose of the organization. It addresses the question "Why does the organization exist?"

2. The statement can be in a wide variety of formats and lengths, ranging from a few sentences to a few pages. At this stage in the development of your nonprofit, it might be best to keep your mission statement to at most about half a page.

3. When writing the mission statement, try include description of what you think will be the new nonprofit's
a) primary benefits and services to clients
b) groups of clients who will benefit from those services
c) values that will guide how your nonprofit will operate
d) how you'd like others to view your nonprofit

4. It's often useful to refine the first, basic mission statement by adding or deleting a sentence or a word from the mission statement until you feel the remaining wording accurately describes the purpose of the new nonprofit organization.

(You may want to read more about Developing/Updating Mission Statements.)

Now Think About What Kind of Nonprofit You Want to Start

The phrase "starting a nonprofit" can mean several things. Read the following very basic information to begin thinking about what you mean when you set out to "start a nonprofit". Keep your mission statement in mind when thinking about each of the following. (There will be more specific guidance later on when you read the next subsection Variety of Checklists to Reference When Formalizing Your New Nonprofit.)

  • You can be a nonprofit organization just by getting together with some friends, eg, to form a self-help group. In this case, you’re an informal nonprofit organization.
  • You can incorporate your nonprofit so it exists as a separate legal organization in order to a) own its own property and its own bank account; b) ensure that the nonprofit can continue on its own (even after you’re gone); and c) protect yourself personally from liability from operations of the nonprofit. You incorporate your nonprofit by filing articles of incorporation (or other charter documents) with the appropriate local state office. (An incorporated nonprofit requires a board of directors.) In Canada, you can file for incorporation at the provincial or Federal levels.
  • If you want your nonprofit (and if you think your nonprofit deserves) to be exempt from federal taxes (and maybe some other taxes, too), you should file with the IRS to be a "tax-exempt" organization. (The IRS states that you must be a corporation, community chest, fund, or foundation to receive tax-exempt status. Articles of association may also be used in place of incorporation.) (Probably the most well known type of nonprofit is a the IRS classification of 501(c)(3), a “charitable nonprofit’.) (Being tax-exempt is not the same as being tax-deductible.) In Canada, you can file for tax-exemption at the provincial and Federal levels.
  • Depending on the nature of your organization, you may also granted tax-deductible status from the IRS. Publication 526 lists the types of organizations to which donations are deductible. In Canada, the Canada Customs and Revenue Agency (CCRA) grants charitable status, and you must be incorporated to achieve charitable status.
  • So, for example, you could start a nonprofit that is incorporated, tax-exempt and eligible to receive tax deductible donations.
  • The particular steps you take when starting your nonprofit depend on your plans for your organization, including the nature of its services. They also depend on how the IRS interprets the nature of your organization, including its services. Again, in Canada, you can file for incorporation and tax-exempt status at the provincial or Federal levels.

You may want to read more about What is a Nonprofit?.)

Consider Fiscal Sponsorship to Jump Start Your Organization

In some cases, you might find and work with another nonprofit organization that will act as your fiscal sponsor. A fiscal sponsor might be useful to you if your nonprofit:
1) Does not have sufficient resources to handle startup costs and fees
2) Does not have sufficient skills initially to manage your finances
3) Will address a community need and then no longer need to exist. See Fiscal Sponsorship -- Help You Get Started?

Do You Need a Lawyer to Start Your Nonprofit?

You Can Do Much of the Work Yourself -- But Get Legal Advice and Guidance

You can do much of the work yourself to get incorporated and/or tax-exemption and/or tax-deductibility, but you should have some basic guidance and advice from a lawyer who understands nonprofit matters. For example, in the USA, it's very important how you characterize your plans when filing for incorporation with your state and/or for tax-exemption and/or tax-deductibility with the IRS -- otherwise, your new organization may be deemed a for-profit or you may have to pay federal taxes (among other taxes) on your income. In addition, there are various reports and filings you may have to submit. A nonprofit-knowledgeable lawyer can help you a great deal. Ask other nonprofits for references to good lawyers. Ask a local funder. Call the local bar association.The following link might also help you. See Getting and Using a Lawyer

Nonprofit Startups and the Value of a Nonprofit Attorney

Nonprofit Incubators

Business incubators are usually facilities that help businesses share resources as low-cost means to getting started. You may have a nonprofit incubator in your community. Contact the local office of the National Council of Nonprofit Associations to find out. The following links will give you an overview of business incubators.
Business Incubation FAQ

Checklists to Help You Register Your New Nonprofit in U.S.

NOTE: Be sure to first read the above section, First Things First -- What Do You Mean by "Starting a Nonprofit"? before you jump into any of the following checklists.

The following are a variety of checklists to help you proceed through the various steps to formally start your nonprofit. It'll help a great deal if you've done some preliminary planning -- if you haven't, the above link Preparation for Planning a Business Venture will help you.

You might glance through a variety of the checklists to get an impression of what needs to be done and to select the checklist that you believe is most useful to you. The topic Nonprofit Taxes will be useful reading after you've reviewed the following checklists.

10 Keys to Starting a Nonprofit

Various Online Checklists for Starting a Nonprofit Organization

1. Here's a comprehensive, narrative description of the steps: How to Start a Nonprofit Organization

2. Here's another checklist with the information BoardSource's "Q & A" and Start a 501(c)(3) non-profit organization
. These are very basic overviews of the major steps to start a nonprofit.

3. You might also see How to Start a Nonprofit. It mentions several of the same steps, and adds references to more forms needed by the IRS.

(NOTE: There are samples of articles of incorporation, along with bylaws, at Articles of Incorporation at Corporate Bylaws.)

How to Start a Non Profit Organization

10 Keys to Starting a Nonprofit Private Foundation

Sites with Numerous Checklists and More Sources of Information

The About.Com (previously Miningco) offers a list of articles in regard to starting a nonprofit organization.

The Starting a Nonprofit

Table of Reminders for Registering Your New Nonprofit in the U.S.

The following table depicts the important steps required to register your new nonprofit. These steps are also mentioned across many of the checklists referenced above. These steps also assume that you chose not to seek Fiscal Sponsorship.

activity

comment

for help

draft mission statement draft a brief mission statement that describes the charitable purpose of your new organization; your board should soon review it during strategic planning and authorize the statement

here

recruit board members (if you plan to incorporate in your state) recruit at least enough board members to meet state requirements for a corporate board (contact state attorney's office); if you don't plan to incorporate, consider an informal advisory board to help guide you

here

get a lawyer to help you file articles of incorporation (if you plan to incorporate), application to IRS for tax-exemption (if you plan to seek exemption from federal taxes); you can do most of the work yourself, but at least have a lawyer review the materials before submission; will eventually need special expertise to review personnel policies

here

get banker and bank account get a bank account; seek bank that understands needs of new, small nonprofit

here

get accountant get an accountant or other finance expert to help you set up basic bookkeeping system; when you get a board treasurer, then he/she can be very helpful in this regard

here

get insurance agent you may need liability insurance, property insurance, and when you hire staff: worker's compensation, health and life insurance benefits, etc.

here

draft articles of incorporation and get board approval these specify legal description of your organization and power to the board; you'll need to draft these only if you plan to file for incorporation with your state; the Board should approve the Articles before submission

here

draft bylaws and get board approval these specify how the board will operate and configure the staff; some states require these; some of this information will be in the Articles if you file Articles; the board should approve the bylaws

here

file for incorporation with state register for incorporation including submitting your drafted and approved Articles (if you plan to incorporate); may need to submit bylaws, too; also find out what various reports the state wants from nonprofits secretary of state or secretary of commerce
file for federal tax-exempt with IRS apply for tax-exempt status (to be exempt from paying federal taxes); board should approve this filing before submission;

here

get state tax exemption from state once you get IRS exemption, file for any state tax exemptions state attorney, attorney general or secretary of commerce
get property tax exemption from city once you get IRS exemption, file for any state tax exemptions local city tax assessor
get solicitation license if you plan to solicit funds, your city may require a solicitation license local city offices
get mail permit this permit gives you a discount on bulk mailings local post office
get federal employer number (do this once you start to hire employees) get federal employer number to withhold income and FICA (once you hire employees) secretary of state, secretary of commerce
get unemployment insurance req's do this once you start to hire employees secretary of state, secretary of commerce

Something to Avoid: Founder's Syndrome

Founder's Syndrome occurs when an organization operates according to the personality of someone in the organization (usually the founder) more than it operates according to the mission of the organization. The Syndrome is not uncommon. To learn how to "diagnose" and recover from the syndrome, including to just stay away from it in the first place, read:
Founder's Syndrome -- How Organizations Suffer -- and Can Recover



FREE RESOURCES

Free Booklets -- Guides to Management and to Program Design and Marketing

(The following booklets are geared to new managers and supervisors of new nonprofits. The reader might be best served to print the booklets for ongoing reference.)

Basic Guide to Management and Supervision provides complete guidelines to accomplish basic skills in management and supervision, including to staff the organization, train employees, manage performance of employees and develop personnel policies associated with these supervisory practices.

Basic Guide to Nonprofit Program Design and Marketing provides complete guidelines and resources to develop your nonprofit programs and services "from the ground up".


Free, Online Nonprofit Organization Development Program

This free, self-paced program will guide you through starting your new nonprofit, building your board, training about basic skills in management and leadership, conducting strategic planning, developing a program and marketing plan, developing a fundraising plan, understanding basic financial and tax management practices, staffing and supervising, and more. The program includes 12 online, self-directed learning modules. Learners progress through each module at their own pace. Learners complete each learning module when it's appropriate to the particular stage of their organization's development. Learners are highly encouraged to complete and share assignments with their board members. See
Free, Online, Self-Paced Program to Completely Build/Strengthen Your Nonprofit

Also see
Supersites


Sources of Assistance to Help You Develop Your Nonprofit

Organizations, Websites, Newsletters, etc.

Don't forget that if you need help, there are plenty of resources available to help you, including organizations, information on Websites, online newsletters, etc. See Resources for Nonprofits
Basic Guide to Management and Supervision
Basics for New Managers and Supervisors to Manage Themselves

Helpful Guidebooks for You

Much of the information in this topic was adapted from the following guidebooks:


Submit a link


For the Category of Capacity Building (Nonprofit):

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.

Related Library Topics

Recommended Books

Starting a Nonprofit Organization

Overall Capacity Building to Enhance an Established Nonprofit Organization



Starting a Nonprofit Organization

Nonprofit Program Design, Marketing and Evaluation - Book Cover Field Guide to Nonprofit Program Design, Marketing and Evaluation
by Carter McNamara, published by Authenticity Consulting, LLC. The most important aspect of starting a new nonprofit is designing your first program -- the reason for your new nonprofit. Your new nonprofit is built around the success of your first program. Too many books completely separate the highly integrated activities of planning, marketing and evaluating programs. This book integrates all three into a comprehensive, straightforward approach that anyone can follow in order to provide high-quality programs with strong appeal to funders. Includes many online forms that can be downloaded.
Developing, Operating and Restoring Your Nonprofit Board - Book Cover Field Guide to Developing, Operating and Restoring Your Nonprofit Board
by Carter McNamara, published by Authenticity Consulting, LLC. Provides step-by-step, highly practical guidelines to organize, operate and sustain high-quality nonprofit Boards -- and to fix a broken Board! Includes variety of Board models you can choose from, roles and responsibilities, how to get the best members, how to train and organize them, goals for standard committees, ensuring high-quality meetings, evaluating Boards, how to evaluate and/or replace the Executive Director, and much more! Includes many sample Board policies you can download! Written by the developer of the Free Management Library. Many materials in this Library's topic about Boards are adapted from this book. 30-day, money-back, guarantee!

The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just click on the image of the book. Also, a "bubble" of information might be displayed. You can click on the title of the book in that bubble to get more information, too.



Overall Capacity Building to Enhance an Established Nonprofit Organization

Consulting and Organization Development With Nonprofits - Book Cover Field Guide to Consulting and Organizational Development With Nonprofits
by Carter McNamara, published by Authenticity Consulting, LLC. Provides complete, step-by-step guidelines to identify complex issues in nonprofit organizations and successfully resolve each of them. This book is also helpful to organizations that are doing fine now, but want to evolve to the next level of performance. This is one of the truly comprehensive, yet practical, books about this complex subject! Includes online forms that can be downloaded. Many materials in this Library's topic about guiding change are adapted from this comprehensive book.
Venture Forth - Book Cover Venture Forth! The Essential Guide to Starting a Money-Making Business in Your Nonprofit Organization
by Rolfe Larson, published by Fieldstone Alliance. Provide step-by-step guidelines to identify and implement the best ideas to generate more revenue to further your nonprofit mission. Ideas can come from current or new services -- many nonprofits are already providing critical services from which they could generate more revenue. The movement of social entrepreneurship, including earned-income generation, is becoming a must for every nonprofit to consider. Many funders greatly appreciate nonprofits generating more income -- this book shows you how!
Coping With Cutbacks - Book Cover Coping with Cutbacks -- The Nonprofit Guide to Success When Times Are Tight
by Emil Angelica and Vincent Hyman, published by Fieldstone Alliance. This treasure trove helps nonprofits to consider a very wide range of practical ideas for addressing financial shortfalls in their nonprofit organization. Every nonprofit, not just those in financial trouble, should be doing financial contingency planning -- planning for what they will do if they do not get the revenue that they expect from fees and fundraising. This book gives you plenty of ideas!
Strengthening Nonprofit Performance - Book Cover Strengthening Nonprofit Performance -- A Funder's Guide to Capacity Building
by Paul Connolly and Carol Lukas, published by Fieldstone Alliance. Provides step-by-step guidelines for funders to plan and develop highly effective capacity building services for nonprofits in their area. Many funders are finding that it's not enough just to write checks -- nonprofits need highly accessible, low-cost means of support and guidance to use the funder's resources to enhance organizational performance. This book explains common types of capacity building, key criteria for any successful capacity building program, and how to set up the best capacity building program.
Nonprofit Strategic Planning and Facilitation - Book Cover Field Guide to Nonprofit Strategic Planning and Facilitation
by Carter McNamara, published by Authenticity Consulting, LLC. Step-by-step guidelines to customize and facilitate planners to implement the best strategic planning process to suit the particular nature and needs of their nonprofit. This is one of the few books, if any, that explains how to actually facilitate planning. Includes many online forms that can be downloaded and used by planners.

The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just click on the image of the book. Also, a "bubble" of information might be displayed. You can click on the title of the book in that bubble to get more information, too.



Also See

Organizational Development (Managing Change) -- Recommended Books

Strategic Planning -- Recommended Books

Social Entrepreneurship (Nonprofit) -- Recommended Books

Capacity Building (Nonprofit) -- Recommended Books

Fundraising -- Recommended Books

Program Management -- Recommended Books

Planning and Project Management -- Recommended Books

Leading -- Recommended Books

Volunteers -- Recommended Books




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