Start a Nonprofit
How to Start a Nonprofit: The Steps, Forms and Fees
Starting a nonprofit is like starting a small business with extra rules and public reporting. It's very doable, but it's worth knowing the whole path before you take the first step.
First, a question: does your community need a new organization, or could you do this work through an existing one? Read Do You Really Need to Start a Nonprofit? before you file anything.
1. Write your mission and plan
Write one or two sentences: who you'll serve, what you'll do, and where. Then sketch a simple plan for the first two years: programs, a budget, and where the money will come from. Funders and the IRS will both want to see that you've thought it through.
2. Recruit a founding board
Nonprofits are governed by a board of directors, not owned by anyone. State rules set the minimum number of directors (often one to three). Recruit people who share the mission and bring useful skills, and avoid a board made up mostly of relatives, which creates conflict-of-interest problems and concerns for funders.
3. Incorporate in your state
File articles of incorporation (sometimes called a certificate of incorporation) as a nonprofit corporation with your secretary of state. If you'll seek 501(c)(3) status, the articles need certain language, including a charitable purpose clause and a clause dedicating assets to charitable purposes if the organization dissolves. Your state's website and the IRS Form 1023 instructions describe what's required.
4. Get an EIN and adopt bylaws
- Apply for an Employer Identification Number from the IRS. It's free; don't pay a third party for it.
- Adopt bylaws, the rules for how your board works.
- Adopt a conflict-of-interest policy, hold your first board meeting, and keep minutes.
- Open a bank account in the organization's name. Never mix personal and nonprofit money.
5. Apply for 501(c)(3) status
Applications are filed electronically through Pay.gov.
| Form 1023-EZ | Form 1023 | |
|---|---|---|
| Who can use it | Smaller organizations: projected gross receipts of $50,000 or less a year, and total assets of $250,000 or less (see the IRS eligibility worksheet) | Any organization; required if you don't qualify for the EZ |
| IRS user fee | $275 | $600 |
| What's involved | A short form of attestations | A detailed application with narrative, finances and governing documents |
If you file within 27 months of forming, exemption generally applies back to your formation date. Fees can change, so confirm the amount on the IRS's Form 1023 and 1023-EZ pages before you pay.
6. State tax exemption and charitable registration
- Some states require a separate application for state income, sales or property tax exemption.
- Most states require charities to register before soliciting donations from their residents, and to renew every year. Find your state office through NASCO.
7. Stay compliant every year
- File the annual return: Form 990-N, 990-EZ or 990, depending on size. Organizations that don't file for three consecutive years automatically lose their exemption.
- File your state's annual report and charitable registration renewal.
- Send donors written acknowledgments for gifts of $250 or more, and disclosure statements for quid pro quo payments over $75. (See Donation Receipts Explained.)
- 501(c)(3) organizations may not support or oppose candidates for public office, and lobbying must be limited.
- Keep board minutes, financial records and copies of filings.
When to get help
A nonprofit attorney or accountant is worth it if you'll own property, hire staff, run a business-like activity, or have unusual governance. Many states have nonprofit associations and legal clinics that help small groups at low or no cost.
Study a nonprofit like yours
Print the Charity Research Worksheet and learn from organizations already doing similar work.
Questions people ask
How much does it cost to start a nonprofit?
State incorporation fees vary, often from under $50 to a few hundred dollars. The IRS user fee is $275 for Form 1023-EZ and $600 for the full Form 1023. Add any state registration fees and, if you hire help, legal or accounting costs.
Who can use Form 1023-EZ?
Generally smaller organizations that project annual gross receipts of $50,000 or less in each of the next three years, had $50,000 or less in each of the past three years, and have total assets of $250,000 or less. Use the IRS eligibility worksheet in the instructions to confirm.
How long does 501(c)(3) approval take?
It varies. Form 1023-EZ applications are often decided faster than full Form 1023 applications. Check the IRS's current processing information. Filing within 27 months of formation generally lets exemption apply back to the date you formed.
Sources
This is general information, not legal or tax advice. Rules change and situations differ; check the sources above or ask a tax professional before you rely on a specific number.