How to Start a Nonprofit in 10 Steps

There are thousands of nonprofit organizations in the world covering innumerable causes. Even so, it’s possible that you’ve noticed a need in your community for something that could be helped through charitable efforts, and now you’re inspired to start your own nonprofit. But how exactly do you start a nonprofit? There are some basic steps you can use to start your own nonprofit organization.  

• How to start a nonprofit: first steps
• How to start a nonprofit: build a strong foundation
• How to start a nonprofit: file the paperwork

What is a nonprofit organization?

Nonprofit organizations are groups that work for a social cause, but they do so without making a profit. Nonprofits focus on a wide range of causes—charitable, humanitarian, educational, religious, environmental, political, and more. Their goals are often focused on helping others in need and bettering their community. In most cases, nonprofits rely on donations from supporters or grants to function, and they often have tax-exempt status.  

Explore the different kinds of tax-exempt organizations in the United States with this comprehensive guide, covering the exact types of nonprofits and their classifications.

How to start a nonprofit: first steps  

Starting a nonprofit takes time and consideration. Consider the following steps as you begin.  

1. Perform a nonprofit needs assessment   

As mentioned earlier, you may have noticed a need in your community that isn’t being addressed. Perhaps there is a large homeless population that could use support, or an uptick in stray, unneutered cats in your area. Realizing this need is the beginning step of conducting a need assessment. A nonprofit needs assessment is a way to determine if people will benefit from the services you’re hoping to provide through your nonprofit.  

A needs assessment should answer the following questions:  

• What is the need you want to service? Be sure to consider the root causes, scope, and severity of the problem and how you think your nonprofit will solve it. Identify the most pressing needs and challenges facing your community. 
• Who will your nonprofit serve? Knowing who you hope to serve is vital to starting a nonprofit. Define the demographic characteristics of who is most affected by the identified issues. How many people need this solution, and how will you determine who meets the criteria of need?  
• What other organizations currently address this need? There may be other groups that also work to serve the needs you’ve identified. Perform an analysis to determine the gap between existing resources and the actual needs in your community. Is your nonprofit redundant? Can you partner with existing groups to make a larger impact? Are there unmet needs in your community or areas where existing services are insufficient or ineffective? 
• What does your community have to say? When you’re trying to help the community, it’s best to listen to what they have to say. Connect with community members, stakeholders, and relevant organizations in the needs assessment process. Consider conducting surveys, interviews, focus groups, or community forums to gather input directly from those affected by the issues. 

Be sure to spend some time on this step. It’s important to have a clear, specific goal in mind before you get into the nitty gritty of starting a nonprofit.  

2. Perform a cost assessment 

After you’ve determined what your nonprofit is going to do, it’s time to figure out what the costs will be to get started. Starting a nonprofit costs money, even if you’re trying to be as frugal as possible. At the very least, there are filing fees required by the IRS to start your organization. Aside from that, you will need to answer the following questions:  

• What staff do you plan on hiring? Even a small nonprofit requires some staff to keep it going. How many people do you realistically think you’ll need to get started?  
• How much will you need to spend on legal fees? This will mainly be determined by which kind of nonprofit you hope to start, but you want to be sure you understand the cost to file paperwork with the IRS. Additionally, determine if you’ll need to hire a lawyer to help with the paperwork.  
• What funds do you already have in place? If you have access to startup funds, determine how much of them will be committed to the initial steps of setting up your nonprofit. Knowing how far your money will take you is a good thing to know before you get going.  
• What are the anticipated ongoing operational costs? Beyond initial setup expenses, consider ongoing costs such as rent, utilities, insurance, salaries, and program expenses. Estimating the cost of sustaining your operations will help you develop a realistic budget and fundraising strategy.
• Do you have the right software tools? Explore the role of technology in nonprofit operations. Selecting the right software tools for fundraising, donor management, volunteer coordination, and program evaluation can help you streamline processes and maximize efficiency.
• Have you accounted for potential unexpected expenses? It’s crucial to plan for unexpected costs that may arise during the startup and operation of your nonprofit. Building a buffer into your budget can help mitigate financial risks and ensure your organization remains resilient in the face of challenges. 

On the bright side, it’s possible to start a nonprofit with no money at all by working with your community!   

How to start a nonprofit: build a strong foundation

After you’ve considered what your nonprofit will do, who it will help, and what it will cost to get started, it’s time to start creating your organization’s foundation. A strong foundation and identity will help ensure your nonprofit’s success, which in turn benefits the cause you’re championing.

Here are some important things to consider when creating your nonprofit’s identity:  

3. Make your name memorable 

A well-crafted, thoughtful name is an important part of your organization’s identity. A catchy name is great, but not every name must be clever. It’s more important that your name captures the spirit of your organization and what it stands for. For example, Habitat for Humanity is a memorable name because it uses alliteration, and it clearly states what its main concern is: providing habitats for needy individuals. Just as effective, but without alliteration, is the name Feeding America. Again, the name is concise, memorable, and clear in its intention. Do some brainstorming, try out a few different names, and be sure to take some thoughtful consideration on this step.  

4. Clearly state your mission and values 

A clear, concise mission statement is a crucial part of your nonprofit’s identity. This will be your organization’s roadmap as you grow. Use the information you discovered during your needs assessment to identify the important values you want your nonprofit to adhere to. A strong mission statement is also a clear sign to new volunteers and potential board members that you’re serious about your work and that you’ve put a lot of thought into making your nonprofit a success.  

5. Recruit board members  

Developing a clear governance structure is essential for your nonprofit. A strong nonprofit board is key to the long-term success of your nonprofit. The board steers the organization, based on its mission and values, and help it grow into the future. Additionally, individual board members bring their own expertise to the role, so be sure to consider what experts your organization needs when recruiting for your board. For example, you may need someone with a legal background to help with compliance or someone with event planning experience to help organize your charitable events.  

6. Develop a strategic plan 

Your strategic plan is the blueprint for your nonprofit’s operation and should encompass a comprehensive fundraising strategy, covering different ways to raise the funds you need. This includes donor acquisition, grant writing, event fundraising, and more—all aligned with your nonprofit’s mission and values to achieve both short-term and long-term goals. Establishing clear timelines will ensure accountability and focus, guiding your organization’s efforts effectively.

How to start a nonprofit: file the paperwork  

As mentioned earlier, starting a nonprofit requires filing paperwork with various state and federal authorities. Below is an outline of the essential steps involved in this process: 

7. File for incorporation

Articles of incorporation need to be filed in the state where your nonprofit will be based. This step is necessary for your organization to receive tax-exempt status from the IRS.  

8. Apply for tax-exempt status

This step involves identifying the specific type of nonprofit you wish to form. In many cases, this will be a 501(c)(3). To file for exemption, you must complete a 1023 or 1023 EZ form and submit it, for a fee, to the IRS. Additionally, you may need to file at the state level, and this resource from the IRS can assist you in navigating this requirement.

9. Register to fundraise

Additionally, you may need to file at the state level, and this resource from the IRS can assist you in navigating this step of the process. Requirements vary by state, so be sure you check what specifics your state requires.

10. Maintain compliance

Once you’ve filed all the necessary paperwork and commenced fundraising, it’s crucial to maintain compliance with both federal and state laws. The IRS mandates filing a Form 990 annually for federal compliance, and many states have similar filing requirements.

Final thoughts 

Starting a nonprofit can seem daunting, but there are clear steps to take to get you there. Be sure to consult with legal counsel when getting started to ensure you are staying compliant with federal and state laws. 

After you’ve created your organization, you’ll need to embark on the next part of your nonprofit journey. This includes hiring staff, choosing the right software tools, preparing for potential growth, establishing partnerships, and implementing effective outreach strategies. These actions are key for ensuring the successful launch and sustainable growth of your nonprofit organization. 

Additional resources 

For more information, check out these resources:  

• How to Start a Nonprofit. Check out this guide for more in-depth information on starting a nonprofit.  
• Nonprofit Fundraising Strategy: Guide, Best Practices, & More. Use this guide to plan your nonprofit fundraising strategy.   
• Make a Statement: Defining Your Nonprofit Mission and Vision Statements.  Determine your mission and vision statement with this guide.  
• Best Nonprofit Software: Top 10 Tools. This guide will help you find the best fundraising software to solve the unique needs of your nonprofit.