How To Start a Nonprofit
Operating a nonprofit organization is a rewarding prospect. It gives you the chance to flex your entrepreneurial talents while making a difference in a cause you care deeply about. Nevertheless, it is still a challenging path to follow.
As with so many other areas of business, knowing how to start a nonprofit is about identifying areas for solid preparation. As such, we’ve laid out a guide to starting your nonprofit organization.
Earn a Degree in Project Management
Do you need an entrepreneurship degree to start a nonprofit? The skills you gain can certainly set you up well for success. There are various affordable online MBA programs available, each well-designed to empower you with entrepreneurial tools. The in-depth knowledge of core business disciplines you earn here will help you plan and run an efficient business.
However, it’s also well worth it to specialize with a degree in project management. This program gives you practical insights into areas such as strategic planning and risk management. It’s also geared toward developing leadership skills to inspire teams. Nonprofits have a lot of moving parts and a significant community engagement component. As such, a project management curriculum is ideally suited to address the challenges you’ll need to overcome yourself.
Research the Need for Your Organization
There are various types of nonprofits you can focus on establishing. Environmental and sustainability-focused organizations are especially prevalent at the moment. Your organization could address the unique challenges of a specific community segment. Veterans can take advantage of valuable business resources if they want to start a nonprofit to address service members’ needs.
However, you can’t just start a nonprofit and expect to be successful because you happen to be interested in or connected to the cause. You need to establish whether there is a need for the services you intend to provide. Doing some research here can prevent you from putting capital into activities that don’t gain any traction.
Create an Organizational Structure
An important part of knowing how to start a nonprofit organization is identifying its shape. When we use the term “nonprofit” this can refer to various types of organizational structure. You need to choose the right approach to meet your goals and potentially qualify for tax-exempt status.
- Charitable Organizations: Charities could be religious, scientific, educational, arts-based, or with a focus on public safety. The key is that all funds are directed toward these projects with no profits heading to shareholders.
- Political Organizations: This refers to organizations focused on directly or indirectly accepting contributions toward a political cause.
- Private Foundations: Private foundations are usually funded by a single source of income, such as a family or other business. Nonprofits in this sector usually put this income toward making grants, awards, or endowments.
- Churches and Religious Organizations: Religious nonprofits receive income that they use to provide services or fund projects directly related to a recognized spiritual creed or form of worship.
Name Your Nonprofit
Choosing a name for your nonprofit can be challenging. You’ll need to consider various factors. First, make certain the name can be clearly connected to the services you provide. It’s also an important element of branding to think about how your name reflects the values your nonprofit stands for.
Create a Business Plan
Every company requires a relevant business plan to make a successful start. However, it’s important to recognize that a plan for a nonprofit doesn’t take the same shape as one for a standard business. The financial part of your plan should include what resources your nonprofit needs initially, what you need to continue operating, and sources of capital.
Your main focus should be on establishing clear goals and milestones for your new organization. This should include aims for your first months, your first year, and your expectations for growth. You need to identify specifically what you do that directly impacts both donors and your cause. Create a strategy that utilizes digital marketing methods to spark growth within your company. After all, social media interaction is a key form of achieving nonprofit engagement.
Complete Necessary Paperwork
There is significant paperwork involved with running a nonprofit. Pursuing a nonprofit degree can be a useful tool in understanding the administrative elements better. Nevertheless, some of the key components include:
Local and State Paperwork
There is quite a bit of paperwork that needs to be done at the local level before your nonprofit is legit. You’ll have to:
- Register the intended name of your nonprofit.
- File the articles of incorporation (some states refer to this as a certificate of incorporation.
- Publish articles of incorporation in local media and file proof of this with the state.
You should note that these steps can vary between states and municipalities. It’s important to check the requirements with your state before proceeding.
File for Tax Exemption
Tax-exempt 501(c)3 status means your nonprofit won’t have to pay federal corporate income tax. You’ll need to apply for recognition of exemption with the IRS first. The forms for these can be completed and submitted online. There is also a $275 fee to pay for recognition and you may be subject to other fees depending on your exemption requirements.
The nonprofit sector is heavily regulated. As such, you’ll need to keep accurate financial records for all your activities and file these accordingly. It can be worth pursuing an accountancy course if you are uncertain about how to maintain such records to legally compliant standards.
Many states will require you to file an annual charitable solicitation account. This describes how you seek donations from residents of the state. The IRS will also need you to file an annual information return that fully outlines your finances for the year. Your state may also require you to file a similar financial report.
When you start a nonprofit organization, you’ll need to gain funding from investors or loan providers. As such, it’s helpful to plan what expenses you’ll need to pay.
Initially, you can expect to require funding for:
- Tax and incorporation registration fees
- Business equipment
- Software for accountancy, project management, and donor management
- Legal advice
For the lifespan of your nonprofit, you’ll need ongoing funding for:
- Insurance and utilities
- Staff salaries and benefits
- Property rental
- Projects and events
- Annual state filing costs
- Company scaling
Ongoing funding can be procured via donations that serve as tax write-offs for the donors. This is only a viable option if you’ve secured the proper 501(c)3 classification.
Your nonprofit organization needs other skilled contributors to make it a success. When you first start, it’s important to identify what the essential initial roles you need to fill are to stay operational. These may be technical roles like information technology experts or legal professionals. You can certainly make use of unpaid volunteers in soliciting donations and running projects. However, it’s important to invest in people performing in highly skilled positions.
Wherever possible recruit those who share the ethical and social values at the heart of your organization and are committed to achieving your goals. It’s also important to hire staff from diverse backgrounds. This is both an ethical duty and can provide your nonprofit with valuable alternative perspectives.
Additional Tips for Starting a Nonprofit
We’ve covered the essential components of how to start a nonprofit, but some nonessential aspects can nonetheless improve your experience. Keep networking among other students on your degree course and at industry events. This can give you insights into new opportunities for your organization and even open you up to resources and sponsors.
Wherever possible, utilize remote working practices. This helps to keep your overheads lower and you can benefit from a global talent pool. It also allows you to establish a more inclusive and culturally diverse operation.
Running a nonprofit is never anything less than challenging. However, with some knowledge, planning, and focus, you can make a difference in the world.
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