You’ve decided to start your own nonprofit organization. That’s great! Here’s an incomplete guide to what you might need to accomplish, written from a legal perspective. Feel free to reach out with questions.
How will you get from here to there?
Get help! I serve on the board of the Center for Nonprofit Excellence, and they have a fantastic nonprofit toolkit you can download. Resources are out there for you, so use them.
Get started. Write down your idea in your own words. How will your idea serve the public and qualify as a charitable purpose? For an idea of what the IRS means by charitable purpose, look here.
Before you jump too quickly, do a reality check. Look around to make sure that nobody else is already doing what you have in mind. Are you doing this for your ego or to serve the public? Is this a future case of founderitis?
Draft a mission statement — what goals and values will guide your organization? Harvard Business Review has some great tips on how to do this well.
Articulate a vision for the future — how will your organization improve the world, the country, or the community?
Build a business plan — market research, core activities, financial plan, everything. The National Council of Nonprofits can be a great resource here.
Grow your network — talk to lots of people and solicit their input and support. Nonprofits need stakeholders, and you'll need a diverse team.
Raise money — get comfortable seeking funds because that need will never go away, whether it’s donations, grants, or earned income. Make sure you are checking to see what the charitable solicitation laws and regulations are in your area. Here is the info in Virginia.
Directors — build a team of at least three people for your board of directors. These people will lead your organization, so think carefully about identifying the right people.
Legal documents — draft articles of incorporation, bylaws, initial meeting minutes, conflict of interest policy, & more. These should not just be dusty paper created to meet a legal requirement, so take time to think through the details and internalize what they require.
Go to the Virginia State Corporation Commission (SCC) website and form a new nonstock corporation. Pay $100. You’re officially incorporated as a nonprofit!
Finalize your legal documents and obtain an employer identification number from the IRS. Lots of search results will offer to charge you to get this, but it’s free. Take the time to do it yourself. You’ll learn some good information and save money!
Open a bank account and do other things that real corporations do, but there’s just one more thing. You just don’t have tax-exempt status yet…
Learn about IRS Forms 1023 & 1023-EZ that are used to apply for tax-exempt status. Are you eligible to apply using the simpler form? Use the worksheet on page 13 here to figure that out.
Create an account at Pay.gov, complete and submit the IRS Form 1023 ($600) or 1023-EZ ($275). These forms are comprehensive and will kindly jog your memory if you’ve forgotten to complete any steps above.
Wait! The IRS review can take a few weeks or a few months or a year. Be patient and keep calm. They’ll be in touch if they need more information or have concerns. If you have a specific deadline, you can let them know about it, and they may move your review earlier.
Can you still raise funds before your tax-exempt status is approved? Generally yes, you can, but your donors must be told that you are still waiting for approval, and the tax benefits are not official until then.
If your donors are uncomfortable with that uncertainty, you can look for another nonprofit with tax-exempt status and a similar mission that may be willing to serve as a fiscal sponsor.
After a while … celebrate! The IRS works diligently to review and process applications (even during the pandemic), so you should hopefully get good news before too long. Congratulations on all of your hard work!
Just one more step to maintain what you’ve achieved — compliance. You’ll need to keep up with your corporate filings and tax-exempt status. The IRS has a helpful website dedicated to this.
Now that your nonprofit organization has officially been formed and achieved tax-exempt status, you can get on with serving the public and fulfilling your mission!
Let us know if this was useful, or if you think we’ve missed any critical steps along the way. And we proudly serve nonprofits. If you want our help, set up a consultation here. Thanks!