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6 Steps to Start a New Nonprofit Organization

Although the process of forming a nonprofit may initially appear daunting, gaining an understanding of the basic steps involved can greatly assist potential founders in planning and preparing effectively.

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Step 1: Define Your Mission and Vision
Before immersing yourself in the legal aspects of forming a nonprofit, it is crucial to invest time in clearly defining your organization's mission, vision and exempt purpose. This pivotal stage involves brainstorming ideas, conducting thorough research, and establishing a solid purpose and goals for your nonprofit. While the timeline for this phase may vary depending on the complexity of your mission, dedicating approximately one to two months to this initial groundwork is essential for laying a strong foundation.

Step 2: Draft and Submit Your Articles of Incorporation
The next crucial step in forming a nonprofit is drafting the Articles of Incorporation. This legal document serves as the "charter" or framework for your organization, outlining vital details such as its name, exempt purpose and registered agent. 

Step 3: Draft Bylaws and Policies
During the formation process, it is imperative to develop comprehensive bylaws that outline the internal operating procedures of your nonprofit. These bylaws should encompass crucial aspects such as board structure, decision-making processes, and membership requirements. Simultaneously, it is essential to establish key policies like conflict of interest policies and financial management procedures. This stage typically takes one to two months, considering consultations with legal professionals and engaging board members in the review and approval process to ensure compliance and alignment with best practices.

Step 4: Hold Your First Formal Board Meeting
As a new, separate entity that is overseen by a board of directors, your new organization's board must hold a formal meeting to adopt the bylaws, policies, the actions of the incorporator, appoint signatories with the authority to access the organization's bank account, and other initial resolutions required of a brand-new organization. This meeting should be memorialized in formal, written minutes, and kept with the organization's corporate documents (and addressed in your document retention and destruction policy).

Step 5: Apply for Tax-Exempt Status

Obtaining tax-exempt status from the Internal Revenue Service (IRS) stands as a pivotal milestone for most nonprofits. The application process involves completing Form 1023 (or Form 1023-EZ for eligible organizations) and submitting supporting documentation to establish your organization's eligibility and exempt purpose. While the timeline for IRS approval can vary, it generally takes around six months to receive a determination. 

Step 6: Register with State and Local Authorities (Varies by State):
Registering your nonprofit organization with state and local authorities is a necessary step to legally fundraise in a majority of states. The timeline for this process varies based on the requirements and processing times of your specific jurisdiction. It may involve filing for state tax-exempt status, obtaining necessary business licenses or permits, and complying with local charitable trust regulations. Familiarize yourself with the specific requirements of your jurisdiction and allocate adequate time to complete these registrations successfully.

Forming a nonprofit organization demands careful planning, collaboration, and adherence to legal procedures. While the timeline for nonprofit formation can fluctuate based on factors such as the complexity of your mission, responsiveness of authorities, and the accuracy of your documentation, it is vital to be prepared for the process to span several months to a year. By gaining a comprehensive understanding of the different stages involved and allocating sufficient time for each, aspiring nonprofit founders can navigate the formation process more effectively.

6 Steps to Start a New Nonprofit Organization 

  • ​Step 1: Define Your Mission and Vision
  • Step 2: Draft and Submit Your Articles of Incorporation
  • ​Step 3: Draft Bylaws and Policies
  • ​Step 4: Hold Your First Formal Board Meeting
  • Step 5: Apply for Tax-Exempt Status
  • ​Step 6: Register with State and Local Authorities