How to Start a Charity: Everything You Need to Know

Common Questions To Ask Before You Start A Nonprofit

Before you take the plunge to set up your charity, there are a few frequently asked questions to address.

1. What is a Nonprofit Organization?

A nonprofit organization operates for the public good, supporting a charitable purpose or social cause, rather than to make a financial profit.

Unlike a typical for-profit business, any profits exceeding expenses need to be reinvested in the charitable organization or used to support its mission and cause.

The most common nonprofit organization is a 501(c)(3) public charity corporation, which we’ll cover in this step-by-step guide. All charities are nonprofits, but not all nonprofits are charities.

2. Who Can Start a Nonprofit?

Good news: anyone can start a nonprofit.

There are no specific eligibility criteria to begin the process, however, there are legal and financial requirements to establish a nonprofit organization.

Read on for our step-by-step guide to setting up your own charity.

3. How Much Does It Cost To Set Up A Nonprofit?

It depends. Estimates vary from $1000 to $3000.

There are multiple fees required to set up, including state filing fees and IRS charges, and potential legal and accounting fees. How much you need to pay at each stage depends on several factors and the choices you make.

Our advice is to try to over-budget, so you aren’t caught off guard.

Don’t let this be a hurdle. You can apply for grants and funding, as well as make a start to marketing and early fundraising to cover the set-up costs.

4. What are the Legal Requirements to Start a Nonprofit?

There are many legal requirements to set up a charity.

You must incorporate as a nonprofit corporation, apply for an Employer Identification Number (EIN), and receive 501(c)(3) tax-exempt status from the IRS.

We explain these stages in more detail in our step-by-step guide below.

5. How Long Does it Take to Set Up a Nonprofit?

It can take a few months to a year to set up your nonprofit. This is due to there being multiple legal requirements in the process, as mentioned above.

You’ll also have to establish your mission statement, board of directors, and bylaws, all of which take time, depending on factors such as scheduling and other commitments.

10 Steps to Start Your Nonprofit Organization

1. Do Your Research to Establish Your Cause

Before you go through all the hassle of filling out IRS forms and meeting legal requirements, you need to work on your nonprofit. Establish what cause you want to support, the impact you’re trying to have, and research existing organizations in your local community.

Don’t be disheartened if you discover it’s a crowded market, that doesn’t mean you’re idea can’t happen. You might just need to refine it further to support an underserved community or find a sharper niche.

If you decide you’d rather find another way to support a good cause, explore what other options there are. You could collaborate with existing nonprofit organizations if you are supporting similar causes. Another option is getting a fiscal sponsor to help incubate the charity. More on that here.

2. Appoint Board Members

Before you go any further, it’s important to appoint your board members. It might seem early, but the next stages of setting up will benefit from this early organization.

Rather than choosing friends or family, think about people who will add value to your nonprofit organization. It would be wise to select influential community members who can support you with unique skills and experience you don’t have yourself. Not only will they have the expertise, but also the social influence to further advance your cause.

Seek out individuals with experience running charitable organizations for their expertise, advice, and guidance.

Establish clear roles for board members, such as a chair, secretary, and treasurer. Consider appointing specialist roles that suit people’s skill set and experience.

3. Develop Your Mission Statement and Goals

Now that you’re set with your idea and are establishing your board members, it’s time to start shaping your mission statement and goals.

These are crucial in setting up a successful non-profit. Most people are only able to support one or two charities, so getting people to part with their hard-earned cash isn’t easy. To do so, you’ll need to make sure your mission statement is compelling and conveys the value your nonprofit will bring.

Make sure your charitable story uses powerful and emotive language, and don’t underestimate the power of photos and video to help further convey your good cause.

Your mission and goals will influence everything: from your marketing and brand to future fundraising opportunities and potential supporters.

You don’t have to have every corner covered straight away, as your goals can develop over time. They’ll also shift as the world around us changes and new causes come to the forefront.

4. Establish Bylaws to Manage Compliance

To operate effectively and legally, you’ll have to make ongoing compliance a number one priority. It’s never too early to start thinking about this.

Establishing bylaws is a good place to start. This establishes how your organization will operate, including financial reporting requirements, annual reports, and conflicts of interest policy.

Lean on your board of directors for support and assign each person roles and responsibilities.

5. Think About Funding and Budget

Before you can start on formal paperwork, you need to establish an operating budget and business plan.

Work out roughly what you think it’ll cost to do your programming for the first year, including staffing costs, materials, etc. Don’t underestimate here, because it’ll impact you in the future.

Next, you need to work out what you’ll need to do to raise the money. Nonprofit organizations can raise charitable funds in a variety of ways, including through donations, grant writing, and corporate sponsorships. Our advice is to try a few options, to see which is best suited to your organization. Note: Before you ask for donations, you’ll likely need to register your nonprofit with the state you’re operating in.

You’ll need to start thinking about how you’ll manage your accounting, so that you’ve got everything you need to produce financial reports when the time comes.

6. Get Your Legal Ducks in a Row

For many people, following formal processes and filling out forms can be intimidating.

You need to incorporate as a nonprofit corporation in your chosen state. You need to fill out your Employer Identification Number (EIN) form on the IRS (Internal Revenue Service) website. This is your nonprofit’s unique federal tax ID.

State requirements differ, so you’ll need to do your research to find out what is required. Contact your secretary of state’s office to guide you through. Fundraising activities are regulated by state law, so make sure you’re registered before you ask for donations.

At this stage, you’ll need to file Articles of Incorporation with a state agency. This makes your organization official, outlines its purpose, name, address, etc. This will require you to establish a bank account for your nonprofit and decide who will be the signatory.

7. Don’t Forget Your Federal Tax Exemption

Many nonprofits are eligible for 501(c)(3) status, which means they are exempt from paying federal income taxes and can receive tax-deductible donations. You may also be exempt from state tax, check with your secretary of state.

To apply for the 501(c)(3) status, you’ll need to fill out Form 1023-EZ or Form 1023.

Remember, there are lots of different tax exemption forms beyond the 501(c)(3), so do your research to find which exemption will serve your particular needs the most effectively.

8. Launch Your Charity

Finally, it’s time to launch your nonprofit organization. It’s taken a lot of effort to get here, but now you can focus on raising awareness and money for a good cause.

Make a splash about your new organization. Post on social media to establish a brand presence and seek out partnerships with local businesses that align with your values and mission statement. Read our guide on amplifying your reach online.

9. Develop a Long-Term Funding Strategy

One thing’s for sure: to make an impact with your charity, you’re going to need to fundraise.

There are more than one million nonprofits in the US alone, all competing for financial support. Most people can only commit to supporting a handful of causes each year.

You need to get comfortable and strategic about asking for donations. If you have the resources and network, assemble a fundraising team to manage these efforts.

Read our guide on five easy charity fundraising tips to get you started.

10. Find Crowdfunding Platforms That Can Help You Grow

Crowdfunding is an excellent way to raise funds as a nonprofit, it’ll help make your dream a reality and increase the impact you can have to support your chosen cause.

Crowdfunding has transformed the fundraising landscape in recent years. Crowdfunding platforms allow you to rally friends, family, and the local community to raise vital funds for your cause. It’s also an easy way to reach beyond your network and make a bigger impact.

Start Your Nonprofit Journey Today

With over $30 billion raised from more than 150 million donors, GoFundMe is one of the most well-known and trusted personal fundraising websites in crowdfunding.

When it comes to charitable giving, GoFundMe has a critical edge over its competitors. On GoFundMe, individuals can raise money for a charity, or a charity can raise money and create its own donation site.

Sign up today to take advantage of our fundraising tools for nonprofits.