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Nonprofit Strategies

How to start a charity: 11 must-know steps

Ready to make the world a better place? Discover the different types of charities and how to start your own with this beginner-friendly guide.

Nicola Scoon
December 28, 2023
December 16, 2020
Nerd Mr Butter

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Taking the leap and launching your own charity is exciting, but it also takes careful planning, research, and execution. Beyond the legal paperwork and red tape, you’ve got to create a business plan, assemble a team, and come up with a smart strategy to raise funds year-round.

Ready to get started? We’re here to help! Learn how to start a charity organization in the United States with this step-by-step guide. 

What is a charity? 

Before we dive into how to start a registered charity, let’s talk about what a charity is and isn’t. It’s a pretty broad term, but the Internal Revenue Service (IRS) explains exactly what “charitable” means in the context of tax-exempt nonprofit organizations. 

Basically, a charity is an organization that’s concerned with the public good. With philanthropic goals and a desire to improve the community or wider world around them, charities tend to be committed to causes that are humanitarian, religious, educational, scientific, or literary. 

A charity may help underprivileged people, erect public monuments, defend civil rights, advance science, or reduce community tensions. A charity may also conduct testing for public safety, hold amateur sports competitions, or further the prevention of cruelty to children or animals.

There are more than 1.54 million charitable organizations in the U.S., all helping to raise vital funds and support projects that contribute to a better world.

Types of charity

When it comes to deciding how your organization will operate, there are different charity types. 

Let’s take a closer look at the two main types of charities—the private foundation vs. public charity:

  • Public charity 👪 These are the organizations people usually think of when they hear “charity.” Public charities include hospitals, private schools, universities, and churches. They’re “public” because they mostly rely on contributions from the general public, government agencies, corporations, and other charities for funding.
  • Private foundation 🏦 Private foundations are similar to public charities, except they’re usually controlled and funded by a relatively small group—like a wealthy individual, family, small business, or corporation. They also come with additional taxes and restrictions.

Often, people start private foundations in order to make grants or gifts to other nonprofit organizations that improve the lives of people in need (and enjoy enormous tax benefits). One of the best-known examples of this type of charity is the Bill & Melinda Gates Foundation.

Charity vs. nonprofit vs. foundation: What’s the difference?

You may have heard “charity” and “nonprofit organization” used interchangeably. You might also have heard about foundations, like in the example above. The fact is that there are many types of nonprofits, and a charity is just one of them. 

Here’s a quick guide on these different types of nonprofits and how they operate: 

  • Charity 💚 A charity is an organization that raises money for charitable purposes, as defined by the IRS. An organization must meet specific rules and have a charitable objective, like preventing animal cruelty, to qualify as and register as a charity.
  • Foundation 💸 A foundation is an organization created to provide funds to other charities or nonprofits, through grants or contributions towards an existing organization’s projects and activities.
  • Nonprofit 🏛️ A nonprofit is a catch-all term for any charitable organization. It can be any organization that’s not-for-profit, where any income generated is invested in projects or activities that help meet a social or charitable goal.

In other words, all charities and foundations are nonprofits, but not all nonprofits are charities.

How to start a charity in 11 steps

Figuring out how to create a charity from scratch may seem intimidating when you look at it as one task, but like anything, you can break it down into smaller, more manageable tasks.

Step 1. Define your mission and values 🌏

The first step in starting a charity is to decide what you stand for and what you’ll do. What service will you provide to your community? Are there organizations already tackling the same challenge in your area, or is there an unmet need? What will set your charity apart?

A great way to answer these questions and establish a clear, concrete vision is to perform a nonprofit needs assessment. Once you’ve done some research, express your core values and goals in a mission statement.

A powerful mission statement communicates to others what you do, why you do it, and why they should join you. For example, here’s the Make-A-Wish Foundation’s mission statement: “Together, we create life-changing wishes for children with critical illnesses.” It’s clear, simple, and impactful. A statement like theirs is also easy to keep top of mind as you take on the next steps in this process.

⭐ Pro tip: At this stage, you might discover that your social cause is already well covered in your area. If that’s the case, look for opportunities to work with existing organizations to enhance what they do: Volunteer, join their board, help them fundraise—the sky’s the limit.

Step 2. Choose a name 💬

While the focus of your charity is on raising funds for a good cause, having a unique, interesting, or clever name can help draw attention to your mission.

Take Knock Knock Give a Sock for example. This organization breaks down stigmas around homelessness through meaningful interactions based on… donating socks! The name is instantly intriguing and highly memorable.

As you choose a name for your new charity, consider the following:

  • Relevance 🤝Is your chosen name relevant to your cause or mission?
  • Simplicity 👌 Is the name easy to read or say? Is it simple to explain to others?
  • Personality ✨ Does the name reflect your values and brand personality?
  • Memorability 🧠 Is the name memorable? Will people remember what you’re all about?
  • Availability 👀 Is the name available? Check with your state’s business name directory before you commit to it. Doesn’t hurt to look on social media, too. 

You don’t have to finalize your charity’s name at this stage. You’ll need a name when you register, but for now, you can use a temporary or “working” name to describe your organization. 

Step 3. Assemble your board of directors 👋

As the leadership team for your charity, your board members fulfill a variety of different roles as you launch and grow. To build a strong charity, you’ll need an eager and passionate team of individuals who can make your goals a reality.

Initially, your board members may be involved in everything from organizing fundraising events to scheduling volunteers. As you hire staff in the future, board members typically step into positions that involve strategic planning and building relationships with corporate sponsors. 

⭐ Pro tip: Selecting your board members may take some time, but it’s worth it. Use this guide on how to find the right board members to help you make the best decisions. 

Step 4. Decide how to operate your charity ⚖️

With a team of excellent people on board, you can start deciding how you’ll operate, including what to do with funds, and how to handle any conflicts of interest that might arise.

Together with your board, you should: 

  • Write your charity’s bylaws 💼 Map out how your charity will conduct its operations—including each member’s role, how funds will be used, and more. 
  • Create a code of ethics 🔐 Establish a strong foundation to help guide any decisions you make in the future, such as what kinds of organizations you’ll partner with—and which you won’t.
  • Determine your conflict of interest policy 🕊 Set some ground rules on what to do if a board member is put in a position of conflict of interest. Agreeing on this now means you know exactly what to do in the moment and can apply any decisions fairly.

Step 5. Register your charity 🏛️

Not every charity has to register at the state level, but doing this offers extra legal protection and makes it easier to file for your 501(c)(3) tax exemption later.

Incorporating your charity also adds credibility to your organization. This is a big deal, especially when recent research shows that only 40% of Americans trust nonprofits to do the right thing. Registering your charity is another way of showing your commitment to the cause. 

You can register your charity in two steps:

  • Create your articles of incorporation: First, search for a lawyer-reviewed template for your state and nonprofit type or use the IRS’ suggested organizing documents as a foundation. We recommend having a legal consultant review these documents.
  • File these documents with your state office: The Secretary of State’s office typically processes these applications, and there’s a small fee involved. If you want to operate in multiple states, you may need to register in every location.

Step 6. Get an Employer Identification Number

To fully operate your charity, you’ll need an Employer Identification Number (EIN). This identifier makes it possible to hire staff, complete tax forms, open a business bank account, and more.

Getting an EIN is a swift and simple process that’s easy to complete online. Good news: It’s also free! Gather the details you need, then apply on the IRS website.

Step 7. Write a fundraising plan 💰

We might be in the early stages here, but sustaining your charity should always be on your mind. Create a fundraising plan now, so you’re not in a panic when you desperately need funds.

Your fundraising plan should be part to-do list, part calendar. It’s both strategic and actionable.

Here’s what to include in your fundraising plan: 

  • Fundraising goal 🎯 An overview of your major goal and why you’ve chosen it
  • Budget 💸 Explains what your total budget is for your fundraising initiatives
  • Fundraising activities 🎉 Details your planned activities, events, and campaigns
  • Resources 🛍 Explains which resources you’ll need, including staff members and volunteers
  • Timeline 🗓 A map of when you plan to execute your fundraising strategies 

Fundraising is the bread and butter of any nonprofit—especially public charities—so don’t wait to start strategizing. Even if you choose to launch a private foundation, you still need a strategy for donor stewardship to nurture relationships and keep the funds rolling in.

Step 8. Write a business plan 📝

Although your charity has different goals than a typical for-profit business, you still need a clear-cut business plan to keep you on track. This is your roadmap to a healthy budget, consistent funding, and effective marketing.

Here are the major components of a solid nonprofit business plan:

  • Executive summary: A brief overview of your complete business plan, mission, and vision
  • Programs, services, impact: Explains the challenge or opportunity and how your charity’s services will make a difference
  • Industry analysis: Identifies who your charity serves, your target donors and volunteers, and your competitors
  • Marketing plan: Breaks down your awareness and outreach strategy to raise money and gain support
  • Operations plan: Outlines the things you need to operate your charity—like your office, equipment, and materials, as well as the actions you’ll take to secure them
  • Management team: Highlights the skills and experience of your charity board members or leadership team
  • Financial plan: Describes your fundraising strategies—how you’ll earn donations, make sales, and cover all your operating costs. This section usually includes standard financial projections and financial reports.

Step 9. Start to build a brand 📷

You don’t need a full marketing suite ready to go as soon as you launch, but you should have some sense of identity. Not only will a strong brand give you a way to share your story visually, but it’ll help you stand out from others too.

Consider your charity’s mission, goals, and values, then design a brand identity that lets them shine through. Your charity may be new, but design a strong brand now and you won’t need to go through the painful exercise of rebranding in the future.

Here’s what to create as part of your brand-building exercise:

  • Charity logo
  • Brand colors
  • Brand guidelines
  • Website
  • Templates for social media posts
  • Illustrations and photographs

Most new nonprofit leaders are skilled in a range of areas, but if visual design and brand identity aren’t a strength of yours, don’t panic. Call on the talent within your board of directors, build a partnership with a local design agency, or hire an expert to create a memorable brand for you. 

Step 10. Find the right fundraising software ⚒️

The best fundraising platform can streamline your operations, help you stay in touch with donors, and give you an easy way to accept online and offline donations. When comparing the best fundraising software solution for your charity, make sure it includes these must-have features:

  • Fundraising pages that keep your supporters engaged
  • Fundraising events and ticketing for virtual, in-person, or hybrid gatherings
  • Auctions that are easy to plan and fun for your donors
  • Marketing tools like personalized, custom email and SMS campaigns so you can keep your supporters updated and invested in your success.

Step 11. File for tax-exempt status 🎉

You’re at the last step! The only thing left is to apply for tax exemption with the IRS. Thanks to Section 501(c)(3) of the Internal Revenue Code, charities are tax-exempt organizations. This is why charities are often called 501(c)(3)s.

Your charity doesn’t have to pay federal income taxes, freeing up crucial funds for your mission. There’s more good news. Depending on the nonprofit type you choose, charitable donations could be tax-deductible for your incredible community of donors too. 

While applying for your status is straightforward, waiting for approval takes some time. It can be anywhere between six weeks and several months before it’s official—so apply as soon as possible.

There are two ways to apply for your 501(c)(3) tax exemption:

  • File Form 1023: This is the standard, default form and has a higher filing fee. As well as the form, the IRS requires you to submit organizing documents like your articles of incorporation. It’s a thorough form, with a longer expected approval wait time.
  • File Form 1023-EZ: This is the easy (“EZ”) version of IRS Form 1023, designed to simplify the process for smaller nonprofit corporations. To use this form, your gross revenue must be under $50K, with total assets under $250K. There’s a more affordable filing fee, no requirement to submit your organizing documents and a shorter expected wait time.

No matter which form you use, it’s a good idea to hire a legal or financial consultant to help you. 

⭐ Pro tip: Keep in mind that this tax exemption is at the federal level. You’ll need to double-check whether your state or municipality recognizes your tax-exempt nonprofit status. You may need to pay a state charitable registration fee too.

Start your charity with the best tools possible 

We’ve covered just about everything you need to know to turn your charitable vision into concrete action. Starting a charity takes time, but the payoff is worth it in the end. 

Remember, you don’t have to shoulder the registration process alone. You can always get guidance from an expert, or use an online legal service, to ensure you’re handling your paperwork correctly. 

When it comes to fundraising, supporter engagement, and donor management, Givebutter has everything you need in one user-friendly place: donation forms, fundraising events, nonprofit CRM, multiple payment options, and so much more—all for free. 

Create your free account and see how Givebutter can help make starting a charity a much smoother process. You’ve got this! 

Givebutter makes fundraising easy, free, and fun

How to set up a charity: Frequently asked questions

Starting your own charity or foundation can be a confusing process, especially if you do it solo. Take a look at some of these frequently asked questions (FAQs) to find answers to your burning questions and ease your mind.

Is it hard starting a charity?

In many ways, yes. When you consider how to start a charity foundation, there are a lot of steps involved and some complicated legal forms. Preparing your organizing documents and filing for your tax-exempt status can feel challenging, but there’s always the option of working with an expert to take some of the pressure off. 

How much money do you need to start a charity?

While you can start a charity on a budget, you’ll eventually need some funds to register and make things official. If you’re lucky enough to establish a strong board of directors and score some pro-bono legal support, the main startup costs will be essentials like applying for your tax-exempt status—which can cost up to $600.

Of course, the healthier your budget, the more you can invest in other areas like branding, marketing, and hosting fundraising events.

If you’re working with a limited budget, see our guide on how to start a nonprofit with no money.

How do I start a charity by myself?

Starting a charity by yourself or with a team follows the same process, it just might take a little longer. While you can work through many of the steps solo, you will eventually need to bring others on board when it’s time to recruit a board of directors, a requirement for nonprofit organizations. 

How long does it take to start a charity?

The length of the process will be different for every charitable organization. For some people, coming up with a name, brand, mission, and board of directors happens quickly. For others, these parts of the process take longer to establish. 

Even if you’re quick to assemble a team and prepare your documents, waiting for tax-exempt status can introduce delays. Expect the process to take between 3-6 months, or longer if you want to take the journey at a more relaxed pace.

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