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Nonprofit Strategies

How to start a nonprofit: 11 steps for success

From crafting a business plan to registering with your state and writing bylaws, we’ll help you sort out how to start a nonprofit so you can make an impact as soon as possible.

Kylie Davis
July 12, 2022
December 16, 2021
Nerd Mr Butter

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You don’t need a large budget or complicated technology tools to start a nonprofit. You simply need a clear mission, a plan to attract (and retain) new donors, and a platform to amplify your message. 

With this guide on how to start a nonprofit, you’ll learn to make a sound business plan, register your organization, apply for tax exemption, and set up fundraising channels. We’ll walk you step-by-step through how to start a nonprofit—from the conception stage to launching your first campaign—and we’ll even dive into some of the tools you’ll need to get started.

Please note: This post is meant for informational purposes only and should not be taken as legal advice. Please contact an attorney for more information surrounding federal and state laws surrounding public charities.

What you need to know before you start a nonprofit

Forming a nonprofit is a meaningful way to rally individuals to urgent social causes and affect widespread change. In addition, generous tax breaks let founders and volunteers do the most good with each contribution.

But before you can roll up your sleeves, you’ve got to lay a strong foundation. Launching a nonprofit organization—just like launching a for-profit business—is an undeniably complex process. National Center on Charitable Statistics reports that roughly 30% of all nonprofits fail by the 10-year mark—often due to a lack of planning.

Don’t let this stat scare you. To set your organization up for success, consider this overview on how to start a nonprofit. 

⭐️ Pro tip: Starting a nonprofit takes time and shouldn’t be rushed. Most tasks to starting a nonprofit are interdependent, meaning you can’t proceed to the next step until the previous one is 100% completed. So, there’s a domino effect to any mistakes or delays. We recommend bookmarking this page, so you can easily return to it when you’re ready to move on to the next step. 

How to start a nonprofit organization in 11 steps

Forming a nonprofit can take anywhere from a few months to a couple of years. The key to successfully doing so—and avoiding paperwork purgatory—is to take this process step by step.

1. Assess your area’s needs 🤔

According to the National Council of Nonprofits, there are 1.56 million nonprofits in the United States already competing for funding dollars and volunteers. Before you start defining your mission and planning your marketing strategy, you need to answer one key question: 

Is a new organization needed?

One way to figure this out is to perform a nonprofit needs assessment.

Let’s say you want to open an animal shelter. You need to find out how many shelters already exist, the staff and budget sizes, and each nonprofit’s reach. If there are 20 underfunded shelters in your city, is your nonprofit really serving an unmet need? How will your nonprofit mobilize members and attract donations? It's up to you, as a founder, to capture supporters' attention. Here are a few exercises to get started:

  • Create a positioning statement: Do your research and make a list of other charities that are trying to accomplish a similar mission. What makes you different? This competitive edge will help you draft your positioning statement, explaining what sets you apart.
  • Write a SWOT analysis: SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It's a way to identify key factors that will help distinguish your organization in the nonprofit sector. Weighing these factors while you’re in the planning phase will also help you course-correct sooner.

Being objective when you’re passionate about a new idea can be challenging. We recommend pulling in trusted individuals or leaders of existing organizations (that don’t compete with your group) to fill out your SWOT analysis. You’ll hear different perspectives and have more insights to draw from overall.

2. Identify your “why” 💓

Now that you’ve considered your area’s needs, you’re ready to identify and document your why. Ask yourself: 

Why am I doing this? What problem do I wish to solve?

The answers to these questions will guide you to your mission. Your mission statement is your organization’s purpose for existing and should be formally put into writing.

Once you (or your team) identifies your organization's mission, you’ll need to brainstorm other key qualifiers for your organization, including: 

  • Your name: Naming an organization takes inspiration plus some research. Before you fall head-over-heels in love with a name, search a domain directory (like GoDaddy.com) to see if a URL is available and check which social media handles are available. 
  • Your values: Your values help determine how you’ll conduct your business. For example, are there certain businesses or individuals you will not accept support from?

3. Determine your organizational structure 👯

Nonprofit corporations aren’t like other business types. As a charitable organization, a nonprofit can’t be owned by a single person or group. That means you’ll need to establish a board of directors to get up and running.

You want a group that can effectively pool their knowledge and draw on different skills to build a long-lasting organization. Before you build out a full team, your board will develop and execute strategies themselves. This is what’s known as a “working board.” Later on, it may transition to a “governing board,” in which board members handle higher-level responsibilities and your staff handles day-to-day tasks.

Ideally, each board member will have a personal passion for your project. This enthusiasm is vital to sustaining your nonprofit through the early months of long hours and unpaid work.

That said, you may not employ an executive team or board members in the beginning stages of your nonprofit—and that's ok! To help cover the workload, you may want to recruit volunteers who are passionate about your cause. To start:

  • Create a volunteer recruitment strategy: How will you convince a team of passionate people to give up their free time to serve your organization? Consider capturing email addresses at fundraising events to send a monthly newsletter and attract new volunteers.
  • Build a volunteer database: Set up a CRM system to keep track of current and potential volunteer contact information and past hours. In addition, ask loyal volunteers to help recruit new members to support your cause.

4. Gather your legal documents 💼

Before you can file for tax-exempt status with the Internal Revenue Service (IRS), there are certain documents you need to prepare. State tax exemption laws vary from state to state, so be sure to check your state's compliance guide on the IRS website.

To get through this step, you may want to partner with an attorney or CPA to help navigate federal income tax laws surrounding charitable organizations. If you're going the DIY route, you will need to take the following steps:

  • Understand the different types of nonprofits: To file for tax-exempt status, you must determine whether you are a nonprofit corporation, trust or private foundation, or association. There are roughly 30 types of nonprofits, but more than two-thirds of all nonprofits are 501(c)(3s), or public charities and private foundations.
  • Write your organizing document: As described by the IRS, you will need to draft either the “articles of incorporation for a corporation, articles of organization for a limited liability company, articles of association or constitution for an association, or trust agreement or declaration of trust for a trust.”
  • Put your bylaws into writing: A nonprofit's bylaws are legal documents outlining how a nonprofit will be managed and operate, outline rules for board meetings, and settle conflicts of interest or internal disputes. We’ll go more in-depth on writing bylaws in the next section.

⭐️ Pro tip: Fiscal sponsorship is one alternative route that many smaller organizations opt to take in the beginning stages of becoming a nonprofit. Before undertaking all of the cumbersome steps toward becoming your own legal entity, you can choose instead to register as a project of a larger nonprofit or foundation. In exchange for a percentage of your income, your fiscal sponsor provides your organization with nonprofit tax status, legal compliance resources, and a fully functional human resource department that could otherwise take years to get up and running, freeing you up to start living out the mission of your organization.

5. Write and adopt bylaws ✍️

Bylaws are the main governing document for your organization. They’re a set of internal rules and procedures for how your nonprofit will conduct its operations. And in times of conflict, confusion, or change, bylaws are a guiding light for your nonprofit. Bylaws are typically required for 501(c)(3) corporations, but bylaw requirements can vary from state to state, so be sure to check with the attorney general or secretary of state within your home state.

Gather your board and draft the first version of your bylaws. Bylaws should cover important aspects of your nonprofit like:

  • Mission and legal powers
  • Member elections, roles, and compensation
  • Policies on conflicts of interest
  • Fund distribution
  • Financial reporting
  • Amendment of bylaws
  • Dissolution

Avoid using bylaw templates from unfamiliar websites. Search for lawyer-reviewed templates or submit yours directly to a lawyer familiar with nonprofit law.

Many nonprofits adopt their bylaws at their first official board meeting, and you can update bylaws as your organization evolves. If you do, you may need to report changes to the Internal Revenue Service and your state.

6. Register with your state 🙋

Like for-profit businesses, many nonprofit organizations are required to register at the state level. Even if you aren’t required, there’s a wide range of benefits to doing so. Incorporation legitimizes your operation, provides legal protections, and makes it easier to get approved for federal tax-exempt status.

The application process is straightforward, and it’s best to start early. It can take weeks or months to get state approval.

Here’s a quick breakdown of the process:

  • Choose a business name that’s available in your state: You can search through your state agency’s business name directory to find open options. Also, double-check that you can get a web domain name to match your business name. You can use a business name generator to get some ideas.
  • Prepare your articles of incorporation: Add your business name, address, purpose, expected duration of the nonprofit, and board member information. We recommend having a legal consultant review these documents.
  • File the articles with your state office and pay fees: The Secretary of State office typically processes applications. You’ll likely pay a $20 to $100 filing fee. If you plan to serve multiple states, you may need to register there too.

For tips and guidance, reach out to your state’s nonprofit association. You can also outsource this entire process to an online service like LegalZoom or BizFilings.

7. Get an Employer Identification Number 💯

An Employer Identification Number (EIN) is basically a Social Security number for your nonprofit business. You’ll use it to complete tax forms and hire staff later on (that’s what the “Employer” part refers to). Applying for an EIN is free, fast, and can be done online through the IRS website.

Having an EIN also lets you:

  • Open a business bank account
  • Get a business credit card
  • Apply for federal and state tax exemptions
  • Apply for any small business licenses and permits
  • Establish your business credit score

When you’ve completed steps one through seven of how to start a nonprofit, you’re ready to claim your tax-exempt status.

Apply for the right tax exemption 🤑

Your nonprofit can become exempt from federal income tax thanks to section 501(c) of the Internal Revenue Code. That frees up important funds for your educational, religious, scientific, or charitable work. It also makes contributions tax-deductible for your generous donors, depending on the type of nonprofit you've chosen.

To start, you'll need to fill out an IRS form and pay the associated fees. There are two main ways to apply for the 501(c)(3) tax exemption:

  • IRS Form 1023: You’ll have to answer detailed questions about your nonprofit in this roughly 18-page form. You may need to ask a legal or financial consultant to help you. There’s a $600 fee to submit the 1023.
  • IRS Form 1023-EZ: This is the easy (“EZ”) version of the 1023 created to streamline applications for small nonprofits. Generally, you need gross revenue under $50,000 and total assets under $250,000 to qualify for the 1023-EZ. It’s three pages of fairly simple questions and checkboxes. You’ll include a $275 fee with your application. Before you start, be sure to review the instructions to ensure you're eligible. Once finished, this form must be submitted electronically via Pay.gov.
  • Pay any filing fees: There are fees associated with filing for tax-exempt status. Check out the IRS appendix for more information.

It can take anywhere from six weeks to six months to get approved. In the meantime, if you’re accepting donations and promoting your cause, make sure you’re complying with federal and state laws, especially rules about solicitation. Most states recognize your federal tax-exempt status, but you’ll need to double-check. See if you have to apply at the state level or pay a state charitable registration fee (usually under $50) to operate.

Preserving your exempt nonprofit status

After all this time and effort, you don’t want to lose your tax-exempt status to a simple mistake.

Protect your status by keeping detailed records of your business activities, especially your finances. It’s a good idea to create a corporate binder with copies of your official documents, reports, licenses, and meeting minutes.

Here are some other quick tips:

  • Watch videos and find guidance on Stay Exempt, the IRS.gov site created specifically for tax-exempt organizations.
  • Review Nolo’s guide to protecting your tax-exempt status.
  • Read the IRS Compliance Guide for 501(c)(3) public charities.

8. Determine how you will raise funds 💭

In order to get off the ground, you’ll need to cover nonprofit startup costs like incorporation fees, 501(c)(3) fees, office space, employees' wages, and marketing.

Most nonprofits rely on a combination of small business loans, nonprofit grants, fiscal sponsorships, fundraisers, and donations to get the job done. Start by identifying funding sources. New nonprofit founders should take advantage of the community connections and resources they already have. Build good relationships with local businesses, schools, other nonprofits, and municipal offices and agencies.

You can also study other organizations in your specific nonprofit sector (youth programs, homelessness, voter education, cancer patient support, etc.) to see how they approach fundraising. You’ll be able to make a more accurate startup budget and better predict costs. Once you’ve identified potential sources of funding, you can create (and execute) a more detailed fundraising plan.

Don’t let a $0 budget stop you from making your vision a reality. Learn how to start a nonprofit with no money → 

9. Create a strategic fundraising plan 💸

A strategic fundraising plan will help ensure the survival of your startup nonprofit. Your strategic plan will create objectives for the next year, five years, and even 10 years down the road, ensuring all goals tie back to your mission and values.

To help accomplish your goals, you need the right tools. Be sure to consider these steps within your strategy session:

  • Open a bank account: You’ll need a dedicated bank account to track tax-deductible donations and operational expenses. While different banks have different requirements, most require your articles of incorporation and your EIN number.
  • Create a website: A website helps define who you are, what you do, and how you accomplish your mission. It also provides new donors and volunteers with the necessary forms and contact information to learn more and contribute to your organization.
  • Integrate with a fundraising platform: Charitable solicitation is the backbone of all nonprofits. You’ll need a way to collect donations, create fundraising events, and engage with your amazing supporters. Givebutter is a free and easy-to-use fundraising platform for nonprofits that makes managing every part of your strategy easy. Tap into tons of unique and powerful fundraising features from one convenient dashboard and collect various payment methods. And unlike other platforms, Givebutter lets donors cover your payment processing fees, so you can keep 100% of every donation. 

We also suggest reviewing the fundraising information and tips provided by the National Council of Nonprofits. Also, see if your state has a nonprofit association. They provide helpful workshops, meet-ups, and tools.

10. Start marketing your organization 📣

Once your organization is established, and you officially receive your tax-exempt status, the work doesn't stop. Now, you must market your organization, attract new donors, and get potential volunteers excited about your mission.

To help provide the foundation for your nonprofit marketing strategy, consider starting with the following: 

  • Launch a regular newsletter: Set an attainable goal to publish a monthly newsletter about the work within your organization. Inform your audience about upcoming events, how donations are being used, and any local or national news related to your mission.
  • Build a social media presence: As a startup, you don't need to establish a presence on every single social media channel. Instead, research to find out where your audience hangs out online and stick to a consistent posting schedule.
  • Plan your first event: Consider launching an in-person, virtual, or hybrid event to attract new donors. Invite supporters through SMS and email, sending reminders through your marketing automation platform.

11. Turn all of this research into a business plan 📌

A business plan is a living document that walks through your current (or prospective) nonprofit. In practice, it’s a snapshot of your organization for prospective lenders, donors, banks, and foundations. You’ve already done most of the work for this in the previous steps. Now you just need to write it down! 

Here are seven essential sections you should include:

  • Executive summary: A short, general overview of your business plan, mission, and vision. It’s helpful to craft your mission statement and vision statement first.
  • Programs, services, and impact: Describes the opportunity at hand and how your programs, services, and initiatives will make a positive change.
  • Industry analysis: Identifies who your nonprofit serves, along with target donors and competitors. Draw on your needs analysis and SWOT analysis.
  • Marketing plan: Outlines your strategy for advertising, promotion, and outreach.
  • Operations plan: Covers the short-term and long-term actions (people, materials, and activities) that will help you meet your nonprofit’s goals.
  • Management team: Describes the experience and qualifications of your leadership team. Later, add an “Organizational structure” section with a detailed organizational chart.
  • Financial plan: Includes useful financial projections. Describe how you’ll distribute money, handle market changes, raise funds, and cover costs.

Need more help? Check out this free nonprofit business plan template to get started.

Givebutter can help turn your passion into progress

Now that you've learned the basics of how to start a nonprofit, the process may seem overwhelming or time-consuming. Don't worry, no one expects you to be a legal expert overnight. Hopefully, this guide will set you up for success. 

You can always request legal advice or outsource some of the hard work—like your state registration or 501(c)(3) application—to an online service like LegalZoom or BizFilings. It may also be helpful to consult with a tax professional or certified public accountant.

With 160+ free fundraising tools at your fingertips, a built-in CRM system, and marketing automation features, Givebutter is the all-in-one platform that can help your organization get up and running. With the logistics taken care of, you can focus on connecting with individuals and building support for your amazing cause.

Ready to launch your nonprofit with Givebutter? Create your free account to get started.

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