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How to start a nonprofit organization with no money

Follow these 10 steps for starting a nonprofit—even if you have a limited budget. You'll discover handy tips and tools for getting your nonprofit off the ground without breaking the bank.

Kylie Davis
December 28, 2023
January 25, 2022
Nerd Mr Butter

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You don’t need major funding or expensive tools to launch the nonprofit of your dreams. You simply need a mission, a plan, and a platform to amplify your message. 

In this guide, we’ll walk you step-by-step through how to start your nonprofit, including how to file for an EIN number, apply for tax-exempt status, and draft your nonprofit bylaws. Along the way, we’ll share best practices and point out free resources so you’re set up for success, even with a zero-dollar budget. 

What you need to know before you start a nonprofit

Forming a nonprofit is a meaningful way to bring people together to create change in your community. This process may also open the door to generous tax breaks, which means you can do more with each donation you receive from supporters. Sounds like a win-win situation, right? 

The challenge is that starting a nonprofit in the first place isn’t easy, and keeping one running is even harder. But don’t let this news scare you! You can often make a bigger and better difference in the world as a nonprofit organization. 

Just keep in mind that the whole process can take anywhere from a few months to a couple of years—don’t rush it. You just need the right guidance and tools to make the process easier. 

How to start a nonprofit for free (or close to free!) in 10 steps

How much does it cost to start a nonprofit? Turns out you can get a lot done without a big budget, although some costs are unavoidable. The key to success—and avoiding the dreaded paperwork purgatory—is to follow clear steps. Most tasks are sequential, so you can’t move on until you’ve completed the previous step.

Let’s explore how to open a nonprofit in 10 steps and the free or low-cost tools and tips to help you get there.

Step 1. Assess the need 🤔

Across the United States, 1.8 million nonprofits are out there making a difference in their communities—and competing for funding dollars and volunteers. Before you start applying for tax-exempt status 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. Here are a couple of exercises to get started:

  • Create a positioning statement 🎯 Make a list of other organizations with a similar mission. What makes you different? Use this to draft a positioning statement to explain why your organization is needed.
  • Do 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. 

Being objective when you’re passionate about a new idea can be challenging. We recommend exploring different types of nonprofits, as well as asking trusted individuals or leaders of non-competing organizations to volunteer their time and insights for your needs assessment. You’ll hear different perspectives and have more insights to draw from overall.

Step 2. Identify your “why” 💓

Now that you’ve considered the need, 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. Draft a mission statement that explains your organization’s purpose for existing and the broad strokes of how you’ll serve that purpose. Once you’re clear on your mission, you’ll need to brainstorm other key qualifiers for your organization, including your name and values.

Step 3. Decide on your organizational structure 👯

Nonprofits aren’t like for-profit businesses—as a charitable entity, 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.

For your nonprofit board, you’ll want to assemble a passionate team of people who can pool their knowledge and draw on different skills to build a long-lasting organization. Before you bring on a full team, your initial board members 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.

Fiscal sponsorship is an alternative route that smaller organizations can opt to take in the beginning stages of becoming a nonprofit. This allows you 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 and legal compliance resources. It can be a quicker route to making your mission a reality. 

🤑 Money-saving tip: As a nonprofit startup, you may not have the budget to hire full-time staff, but you still need all the help you can get. What can you do? Rely on volunteers! Not only for your board but also to help with programs, fundraising, and marketing, potential volunteers are everywhere. Recruit people through email newsletters, attend college events, and ask existing supporters to help spread the word. 

Step 4. 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 operate. In times of conflict, confusion, or change, nonprofit bylaws are a guiding light for your deserving cause.

Gather your board and draft the first version of your bylaws. Be sure to cover the following areas:

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

Typically required for 501(c)(3) organizations, bylaw policies can vary from state to state, so be sure to check with the attorney general or Secretary of State within your home state. 

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 (IRS) and your state.

🤑 Money-saving tip: Don't think you can afford an attorney? Think again. Many states have a mandatory pro bono requirement under their state bar association. Reach out to firms in your community to see if an attorney can offer legal advice on a pro bono basis thanks to state requirements—ideally one who’s well-versed in federal and state tax laws for charitable organizations! 

Step 5. Register with your state 🙋

Many nonprofit organizations are required to register at the state level. Even if this isn’t required, there can be 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: Come up with a potential name, then check it isn’t taken by searching your state agency’s business name directory. Make sure you can also secure a matching domain name and social media handles.
  • Prepare your articles of incorporation: Add your business name, address, purpose, expected duration, and board member details. We recommend having a legal consultant review these documents.
  • File the articles with your state office and pay fees: The Secretary of State’s office typically processes applications. One cost you can’t avoid is 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. 

Step 6. Get an Employer Identification Number 💯

An Employer Identification Number (EIN) is like a Social Security number for your charitable organization. You’ll use it to complete tax forms and hire staff later on. 

Having an EIN 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

Great news: It’s free to apply for an EIN online! 

Step 7. Apply for the right tax exemption 🤑

A big money-saving step for cash-strapped changemakers is filing for tax-exempt status with the IRS. Not only does 501(c)(3) status spare your organization from the financial burden of paying state, federal, and even property taxes, but it ensures all donations are tax-deductible for supporters.

To qualify, you’ll need to meet the Section 501 exemption requirements, fill out an IRS form, and pay the associated fees. There are two main ways to apply:

  • IRS Form 1023: You’ll have to answer detailed questions about your nonprofit in IRS Form 1023 and include the right organizing document (such as the articles of incorporation you wrote in step 5). You may need to ask a legal or financial consultant to help you.
  • 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. It’s three pages of fairly simple questions and checkboxes. Unfortunately, you will have to pay a filing fee of $275. 

State tax exemption laws vary from state to state, so be sure to check your state's compliance guide to see if you have to apply at the state level or pay another registration fee (usually under $50).

It can take anywhere from six weeks to six months to get approved. In the meantime, make sure you’re complying with federal and state laws—especially rules about solicitation. 

Once you’re all set, you’ll need a dedicated bank account to track tax-deductible donations and operational expenses. Be sure to keep your tax-exempt status protected by saving detailed records of your business activities and finances. 

Step 8. Create a strategic fundraising plan 💸

Most nonprofits rely on a combination of funding sources like small business loans, grants, fiscal sponsorships, fundraisers, and individual donations, and creating a strategic fundraising plan will help to determine the best course of action for your organization. 

Creating a fundraising plan involves gathering stakeholders, setting goals, and creating objectives for the future that align with your mission and values. It also involved choosing which strategies and tools you’ll use to reach your goals. 

🤑 Money-saving tip: It’s unavoidable—you will need to cover some startup costs. Take advantage of the community connections and resources you already have to save money where you can. Connect with local businesses for corporate sponsorships, reach out to community centers and libraries that may be able to waive venue rental fees, and build relationships with other nonprofits, your elected officials, and municipal agencies. 

Step 9. Start marketing your nonprofit 📣

The work doesn’t end once you receive your tax-exempt status. You’re a fully-fledged nonprofit corporation, and now you need to tell the world about your mission! 

Before you implement a marketing strategy, research your target audience to identify which channels resonate most with them. Plan your campaigns and materials around this information for the greatest impact. Some of the most popular ways to jumpstart your marketing efforts include: 

  • Launching a newsletter 📫 Take advantage of the power of free email marketing software and start a monthly newsletter. Promote events and services, share photos, and show how you’re making a difference.
  • Building your online presence ✨ Figure out which social media sites make the most sense for your nonprofit (bonus: most are free!), and start posting regularly to keep your community updated and engaged in your progress.
  • Creating a website 🖥 A single place for would-be donors and volunteers to find out about your organization and support your cause is a must. Make sure you have a reliable donation landing page that makes giving as easy as possible. 
  • Planning your first event 🎉 Consider launching an in-person, hybrid, or virtual fundraising event to introduce your new nonprofit to the world and attract new donors.

🤑 Money-saving tip: Plenty of nonprofit software doesn’t come with a hefty price tag, and many marketing platforms offer discounted or even free versions for nonprofits. 

Step 10. Put it all together in a nonprofit business plan 📌

A nonprofit business plan is a living document that provides a snapshot of your organization for prospective donors, banks, and foundations. You’ve already done most of the work for this in the previous steps—here’s where you put it all together. 

Your business plan should include these sections: 

  • Executive summary: Provide a short overview of your business plan, mission, and vision. 
  • Programs, services, and impact: Detail your goal and how the actions you take will have a positive impact. 
  • Industry analysis: Identify who your nonprofit serves, and who your target donors and competitors are. 
  • Marketing strategy: Outline your plan for advertising, promotion, and outreach.
  • Operations plan: Cover the short-term and long-term actions that will help you meet your nonprofit’s goals.
  • Management team: Describe the experience and qualifications of your leadership team. 
  • Financial plan: Include financial projections and describe how you’ll distribute money, handle market changes, raise funds, and cover costs.

Launch your nonprofit with Givebutter

With the right help and tools, it’s completely possible to start an organization that supports a good cause with almost no money at all. Use this guide to help you complete the process from start to finish, whether you have a healthy budget or are keeping costs as close to zero as possible. 

Givebutter is one free resource for nonprofits that you’ll definitely want to have in your toolbelt. An all-in-one platform, Givebutter brings together everything you need to accept donations, manage donors, run fundraising campaigns, connect with your supporters, and more. 

From marketing and engagement features for sending emails, text messages, and videos to your supporters to a free nonprofit CRM for tracking contributions, activity, and correspondence Givebutter is always free for nonprofits, so you can spend your dollars where you need them the most. 

Sign up for a free account today to see how Givebutter can help you start the nonprofit you’ve been dreaming about.

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