How to Launch Your Nonprofit Organization: A Complete Guide

Establishing a nonprofit organization is a noble endeavor that holds the potential to bring about meaningful change in society. However, the process of starting a nonprofit can seem hard, with various legal and administrative steps to navigate.

To assist you in this journey, we have compiled a comprehensive guide that breaks down each crucial step of forming a nonprofit, providing you with the guidance and insights you need to lay a strong foundation for your organization’s success.

How to Launch A Nonprofit (in 10 Steps)

Here is how to launch a nonprofit organization:

1. Reserve Your Nonprofit Organization’s Name

First, choose a name for your organization that reflects its goals and enhances its brand identity. Ensure the name is not already trademarked and is unique within your industry, which is crucial for registration and tax-exempt status applications. 

After deciding on a name, verify its availability and trademark status through the Secretary of State and the U.S. Department of Commerce. Then, register your organization with both state and federal authorities. 

Remember, your nonprofit’s name is fundamental to its identity and public perception, so select one that makes a lasting impression.

2. Establish Board Members for Your Nonprofit 

The board of directors is vital for steering your organization towards sustainability. Assemble a diverse and committed board of directors who are passionate about your cause and possess a variety of skills and expertise.

 Clearly define the roles and responsibilities of each board member to promote transparency, accountability, and collaboration. It is recommended to have at least three board members to ensure a robust governance structure.

3. Acquire an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a unique identifier assigned by the Internal Revenue Service (IRS) to identify your nonprofit for tax purposes. Apply for an EIN from the IRS to fulfill various administrative and tax-related obligations such as opening bank accounts, hiring employees, and applying for tax-exempt status. 

You can request an EIN from the IRS by completing Form SS-4 online or by mail, fax, or phone. Once you have obtained your EIN, the IRS will recognize your organization as a legal entity, subjecting it to certain tax obligations. 

4. Formulate Your Nonprofit Organization’s Bylaws

Bylaws serve as the fundamental framework of rules and guidelines governing the operations of your organization. Behind every successful nonprofit, there is a clear and compelling mission.

Take the time to define your organization’s objectives, vision, and goals, outlining the impact you hope to achieve in the community. Undertake comprehensive research to gain insights into the social or community issue you seek to address.

Collaborate with your board of directors to draft the organization’s bylaws, outlining essential elements, including organizational structure and the responsibilities of board members. It is crucial to understand that the IRS mandates the inclusion of your organization’s bylaws in your tax-exempt applications. 

5. Incorporate Your Nonprofit Organization

Incorporation serves as a key step in establishing the legal foundation of your nonprofit. It offers essential legal recognition and protection, establishing your organization as a distinct entity separate from its founders or members.

To initiate incorporation, you must submit requisite documents, such as Articles of Incorporation, to the relevant state authorities. This process not only strengthens your nonprofit’s legal standing but also maintains its credibility and accountability.

Fulfilling these requirements formalizes your organization’s actions, setting a strong legal foundation for its endeavors and objectives.

6. Apply for Federal Tax Exemption

Intended to encourage nonprofits that serve welfare purposes, the IRS grants them tax-exempt status provided they meet the guidelines and requirements established. Obtaining tax-exempt status allows your organization to receive tax-deductible donations and exempts it from federal income taxes. 

To apply for tax-exempt status, you will need to submit the appropriate forms to the IRS, such as 

• Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) 

• Form 1023-EZ (Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code)

• Form 1024 (Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code)

Depending on the IRC classification of your organization, you may need to file the relevant forms to submit your application for tax-exempt status. These applications can be submitted through the IRS website through Pay.gov.

Once approved, your organization will receive a determination letter confirming its tax-exempt status. 

7. Apply for Your State Tax-exempt Status

In addition to federal tax exemption, you may also need to apply for state tax-exempt status to operate legally within your state’s jurisdiction. Each state has its requirements and procedures for obtaining tax-exempt status, so be sure to research and comply with the regulations in your state. 

Applying for state tax-exempt status will further enhance your organization’s credibility and facilitate its operations within the local community. Refer to your state’s tax department for more information regarding the exempt status application.

8. Register for Fundraising

Fundraising is essential for sustaining your nonprofit’s operations and fulfilling its mission. Before demanding donations or conducting fundraising activities, you may need to register with the appropriate state authorities.

Many states require nonprofits to register before engaging in fundraising activities to ensure clarity and accountability. Be sure to familiarize yourself with the fundraising regulations in your state and comply with any registration requirements. 

Assess your income and expenses, and identify sources of funding. Implement effective strategies to attract donors and generate revenue to support your mission.

Put together volunteers and associates who match your objective and whose contributions could significantly push your organization toward achieving its goals.

9. Charitable Solicitation Registration

Charitable solicitation registration is an essential process when it comes to fundraising where nonprofit organizations register with state authorities to legally solicit donations from the public within specific states.

Each state maintains its own set of regulations and requirements governing this process. In general, an organization must register in the jurisdiction where it is incorporated additionally, it must register in each state where it solicits contributions.

Nonprofits typically need to apply, pay a registration fee, and provide various documents such as their IRS determination letter, as well as the TIN from the Office of Tax and Revenue. This registration should be done before fundraising activities commence, with renewals required annually to maintain compliance.

10. Comply with the IRS Tax Obligations

Your nonprofit may have qualified as a tax-exempt organization. However, the IRS has established certain annual filing requirements that you must comply with to maintain your tax-exempt status. This is when Form 990 comes into play!

Form 990 is an annual information return that you can use to report your organization’s financial information, activities, and certain other data as required by the IRS every year. The IRS offers different versions of Form 990, such as 

• Form 990-N –  For organizations with gross receipts of $50,000 or less.

• Form 990-EZ – For organizations with gross receipts < $200,000 and assets < $500,000.

• Form 990 – For organizations with gross receipts of $200,000 or more (or) assets of $500,000.

• Form 990-PF – For organizations classified as Private Foundations. 

• Form 990-T  –  For organizations with unrelated business income of $1000 or more.

Ensure that you select the appropriate form and submit your organization’s 990 return punctually to uphold compliance and maintain public trust in your nonprofit’s operations. 

Additionally, it’s crucial to adhere to the tax obligations set forth by the state. Remember, each state has distinct requirements for tax reporting, so it’s essential to familiarize yourself with your state’s specific tax requirements.

One of the highlighting aspects of the 990 form is its availability for public inspection. Because of that, ensuring 990 compliance becomes more crucial not just to maintain tax-exempt status but also to ensure public integrity.

Conclusion

Starting a nonprofit organization requires careful planning, dedication, and perseverance. By following the steps outlined in this guide and seeking support from your board, volunteers, and community, you can create a successful nonprofit that makes a meaningful difference in the world.