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How to start a nonprofit organization | Nonprofit List

Starting a nonprofit organization from scratch comes with its own set of statutes and limitations that vary from country to country. The objective of this post is to shine a light on the procedures and process to start a nonprofit organization within the United States of America. Again, the laws here differ from state to state but the general gist remains unchanged. There are even some regulations regarding the formation of groups without classifying them as an organization. These regulations can be highly technical and to recover from such errors can be time-consuming and at times an expensive ordeal. Any ideas about a possible group work should be thought in a thorough manner and also the requirements that go with such a plan. The best way to put a step forward with such an idea is to consult and take advice from the people who are already doing work in the capacity of nonprofit organizations around the country. This usually involves three major steps namely:

1. Getting Ready

2. Incorporating in a state

3. Applying for the federal tax-exempt status

Getting Ready

The process of starting a nonprofit organization can be a daunting task and preparing for it beforehand is the key to getting a headstart in the process. The most important part of starting a nonprofit organization comes way before the incorporation stage. One of the first tasks before getting formulated is drafting a “mission statement” that will summarize the work of the new organization. The board statement will include a detailed explanation of the following things:

• First Principles
• Key Duties
• Accountability
• Operations
• Internal Conflicts
• Other resources

Incorporating in a state

One of the main things before starting a new nonprofit organization involves establishing an organization under the law of the state. The organization can only apply for the tax exempt status once that has been done since the federal tax exempt status is available only for corporations and other similar entities. Furthermore, not all federally recognized tax-exempt organizations are eligible to receive contributions that the donor can deduct from their personal income tax, the special status which is recognizable under section 501(C)(3) of the federal tax code requires that organizations meet specific standards set as per the law.

The incorporation laws among the state remain mostly the same except for a few tweaks here and there which might cause a delay and possible disasters if ignored. The National Association of State Charity Officials has a listing of stat- run agencies in their database which can be accessed through their website www.nasconet.org/agencies. This is a healthy practice to follow before incorporating your own nonprofit organization. The law has also prescribed certain privileges and exemptions to nonprofit organizations which varies from state to state. The general terms and conditions for businesses and nonprofit organizations usually remain the same but some provisions work in the favor of nonprofit organizations and need to be adhered carefully like fees or exemptions if any, are best answered by the local agencies.

There is a book widely famous among people who are looking to start their own nonprofit organizations authored by Anthony Mancuso named “How to form a nonprofit organization in all 50 states”. There is also a list of programs that provides assistance to forming a nonprofit organization. This can be availed in states with a National Council of Nonprofit office, the address for which can be locally searched through a simple Google search. It is also highly recommended to avail the service of financial and legal professionals if one’s newly formed organization would be dealing with large chunks of money or contract to deliver critical services. Usually, information and referrals to such professionals can be provided by the state association of lawyers and CPA’s who have experience working with nonprofit organizations.

Applying for Federal tax-exempt status

The Internal Revenue Code(IRC) states that every organization or corporation is liable to pay taxes, apart from a few exceptions. The IRC has stated that corporations that have been formed with specified purposes can apply for tax-exempt status. One familiar exception for nonprofit organizations is the “501(c)(3) that exempts private foundations and public charities. The IRS publication 557 lists out several options and procedures for applying for federal tax exemption, the IRS publication 4220-aplying for 501(C)(3) tax-exempt status, is available for reading to the general public and is listed on IRS’ personal website.


Many people have pointed out that it is a bigger hassle to be operating a nonprofit organization than a simple business or corporation of the same size. Nonprofit organizations tend to have more stakeholders as compared to businesses and have relatively lesser tangible missions at their sights. There are many special reports that need to be filed if one is operating a nonprofit organization and also there are laws regarding fundraising and accounting that involves getting acknowledgments from government officials.

As one can see from the above-mentioned details of the article, there is a whole load of things to look out for in order to open and operate a nonprofit organization within the states.