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How to Start a Nonprofit in 9 Steps

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Published May 1, 2023 Reading Time: 11 minutes

It’s highly likely you landed on this page because you’re an ambitious leader looking to create meaningful change in your community. First of all, thank you for being a changemaker in this world. Secondly, we’re here to make it easier with a step-by-step guide to starting a nonprofit foundation.

We’re honored to guide you as you prepare to serve your community in new and creative ways. Below, you’ll find insights from our experience partnering with thousands of nonprofits who’ve collectively raised over $5 billion with our comprehensive fundraising suite.

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Our goal is simple. We help nonprofits raise more to do more. Each of the nonprofits we partner with started right where you are now, and we can’t wait to help you kick off your incredible journey.

Keep reading to get answers to the most common FAQs, such as:

  • How do you start a nonprofit with little money?
  • What are the different types of nonprofit organizations?
  • What is the best way to start a nonprofit?
  • What is the best nonprofit software to use?
  • And many more!

Step 1: Research Your Cause Category

The first step to start a nonprofit is to know who, what, or where you’ll serve. Begin by understanding which cause category you’ll join within the larger social sector.

What are the different types of nonprofits?

Charitable organizations fall into many categories. To understand the types of nonprofits, you can use the major groups identified through the National Taxonomy of Exempt Entities (NTEE) Classification System.1 We’ve listed them here for easy access:

  • Arts, culture, and humanities: A
  • Education: B
  • Environment and animals: C, D
  • Health: E, F, G, H
  • Human services: I, J, K, L, M, N, O, P
  • International, foreign affairs: Q
  • Public, societal benefit: R, S, T, U, V, W
  • Religion-related: X
  • Mutual/membership benefit: Y
  • Unknown, unclassified: Z

How can I find my NTEE code?

The National Center for Charitable Statistics developed the NTEE Classification System as a keyword-searching criterion for nonprofits. You can visit this comprehensive list of all NTEE codes to identify the right fit for your nonprofit’s work and mission.

Understanding where your nonprofit will fall in the system will help you get more targeted in your category research. You can join category-specific nonprofit associations to network and partner with other organizations you might want to engage with to be a fiscal sponsor or mentor. In addition, you’ll need to know your NTEE code to complete appropriate Internal Revenue Service (IRS) forms, such as IRS Form 990.

Do I need to complete a needs Assessment for my nonprofit corporation?

The formula for a successful nonprofit is an inspired idea and a need for the help it provides. Before continuing in the following steps, determine how your nonprofit will serve a particular purpose and niche within the cause category you enter.

A needs assessment will help clarify who your beneficiaries are and how you can support this specific demographic or population. You’ll see gaps in nonprofit work today where your organization can enter to be the difference maker. That will also help you create a competitive edge as you look to gain buy-in.

How can I learn from other nonprofits in my category?

Like any other business, there’s value in learning from those in your cause category. Look at other nonprofits succeeding in your space to identify a list of inspirational organizations. It’s also beneficial to create a network of other new nonprofits to connect with as you all get started together.

Explore Successful Nonprofit Stories<br />

Step 2: Incorporate Your Nonprofit Based on Your State

The second step to start a nonprofit is to know your state’s process. This will determine your next steps. It’ll help you prepare and understand better where all your documents need to go and when to deliver them. 

Where do I find my state’s incorporation requirements?

Google is your best resource for finding your state’s governing body for nonprofits. While we can’t list every state’s requirements, here’s an example of what you’d uncover if you started a nonprofit in California.

The California Association of Nonprofits guides those looking to start a nonprofit in California through state-specific steps, including2:

  • Filing a Statement of Information with the California Secretary of State
  • Applying for California state tax exemption with the California Franchise Tax Board

What is usually required to incorporate a nonprofit in my state?

While your state will provide specific steps to incorporate your nonprofit, here are a few standard requirements to expect in any location:

  • File for an Employer Identification Number (EIN)
  • Complete registration forms 
  • Submit your articles of incorporation
  • Develop nonprofit bylaws and conflict-of-interest policies
  • Complete federal tax exemptions with the IRS
  • Establish your street and mailing address

Creating a checklist of the appropriate paperwork and steps you’ll need to take is helpful. From there, build a more realistic timeline to being a fully operating and legal nonprofit organization.

Step 3: Apply for a 501(c)(3) Tax-Exempt Status

The third step to start a nonprofit is to file as a 501(c)(3). A 501(c)(3) organization is a corporation, trust, unincorporated association, or another type of organization exempt from federal income tax. Section 501(c)(3) of Title 26 of the United States Code is the foundation of this legislation.

How do I apply as a 501(c)(3)?

You’ll need to apply with the IRS to become a 501(c)(3) status tax-exempt organization through Form 1023-EZ. The only requirement is that the IRS considers your nonprofit charitable. In addition, the IRS charges a filing fee for federal tax-exempt status.3 Here are the categories you’ll need to fall into, corresponding to your NTEE code:

  • Religious
  • Charitable
  • Scientific
  • Testing for public safety
  • Literary
  • Educational
  • Fostering national or international amateur sports
  • Prevention of cruelty to animals and children

Step 4: Develop Your Unique Nonprofit Identity

The fourth step to start a nonprofit is to tell the world now that you know how you serve a need in your community and larger cause sector. That starts with defining your nonprofit’s brand and determining how you’ll introduce your new organization to others. 

How do I tell my nonprofit’s story?

Think of nonprofit founders in the same way as entrepreneurs, with a story behind how their organization came to be. 

Imagine yourself on a show like “Shark Tank,” where for-profit startups with fresh ideas enter a room of business investors to present their pitch.4 The business owners develop creative and engaging ways to tell their story and showcase why their idea is worth supporting. 

People want to hear your nonprofit startup story so they can relate to your mission. The story you tell not only matters now when you’re starting but will carry through to every fundraising event, donor interaction, and campaign you run as a consistent drumbeat that calls people to take action. 

Donor relationships sit at the core of sustainable charitable solicitations, and storytelling is the primary catalyst.

What do I need to build my nonprofit’s identity?

Get started with the basics of your nonprofit brand. Determine your nonprofit name, mission statement, purpose, and founding story. Consider how these elements come together to tell your supporters and future board members exactly what you do and whom you serve.

15 Vision Statements to Inspire You

This step can stretch out for a while if you try to make it perfect. While you should be thoughtful about it, we suggest starting with a simple look and feel to get the ball rolling. You can always make changes as you learn how your supporters interact with it. 

If you want to test the waters as you workshop your ideas, consider creating a nonprofit overview on one page with your name, mission statement, and founding story. Share that with a close group of friends or colleagues to get their honest feedback.

How do I stand out with visuals?

Your nonprofit’s identity isn’t complete without visuals. Here are a few considerations to get you thinking about achieving a consistent look and feel across your website and marketing materials:

  • Core brand colors
  • Designated fonts
  • 3 to 5 engaging images
  • Logos

If you want to take your visual identity up a notch, check out this visual design advice from one of Classy’s designers. 

Eventually, your identity and story will become the narrative you weave into nonprofit annual reports to record your growth to supporters, partners, and board members.

Step 5: Draft Your Nonprofit Business Plan

The fifth step to start a nonprofit is to write out your first nonprofit business plan, describing how you intend to achieve your mission in detail. This exercise is a great way to organize your many ideas into a brief outline of action.

What goes into a nonprofit business plan?

Get creative about the format you’d like to use for your business plan. Here’s a list of critical components to get you started:

  • Short and long-term goals
  • Specific milestones and a timeline to achieve them
  • Descriptions of beneficiaries, partners, and other stakeholders
  • Financing models you plan to use
  • Strategies you’ll use to secure funding
  • Products, programs, and services you’ll deliver
  • Details of your nonprofit’s position in the social sector
  • Methods you’ll use to measure success

Who will engage with my business plan?

Your business plan benefits you by putting your thoughts and ideas on paper. It also serves as a valuable asset to some key audiences as you start building your brand, including:

  • Donors: To effectively fundraise, you’ll want to map each campaign to your business plan and use language that excites people to support you. Think about the people most likely to donate to your cause and what they’ll want to know about how their contributions fuel your mission.
  • Partners: If you plan on working with other nonprofits, corporate sponsors, or communities, consider what information they’d want to know before committing to the partnership. 
  • Board of directors and employees: As you build out your team, you’ll want to consider the value proposition of working for you and your nonprofit. How will your team members play a part in your organization’s success, and what will get your ideal board members to agree to join the journey?

Your 6-Step Guide to Writing a Nonprofit Business Plan

Step 6: Build Your Nonprofit Board and Team

The sixth step to start a nonprofit is to plan how you’ll attract individuals to work with you—even if you start your nonprofit alone, you’ll eventually need support.

Can I start a nonprofit by myself?

Of course, you can choose to operate your nonprofit alone. The trajectory of your nonprofit is entirely up to you. Still, recruiting board members and staff can decrease the time to impact significantly. You can decide whom you’d like to bring into your organization based on your fundraising goals for the first few years of operation.

Who should be on my nonprofit’s board?

Your nonprofit’s board supports your organization’s vision, planning, oversight, and execution. When you decide whom to bring in, consider who can fill in the gaps in your expertise. The following list of questions will be helpful in your decision-making: 

  • Who has the experience or expertise in the specific areas I need to bring my nonprofit’s business plan to life?
  • Who has leadership experience that can guide me as I expand the board and internal teams?
  • Who is committed to my cause and passionate about my work?

How many board members should my nonprofit have?

A good rule of thumb is to select an uneven number of board members to avoid tied votes. Start by choosing at least five. You want to know that there are enough members to make sound decisions but not so many that decisions get held up.

How do I build a team of employees?

Think about where you’ll bring in others to support you. Here’s a list of functions you might want to prioritize hiring first:

  • Development and fundraising
  • Database ownership
  • Marketing and design 
  • Direct service 
  • Finance 
  • Information technology 

When should I lean on volunteers?

Volunteers will always add value to your nonprofit, but you can decide where you need support most. You might want to build out a network of volunteers to help you launch your first events or gain marketing support before you’re ready to hire additional team members.

Reach out to people in your network and community first, and encourage them to recruit passionate supporters who can help spread the word and fuel your growth. Knowing exactly what you’ll need volunteers for and promoting that specific role description regularly can help you find a core group of loyal individuals to rely on.

Step 7: Build a Marketing Plan to Acquire Your First Donors

The seventh step to start a nonprofit is to build a marketing strategy to fuel donor acquisition. 

How do I target the right donors?

Based on your business plan, choose your target supporters as you get started and who will most likely support your nonprofit in its first year. Set specific goals around how many supporters you want to attract in your first three months, six months, and year of operation.

Developing a basic donor persona that you can think about as you write promotional copy or develop messaging could also be helpful.

Which marketing channels should I use?

It’s time to get creative. Determine the first marketing channels you’ll focus on to launch your nonprofit to the world. Here’s a list of beginning places and associated resources to help you:

Where can I get ideas for marketing my nonprofit?

Inspiration is everywhere. Log on to any social media platform, and you can see how other nonprofits post content to reach desired audiences. You can also visit the nonprofits’ websites to see what messages appear at the top of each page, as well as the visuals that pull in readers to take action. 

10 Social Media Post Examples

Step 8: Choose Your Fundraising Solution

The eighth step to start a nonprofit is to rely on a fundraising solution. The digital landscape continues evolving before our eyes, and an innovative way to reach donors where they are with an easy-to-use donation process is critical.

How do I find the flexibility I need to focus where it matters most?

You can spend more time ideating and creating new fundraising strategies when your fundraising solution understands the needs of nonprofits. Look for a solution that can offer you the flexibility you need to establish workflows and customize the way you reach your donors with each campaign you run. It makes a difference when campaigns, from peer-to-peer to crowdfunding, feel consistent to your supporters. 

Flexibility also benefits your donors when you can give them options on how to pay, how to engage, and which device they want to use, knowing each experience will be one that brings them back.

How do I deliver tailored giving experiences to my ideal donors?

All giving experiences can’t look the same. When evaluating your suite of direct giving tools, look at ways to build donor journeys for each of the segments you hope to engage. 

For example, will you rely on a group of monthly or recurring donors to build a loyal following? Maybe you’re looking to start strong with events that build cause awareness with new donors who prefer intimate engagement to get to know you. Or maybe you have a list of major donors that will help you in your first few years. Either way, you want to be able to offer each group the right experience at the right time to drive the right action for your organization.

How do I build online relationships?

With social media and app-based experiences at the forefront and the introduction of artificial intelligence like ChatGPT and Google Bard, it’s crucial to have tools that feel modern and make it easy to engage younger donors without overcomplicating it. 

Look for fundraising software that can help you create connections and fundraise beyond your website to build authentic relationships that convert supporters into loyal donors.

Step 9: Collect Donations for Your Nonprofit

The ninth step to start a nonprofit is to secure donations. Identify sources of income that will get you to your goals and desired outcomes.

Can I start a nonprofit with no money?

You can lean on fundraising to build revenue for your nonprofit, but it’s a good idea to have a foundational bank account to pull from in the initial stages. In time, you’ll be able to raise money in increments to invest back into logistics, leading to more annual revenue to achieve your mission.

How do I set realistic fundraising goals?

Start by looking at your annual fundraising goals outlined in your business plan. Determine what’s possible by evaluating what you’ll need to raise to offset any costs you accrue while delivering on your mission. From there, look at how you can work backward to identify what you’ll need to raise each quarter and what that requires in monthly donations. 

To remain realistic about your fundraising goals, give yourself a simple starting point in your first few months. Look at the first campaign you run or the donation page you put up as an opportunity to set benchmarks for what you can predict you’ll raise in the future. 

Start by testing the waters and gaining a more predictable revenue path with each additional campaign you host.

Which type of fundraising campaign should I launch first?

We recommend starting with your main donation page on your website as a year-round campaign that can bring in a steady stream of gifts. 

New public charities can also be successful by adding the following campaign types:

  • Crowdfunding campaign pages: Raise small amounts of money from many people to fund a specific project, collect general donations, or drive support to reach your first fundraising goals
  • Peer-to-peer fundraising campaigns: Let supporters fundraise on your new nonprofit’s behalf through their personal fundraising pages to attract new donors and raise more than they might be able to give
  • Fundraising events: Invite your community to a live or online event to learn about your new nonprofit and build relationships with people who can become your supporters for future campaigns

Stay Up to Date With Effective Fundraising

Free Resources for Starting a Nonprofit

Fundraising Inspiration

Research on Today’s Donor Behavior and Fundraising Trends

  • The State of Modern Philanthropy unveils fundraising trends across over 12 million donations, 5,000 organizations, and 54,000 active campaigns
  • Why America Gives surveys donors to share what motivates them to give to organizations and how they become aware and connected to a nonprofit
  • The Nonprofit’s Guide to Engaging Gen Z puts everything today’s youngest donors want to see from their fundraising experience in one place
  • Hybrid Events Toolkit is your go-to for hosting an event that pulls in online and in-person supporters for a connecting event centered in relationship building 

Article Sources 

  1. “National Taxonomy of Exempt Entities (NTEE) Codes,” National Center for Charitable Statistics, accessed April 18, 2023, https://nccs.urban.org/project/national-taxonomy-exempt-entities-ntee-codes.
  2. “How to Start a California Nonprofit,” California Association of Nonprofits, accessed April 18, 2023, https://calnonprofits.org/resources/starting-a-california-nonprofit. 
  3. “Form 1023 and 1023-EZ: Amount of User Fee,” Internal Revenue Service, accessed April 18, 2023, https://www.irs.gov/charities-non-profits/form-1023-and-1023-ez-amount-of-user-fee. 
  4. “Shark Tank,” ABC, accessed April 18, 2023, https://abc.com/shows/shark-tank. 
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