A Helpful Handbook For Forming a Nonprofit Start-Up (Business Formation Tips)

Starting a nonprofit organization is a rewarding but challenging experience. Starting a nonprofit takes a lot of preparation, commitment, and hard work. To ease the startup process, it is wise to secure legal help. A legal advocate will help you with business formation, startup operations, and contracts.

Before you commit to forming a nonprofit startup and securing legal help, it is beneficial to obtain a good understanding of the nonprofit formation process. Curious to know what goes into starting a nonprofit organization? Let’s take a look at the best business tips we have for nonprofit startups. 

Find Your Why

Nonprofits are tax-exempt organizations whose primary goal must be to serve the public interest, not make money. Because of the tax exemptions and philanthropic nature of nonprofits, they are a popular route for people to pursue. 

More than 1.5 million nonprofits are already registered in the United States alone. This number suggests that there may be organizations already in place that accomplish what you are hoping to do. To make sure that there is an innate need for your nonprofit startup, reference this checklist:

  1. Think about the intended demographic you want to serve
  2. Find data about your demographic that demonstrates a need or missing service
  3. Identify other organizations that serve the same or similar needs
  4. Conclude if starting a nonprofit is the best way to serve the desired demographic

If you choose to go forward with starting a nonprofit, be clear about your purpose. Write down a clear and detailed intention to serve a demographic in need. It is smart to have a mission statement prepared before continuing on in the process.

Your mission statement should be simple and to the point. It should inform others about what your organization uniquely does. A great mission statement helps you build a solid foundation on which you can create a larger business plan. 

Write a Business Plan

Once you’ve fine-tuned your mission statement and purpose, the next step is to write a nonprofit business plan. A well-thought-out business plan is essential to help you see any weaknesses in your plan and to help you recognize your next steps. A detailed plan will help you estimate income, costs, and staffing needs. 

In order to plan for the next 3 to 5 years of your organization, it is wise to do an immense amount of market research in addition to the research you’ve already performed. Depending on what needs your organization serves, you may need to research households, schools, or employment trends in your area.

A business plan is one of the best areas a legal advocate can help you with. Within your nonprofit business plan, you should create plans for marketing, finances, and operations. 

Marketing Plan

A marketing plan will take a detailed look at the trends in your nonprofit’s demographic. Use this plan to dictate how your organization will get the word out about its offerings. Decide what social media outlets and traditional resources you will use. Will you handle marketing in-house or outsource it to a local marketing agency? 

Financial Plan

A financial plan will outline the financial status of your organization and how it plans to keep finances in check. Write up a detailed budget and include cash flow statements, income statements, and balance sheets. 

Note where you can find potential revenue streams and the avenues you will pursue to find funding. Detail how much money you need to start and to operate.

Operational Plan

An operational plan will help you find a structure for your day-to-day operations. Figure out what needs to be accomplished over the course of each day, week, month, and year. Further, dictate which roles will accomplish which tasks. 

Complete Filing Paperwork

After you’ve created a detailed business plan and you feel ready to get your organization off the ground, you will need to file the correct paperwork. You need to establish yourself as a nonprofit organization with your state. This portion requires paying a filing fee. 

The steps to establishing your organization as a nonprofit are:

  • Choose a name for your nonprofit
  • Appoint a board and staff
  • Determine legal structure
  • File incorporation paperwork

Apply for Nonprofit Status

Once you’ve established your organization with the state you operate in, you can apply for nonprofit status. Securing nonprofit status is often a complicated process, so it is best to get advice from your legal advocate.

You will register your nonprofit as a 501(c)(3) organization with the IRS by filling out Form 1023 or 1023EZ. All organizations with this exemption are prohibited from functioning for the benefit of private interests. No amount of earnings obtained from the organization can be used to benefit a private shareholder. 

Secure Startup Funding

Finally, to get your organization officially off the ground, you will need to secure startup funding. Fundraising is essential for all nonprofits, and it can be one of the most tedious and challenging aspects of maintaining a nonprofit organization. 

It is vital to secure strong funding sources from the start so that your organization is more likely to sustain itself through the years. Focus on realistic, tangible ways to bring in money to support your efforts and staff members. 

The most popular way to fund nonprofits is through applying for grants. Grants are often awarded to nonprofit organizations that have a distinct, unique purpose. Certain grants may be reserved for specific populations or types of nonprofits.

Other great ways to secure funding are:

  • Crowdfunding
  • Community fundraising events
  • Peer-to-peer fundraising
  • Charity auctions

Make Your Impact 

If you have the patience and dedication to start a nonprofit organization, it is ultimately very rewarding. There is no greater prize than knowing you are making a lasting impact on a community in need.

If you have any questions about the nonprofit startup process or want a legal advocate by your side throughout it all, contact MSB Employment Justice today. We provide legal support for all kinds of small businesses and nonprofit organizations. 

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Bree Johnson

After more than a decade in the legal industry and BigLaw firms, attorney and activist Bree Johnson saw an opportunity to do more for employees who are mistreated in the workplace with a career move to representing employees and plaintiffs. See Full Bio

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