We receive many inquiries every year about how to take a great idea and turn it into a functioning nonprofit organization. Starting a nonprofit takes the time,
commitment, research and dedication of a group of individuals passionate about meeting a specific need in the community.
We recommend Humboldt Area Foundation’s nonprofit resource page. Check it out HERE!
What is A Nonprofit?
A non-profit organization is an entity that operates for the benefit of a particular cause or community, rather than for the purpose of generating profit for its owners or shareholders. Non-profit organizations may include charities, educational institutions, and advocacy groups, among others. These organizations rely on donations and grants to support their activities and are often exempt from certain taxes.
What Makes an Organization a Nonprofit?
-The organization exists for some benefit to the public.
– No person owns shares of the corporation or interests in its property,
nonprofits are “owned” by the community.
– The property and any income of the corporation are not distributed to any
“owners”, but instead are recycled into the corporation’s public benefit
mission and activities.
Revenue Sources for Nonprofits:
-Revenue can be generated from a variety of sources: donations,
fundraisers, earned revenue from services and products, grants or
borrowed funds. It’s important to consider a healthy mix of revenue sources when you’re planning to start a new nonprofit.
-Nonprofits in California are regulated by the Attorney General’s office and
the Internal Revenue Services.
Reasons Not to Start a Nonprofit:
-You have a limited time special project that will benefit your community
(this might be a good time to add a fiscal sponsor).
-You would like to help someone in need (a sick friend or relative). Another
options could be to work with a local bank to start an account that people
can donate to.
-You think a lot of grant money will be available (only about 10% of grant
proposals are ever funded. Most successful nonprofits have diverse
sources of revenue.
-You have a service or product you want to provide below cost or donate,
but want a tax deduction. Instead, consider volunteering or donating to a
tax-exempt organization.
-You feel your current work is not meaningful. Consider working for an
existing nonprofit or for-profit with a sense of your mission.
-You have important knowledge and perspectives to share. Consider writing
a book, public speaking or joining a nonprofit board instead.
-You want to do things your own way and not be fettered by rules and
bureaucratic procedures. Nonprofits are accountable to donors, boards of
directors, the IRS, Attorney General and the community at large. There are
rules and policies that need to be followed to provide services in
nonprofits.
Things to Consider Before Starting a Nonprofit:
– Is there an organization already doing similar work in the community?
– What unmet need will be addressed through your work?
– How do you know this is the right way to go about meeting that need?
– See the following pages regarding questions to consider before starting a
nonprofit.
Steps to Start a Nonprofit:
- Determine your mission and vision: Before you start a nonprofit, you need to have a clear understanding of the problem you want to solve or the issue you want to address. This means identifying the social or community need that you want to fulfill, and coming up with a mission statement that articulates your purpose. The mission statement should be concise and easy to understand, and it should provide a clear direction for your organization.
You also need to develop a vision statement, which describes your long-term goals and what you hope to achieve. A good vision statement should be inspiring and ambitious, and it should capture the essence of what your organization is all about.
- Develop a business plan: A business plan is essential to the success of your nonprofit organization. It is a roadmap that outlines your goals, strategies, and tactics for achieving those goals, and it provides a framework for measuring your progress.
Your business plan should include the following:
- Executive summary: This section should provide an overview of your organization and its goals.
- Mission statement: This should describe your organization’s purpose and what it hopes to achieve.
- Vision statement: This should describe your long-term goals and what you hope to accomplish.
- Market analysis: This should identify the need for your organization’s services and potential competition in your area.
- Program design: This should outline your organization’s programs and services, including how they will be delivered and who they will serve.
- Fundraising plan: This should describe how you plan to raise money for your organization, including individual donations, grants, and corporate partnerships.
- Marketing plan: This should describe how you plan to promote your organization and its services.
- Organizational structure: This should describe the roles and responsibilities of your staff and board of directors.
- Choose a name and register your nonprofit: Choosing a name for your nonprofit is an important decision, as it will be the public face of your organization. Your name should be unique, memorable, and easy to spell. You can check the availability of your chosen name with the California Secretary of State’s office.
Once you’ve chosen a name, you’ll need to register your organization as a nonprofit corporation with the state of California. This involves filing articles of incorporation and paying a fee. You can find more information about this process on the California Secretary of State’s website.
- Apply for tax-exempt status: To be recognized as a tax-exempt organization, you need to apply for tax-exempt status with the IRS. This involves filling out Form 1023 or Form 1023-EZ, depending on the size and complexity of your organization. You’ll need to provide detailed information about your organization’s structure, programs, and finances.
Once your application has been approved, you’ll receive a determination letter from the IRS. This letter will confirm your tax-exempt status and outline any conditions or restrictions that apply.
- Create a board of directors: Your board of directors will be responsible for overseeing the management and operations of your nonprofit organization. They should be committed to your mission and have the skills and experience to help your organization succeed.
You should look for individuals who have expertise in areas such as finance, fundraising, marketing, and governance. You’ll also need to develop a set of bylaws that outlines the roles and responsibilities of your board and how decisions will be made.
- File the necessary paperwork: Once you have your board of directors in place, you’ll need to file the necessary paperwork with the state of California. This includes your articles of incorporation, bylaws, and annual reports. You’ll also need to obtain a tax identification number from the IRS.
- Obtain any necessary licenses and permits: Depending on the nature