A: Since the pandemic started, several people per week have been asking me how to start a nonprofit. Often, they want to know how fast they can secure tax-exempt status. Your generous and empathetic responses to society’s increasing needs boosts my faith in humanity.
Of course, I direct them to our short course, “Starting a Nonprofit.” At this site, you’ll find a short video, a guide, and templates.
Here are a few things to consider before you begin:
Conduct an environmental scan. Are other nonprofits already serving your mission? Starting and maintaining a nonprofit requires a great deal of infrastructure, time, and money. You may find yourself competing for grants and donations with organizations you respect. Make sure you’re filling a niche, not crowding the field.
Consider other organizational structures, such as fiscal sponsorship. Fiscal sponsors allow several community-based projects to exist under one nonprofit umbrella. This arrangement can reduce administrative costs and employer requirements. It also alleviates the bureaucratic burdens of maintaining your status with the IRS and Washington State Office of the Secretary of State.
Some people benefit from for-profit models, such as a social purpose corporation or set their sights on becoming a certified B Corporation. Some start-ups prefer this because you don’t need to create a governing board immediately.
Think long-term. Once you’ve made a business plan, fulfilled all the legal requirements, and filed as a nonprofit corporation in Washington state, you have a nonprofit. Applying for federal tax-exempt status, which is required in order for donations to be tax-deductible and to receive foundation grants, is a separate process. It may take 3-12 months to receive your determination from the IRS. If your goal is to get resources to people in need as quickly as possible, starting a nonprofit is not the fastest way to go about it.
Building relationships with organizations that are already working in that area and partnering is more efficient. Many groups, such as the mutual aid projects that have sprung up on the wake of the pandemic, simply begin working—they don’t start by establishing a nonprofit corporation.
Don’t do it alone. You’re required to have board members, but beyond the minimum requirements, you want trusted advisors around you. Someone with legal expertise and an accountant will be extremely helpful with crafting your bilaws and business plan.
Good teammates will also help you think about the life cycle of the organization apart from you. They can help you broaden the number of people who contribute to your mission and reduce burnout. Folks in Eastern Washington can connect with SCORE to connect with mentors for free! Connect with like-minded people and share strategies at our Boards in Gear webinar on February 3rd.
Bottom line, starting a nonprofit is not a good way to pay yourself. Many small organizations are completely self-funded and the majority in our state are entirely volunteer-run. Finding funding to cover staff salaries is a chronic issue in the nonprofit sector. I hope this article has helped you see that starting a nonprofit is more complicated than getting a business license. There are simpler ways to make a living.
But You Don’t Have to Take Our Word for It!
Our trusted partners have amassed a treasure trove of resources for you:
- Washington Nonprofit Handbook published by Communities Rise, formerly known as Wayfind
- 501 Commons, Starting a Nonprofit & Fiscal Sponsorship
- National Council of Nonprofits, How to Start a Nonprofit
- Starting a Nonprofit: Four Fundamental Steps, webinar from Columbia University
- ¿Cómo creo una organización sin fines de lucro en los Estados Unidos?
- Individuals in Eastern Washington can request a mentor at SCORE
- 7 Steps to Starting a Nonprofit from Nonprofit Accelerator
Do you have further questions about starting a nonprofit? Would you like support from your peers? If you found this information helpful, I invite you to become a member of Washington Nonprofits. Member benefits include free or discounted learning opportunities, opportunities to connect, and a network of powerful advocates.