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5 Steps to Starting a Nonprofit

Sandra Pfau Englund

5 Steps to Starting a Nonprofit


Step #1:
Start with a good idea
There are more than 1.1 million nonprofit organzations in the United States. Some 20,000-40,000 new nonprofits are formed each year.
Step #2:
Draft Business Plan
There are many differences between nonprofits and for-profits. However, all organizations must have a plan for bringing in more funds than the organization spends or the organization will not be in operation very long.
Step #3:
Form Organization
Two forms of organization are the unincorporated association and the nonprofit corporation. Many people prefer to organize as a nonprofit corporation because of the liability protection the corporate form provides. To incorporate as a nonprofit corporation, articles of incorporation must be drafted and filed with the state government. It is generally a good idea to incorporate in the state in which the organization will have its principle office. Once incorporated, an organizational meeting should be held during which officers are elected, bylaws are approved, and other start-up activities are undertaken. In addition, all organizations, regardless of their form, generally must register with their local government authority to obtain a license to engage in business in that locality.
Step #4:
Draft & File IRS tax exemption application
Organizations that intend to be tax-exempt under section 501(c)(3) of the Internal Revenue Code as charitable, educational and scientific organizations (to which contributions are tax-deductible for the donor) should file IRS Form 1023. Most other organizations should file IRS Form 1024. See also IRS Forms and Types of Nonprofits on this website.
Step #5:
Draft & File state & local tax exemption applications
Some organizations, particularly those that have obtained recognition as 501(c)(3) organizations from the IRS, may qualify for exemption from state sales and use taxes and local property tax and business license and registration fees. To obtain exemption, organizations must apply with the appropriate state and local government offices.

Copyright © 2002 Sandra Pfau Englund. All rights reserved.

Courtesy of
Pfau Englund Nonprofit Law, P.C.
1451 Juliana Place, Alexandria, VA 22304-1516
Voice: 703/751-8203 Fax: 703/823-8692

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