starting a nonprofit

Are you dreaming of starting a nonprofit organization to support a cause you’ve always cared about? More and more people are interested in working for, supporting or even starting nonprofits these days. Here are some things to consider before you get started.

Nonprofit basics

First, do you know what a nonprofit is? I’ve run into some people who think that their companies might qualify as nonprofits because they aren’t making a profit. Unfortunately, that’s not how it works. While the goal of a business is to make a profit, the goal of a nonprofit organization is to benefit a cause. Any money the organization makes, whether from donations, membership dues, grants or product sales, goes back into the nonprofit to further the cause, rather than to the founder.

There are different types of nonprofits. In fact, the IRS identifies 27 different types of nonprofit organizations, ranging from childcare facilities to teachers’ retirement fund associations. However, the most common type of nonprofit is a 501(c) (3) organization. Typically either charities or private foundations, these are the organizations most of us think of when we hear the word nonprofit.

In general, most nonprofit organizations enjoy tax-exempt status from both federal and state governments. However, in order to get this status, you will need to incorporate as a nonprofit organization when starting a nonprofit. You also need to file regular documentation and taxes to keep your nonprofit in compliance.

Unlike a business, a nonprofit organization doesn’t have an owner but is governed by a board of directors. The board is responsible for making sure the nonprofit acts in accordance with its mission, uses its money wisely, and follows laws and regulations regarding nonprofits. Sometimes, board members also run the day-to-day operations.

Should you start a nonprofit?

Now that you know the basics, here are some questions to ask yourself before starting a nonprofit:

  • Is your nonprofit necessary? If there is already another organization that supports the same cause, your nonprofit may have difficulty gaining traction, especially if the other nonprofit is well established. Remember, the ultimate goal of a nonprofit is to support a cause you care about — not to compete with other nonprofits! In this situation, you might do more good by donating to or volunteering for the other nonprofit than by starting your own.
  • Do you have what it takes to get people excited about your nonprofit? Starting a nonprofit organization and keeping it going requires a lot of energy and enthusiasm. You’ll need to maintain a passion for your mission, and be able to inspire that same passion in others, including board members, employees, volunteers and donors.
  • Where will I get my funding? Most nonprofits get their money from donors or apply for grants to finance operations. You can also sell memberships or products (or a combination of the two) to raise money. For example, an organization that supports wildlife preservation might encourage people to join for a $50 annual membership. They could also sell calendars or tote bags, or offer those products as incentives to encourage donations.
  • How are my management skills? Although nonprofits cannot distribute their profits to the business owner, they can pay their employees (including you) a reasonable salary. However, since nonprofit salaries are typically lower than those in for-profit businesses, you’ll need good management skills to attract and keep qualified employees. You’ll also need to recruit, manage and motivate the unpaid volunteers that are often the backbone of a nonprofit’s operations.

Tips for starting a nonprofit

Excited about starting a nonprofit? Begin with a mission statement and a business plan. Just as with a for-profit business, you need a clear vision and well-thought-out plan in order to give your new nonprofit the best chance of success. You can find business planning tools for nonprofits online. Be able to convince others why your nonprofit organization is different and why they should want to contribute to it. You should also have specific goals and benchmarks for measuring the success of your nonprofit.

You can learn more about nonprofits and find resources for getting started at these sites:

  • National Council of Nonprofits
  • State associations of nonprofits
  • Grantspace
  • Society for Nonprofits