How to Start a Nonprofit

Email:  abigail@asalisbury.org

Phone:  412-496-9542

Many people start “living room” organizations and then want to formalize them after they grow in size or once people start asking about making tax-deductible contributions.  If you have never been through the formation process, it can be difficult to understand the general steps.  This is a quick road map to provide a general sense of what is required, although I of course recommend working with an experienced professional to complete the process.

State Level

File Articles of Incorporation with the Bureau of Corporations and Charitable Organizations. The form is easy to fill out, but it is also easy to leave out important things, which will have to be amended later.  The IRS requires your articles to contain specific language.

Employer Identification Number and Banking

Fill out the IRS application for an Employer Identification Number (EIN).  You will need this and your state articles to open a bank account, which you want to do as soon as possible in order to avoid commingling your own funds with those of the organization.

Board and Governing Documents

You will need five board members for a strong IRS filing, so start looking for people early on and begin holding regular meetings to establish which people are truly committed to your organization.  You will also need bylaws to govern your organization.  Board members should be informed of their legal obligations and you should seek out directors and officers liability coverage at a minimum.  Have board members sign conflict of interest disclosures and create an onboarding process with a document to inform them of their rights and responsibilities.

Federal Level

Depending on the type of nonprofit you have and the amount of money you anticipate taking in over your organization’s first three years, you will either need to file using IRS form 1023 or 1023EZ.  Approval can take from weeks to many months, depending on the type of form you use and application volume at the time.  After you get your determination letter, however, you will have a fully-formed nonprofit organization.

Compliance and Ongoing Obligations

You are never really done, because you will have annual filings, fundraising registration obligations, and other requirements to meet.  Failure to comply can result in loss of nonprofit status, so make sure you stay on top of those.

Some Friendly Advice

People often ask me if it is possible to complete a nonprofit filing on their own.  Yes, it is possible.  However, it is much more likely that you will get tripped up due to the lack of advice provided by the state and IRS.  Even attorneys who are not experienced in nonprofit filings frequently make mistakes, because the requirements are very specific to this area of law.  I highly recommend working with a nonprofit attorney as well as an accountant and insurance agent.

Contact me at abigail@asalisbury.org with your questions.

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Please note:  This blog is intended as general educational information only, and should not be considered legal advice or a substitute for consulting a lawyer.