Thinking of Starting a Nonprofit? Here's What You Need to Know!

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Every day, countless visitors come to the Foundation Center's library and tell our librarians that they are interested in starting a nonprofit organization but are unsure of the steps involved. To help address this recurrent question, on May 5 we held a seminar led by start-up consultant Danielle Lanyard, who has helped to launch a variety of nonprofits both in the U.S. and abroad. The program, titled Launching a New Nonprofit Organization: Your Road Map to Resources, offered an excellent overview for novices on where to look and what to do in order to get started in launching a new organization. Here is a sampling of some of Danielle's advice:

Check whether your nonprofit already exists! This may sound like a no-brainer, but it's actually an extremely important step. While there are over 40,000 registered nonprofits in New York City alone, a large number of them don't garner sufficient income. If you create a nonprofit that is essentially duplicating the types of work that another nonprofit is already doing, you'll be competing with one another for a limited pool of funding in order to work on the same kinds of programs, which is not good news for either organization.

If you have a passion for a particular cause, and it turns out that some other existing group is already pursuing that same idea, it's probably best for you to work, donate, or volunteer with that preexisting organization in order for the mission to be fulfilled most effectively. You can find out whether your nonprofit already exists by searching on Idealist, Guidestar, or Charity Navigator.

Choose the best structure for your organization. Once you've confirmed that you're not unnecessarily duplicating the work of other established groups in your community, the next step is to decide whether your organization should take the form of a nonprofit, a for-profit corporation, a social enterprise, or a fiscally sponsored project. Each type of structure has its own advantages and disadvantages, and a lot depends on the type of work you want to do, what sorts of resources you have at your disposal, and what kinds of funding you want to seek.

To help you figure out the best choice, listen to this podcast of attorney Stephen Fall Riff as he explains the differences between forming nonprofits and for-profits.

File legal paperwork. This part is the most significant hurtle you'll have to surmount as you get started, and many people do not realize in advance just how complicated the incorporation process will be. For an extremely thorough explanation and checklist of everything you will actually have to do in order to be able to open the doors at your new nonprofit, read the Nonprofit Coordinating Committee of New York's The Things You Gotta Do to Start a Nonprofit Organization. Before you click to read the 39-step checklist, prepare to be daunted. You'll have to start by:

  • Filing the name of your organization with the New York Secretary of State
  • Assembling a board of directors
  • Creating a cohesive, concise mission statement
  • Developing a set of bylaws
  • Applying for an employer identification number from the IRS

And these are just a few of the many, many steps you will have to take! To smooth the process, you may want to find a lawyer; see the Foundation Center's listing of pro-bono legal services.

Start fundraising. Once you are a registered 501(c)3 nonprofit, you are in a much better position to begin soliciting donations and applying for grants. And it's time to think about creating a practical, doable fundraising strategy to put in place, from its very launch, a plan for the long-term sustainability of your organization. Use the Foundation Center's library to learn how to find foundation funding and try out our funding databases. You can also browse our books and other resources to learn more about fundraising from individual donors and fundraising planning.

Remember from the NPCC's checklist mentioned above that you will need to be registered in every state in which you plan to solicit funds; in New York specifically, you will need to file this form with the state Attorney General's office and pay a one-time fee of $25. The paperwork and fees tend to vary from state to state.

If you're not yet finished with the incorporation process but would still like to raise money in the meantime, you can use a fiscal sponsor, a registered charity that will allow you to seek donations under its tax-exempt status. You can browse a useful directory of possible fiscal sponsors posted by the Tides Center. (Note: The Center's Foundation Grants to Individuals Online also provides a listing of organizations that provide fiscal sponsorship.)

While there are many additional things to learn as you build your nonprofit, following the steps indicated here should help start you on your way toward incorporation and other initial phases. For a full listing of web resources, Danielle has helpfully posted links to all of her recommended resources online.

For even more background on launching a new nonprofit, visit the Foundation Center's library, browse the useful book How to Form a Nonprofit Corporation, which we keep in our book collection, check out the online resources in our Knowledge Base, and attend some of our free training classes on nonprofit management and fundraising.

-- Tracy Kaufman, Library Assistant