7 Steps to Start a Nonprofit Business
Do you want to start a nonprofit business in the USA? Here is a quick guide on all the steps that you need to follow to get it up and running. Check it out!
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How to Start a Nonprofit Business: A Quick Guide
Did you know that there are over 1.5 million nonprofit businesses registered? If you want to join the ranks, you’re doing a great service to humanity.
After all, anyone who wants to start a nonprofit business is going to make a positive impact in the world in some capacity. But if you haven’t done it before, the processes involved in starting a nonprofit business can be confusing.
To help you out, we’ve compiled a quick guide listing the step-by-step instructions for what you need to do to start a nonprofit business in the USA.
Start a Nonprofit Business: What You Need to Do
Before you take the plunge, make sure you are clear about the reason you want to start a nonprofit business. Having clarity about your “why” is important. It will help you stay focused and make long-term plans and commitments.
Once you have it, here are the other steps you need to take to start a nonprofit business:
1. Research Other Similar Organizations
Like we discussed earlier, there are over one million nonprofit businesses already in the USA. Regardless of the niche you pick, there are other businesses that are involved in similar work.
Before you start a nonprofit business in the same field, make sure you have researched what they are up to. Not only will this help you understand the standard practices but it will also help you figure out what your key differentiator is.
2. Create a Formal Plan
The next step in the journey to start a nonprofit business is to write a detailed business plan. From your business name to estimated cost and income, you need to put it all together. In addition to this, you need to think critically and come up with projections for the future.
Some of the sections that you need to include in your business plan include:
- Purpose of your nonprofit business
- Who your target audience is
- Company name and description
- Mission statement
- Competitive and market analysis
- Organizational structure
- Marketing strategy
- Financial summary
- Revenue projections
Creating a detailed business plan will require extensive research and planning. Make sure you invest enough time upfront to include as many details as possible.
3. Think About Incorporation
Now that you have a business plan in place, it’s time to start the incorporation process. If you incorporate your nonprofit, you can get multiple benefits.
These benefits include being exempted from paying taxes, being able to receive grants and donations, and getting protection from any personal liability.
While this step is recommended, you should know that unincorporated nonprofit associations also do exist.
Typically, such an arrangement works best for ad hoc situations where a group of people come together for community service or to raise funds for a short-term goal. Anyone who is looking for a more organized structure should get their nonprofit incorporated.
Incorporation for nonprofits is similar to the process involved in forming a for-profit corporation. In addition to all the steps, nonprofits also have to apply for tax-exempt status.
For each state, the documents and requirements to incorporate a nonprofit business are different. For that reason, you should check the local requirements for the state in which you want to set yours up.
Some of the common processes are listed below:
- Get the name of your nonprofit business registered. Make sure that nobody else has an entity under the same name.
- File the articles of incorporation for your nonprofit business. Based on your state requirements, you may have to give a certificate of disclosure, proof of corporate name, and more.
- Create a set of bylaws that lays down the guidelines for how your nonprofit will operate internally. It should include activities like the election of board members, voting procedures, frequency of meetings, rules about conflicts of interest, and other such important criteria.
4. Apply for Nonprofit Tax ID Number
If you are starting a nonprofit business, you get to enjoy a special privilege — you are exempt from paying taxes. For this, it is necessary for you to have an Employer Identification Number (EIN).
It is important because the Internal Revenue Service (IRS) uses this number to keep track of your taxation status every year. Banks will also ask for your EIN before they can make transactions. Having an EIN also gives your nonprofit business more legitimacy, especially when you are taking donor contributions.
To get your Tax ID number, you need to fill out Form SS-4. It can be confusing and time consuming to fill out this form on your own.
You can easily get a nonprofit tax ID number from a service like GovDocFiling. The online application is designed to simplify the process so that you can complete the setup process without any hassles.
5. File for Federal Tax Exemption
In order to get tax exemption, all nonprofit organizations are required to file Form 1023. Additionally, some states also ask nonprofits to file separately for state-level tax exemption.
If you are not sure if you can handle the formalities on your own, you should seek help from a reliable tax professional.
6. Work on Your Branding Strategy
When are you done with the legal requirements, it’s time to work on communicating to the world what you stand for.
From your logo to your website design, everything should highlight the values that your organization believes in. What’s more, you need to maintain consistency across all mediums.
While formulating your branding strategy, keep in mind that it will be crucial while you are looking for funding, organizing events, and even hiring employees.
7. Build a Strong Team
The final step in your journey to starting a nonprofit business is to find people who are passionate about what you do. Building a strong and committed team is the prerequisite for building a thriving organization.
Some of the positions you should be looking to hire for include:
- Fund manager
- Communications manager
- Events manager
- Membership manager
- Human resources manager
Depending on what your nonprofit organization does, some of these profiles may vary. To make sure you hire the right people, you should write concise job descriptions that include key responsibilities.
It is also important to make sure that your mission is embedded throughout the hiring and onboarding process.
Be selective about who you add to your team; they can make or break your nonprofit business.
Ready to Start a Nonprofit Business?
Now that you know what it takes to start a nonprofit business, it’s time to get going. From research to documentation and hiring, there is a lot to do.
Follow the steps mentioned in this guide to go step-by-step in the right direction. The whole process may require a lot of effort, but it’s worthwhile when you are trying to make the world a better place.
Do you have any questions about starting a nonprofit business? Please mention them in the comments section.