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  • Writer's pictureLila & Associates LLC

Steps To Starting A Non-Profit Organization

Why do people create nonprofits? Typically it is because they have a drive to make a difference about a cause that is close to their hearts or has affected them personally in some way. Starting a Non Profit is an exciting and rewarding opportunity, but it can also be challenging. Let us help you take the stress away.

Starting and sustaining a nonprofit can be significant challenging, particularly in light of today's economy. There are currently more than one million charitable nonprofits in the United States, but many struggle to attract increasingly limited funding. Before starting out, you will need to identify and quantify the need for your specific organization, to research whether there are other groups already engaged in the same or similar work, and to ensure that starting a new nonprofit is the right solution. 

1. Choosing the type of Non- Profit Organization

When starting a non-profit organization there are five types of non-profit organizations in which your organization will fall in. which are the following:

Each category has different tax benefits & requirements. while the majority of nonprofits are classified under 501(c)(3) of the IRS code as charitable organizations. You should review the categories to determine the right choice for your nonprofit organizations.

2. Decide On A Business Name

Choose a name for your non-profit organization. Make sure to check for availability of your non-profit's chosen name. Keep in mind that your state may require that your nonprofit corporation's name include an identifying word such as "incorporated," "limited," "corporation," or an abbreviation of such a term. Once you have chosen your non-profit name next step would be to register your mom-profit name.

3. Choose Board Of Directors

Usually, directors are identified in the "articles of incorporation" and/or "bylaws" of the corporation, or are selected by the person who takes the initial step of incorporating the business.

As suggested by its name, the board of directors "directs" the corporation's affairs and business path. The board of directors also has ultimate legal responsibility for the actions of the corporation and its subsidiaries, officers, employees, and agents. A corporate director's duties and responsibilities typically include:

  • Acting on behalf of the corporation and its best interests with an appropriate "duty of care" at all times;

  • Acting with loyalty to the corporation and its shareholders;

  • Participating in regular meetings of the board of directors;

  • Approving certain corporate activities and transactions -- including contracts and agreements; election of new corporate officers; asset purchases and sales, approval of new corporate policies; and more;

  • Amending the corporation's bylaws or articles of incorporation.

4. Create Articles Of Incorporation

The Articles of Incorporation is the primary corporate document for every nonprofit corporation. A corporation comes into existence on the date its articles of incorporation are filed with the state corporate filing office. The Article of Incorporation should include the following:

  • Name of Non-Profit Organization

  • Name & Address of registered Agent

  • Legal Address of the Non-Profit Organization

  • Duration of Non-Profit Corporation

  • Name of Incorporator(s)

  • Name & Address of Directors

  • Statement Purpose

Once you have create and signed your Articles Of Incorporation File your nonprofit corporation's Articles of Incorporation with your state's Secretary of State, and pay related filing fees.

5. Apply for Tax-Exempt

Once the nonprofit corporation is formed, the most common way to receive tax-exempt status is to apply under Section 501(c)(3) of the Internal Revenue Code. Nonprofit corporations qualifying under this section enjoy exemptions from federal, state, and local taxes, and donors can write off their contributions on their individual tax returns. The IRS allows organizations to file for tax-exempt status under section 501(c)(3) if they fit within one of five identified categories. The organization must:

  • have a "Charitable Purpose"; or

  • qualify as a "Religious Group"; or

  • be considered a "Scientific Organization"; or Serve a "Literary Purpose"; or

  • Qualify as an "Educational Organization"

6. Obtain Licenses & Permits

When starting a business there are federal small business requirements that must be met by all start-ups. Both state and federal governments place certain requirements on small businesses in order for the companies to function properly. From a federal perspective, there are several major small business requirements that the government imposes upon businesses.



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