Five To-Dos Before Creating Your Nonprofit

Each year, thousands of nonprofits are established in the United States. This third sector of our economy fills the underserved gap between business and government and is critical to the economic and social fabric of our country. Nonprofit founders often see a need and seek to address that need through a new nonprofit, but are sometimes unprepared for all of the intricacies of running an organization. Starting and maintaining a nonprofit can take a lot of time and resources. Once you create your new nonprofit, you will have certain obligations to fulfill in order to keep your organization alive and well. 

Before establishing a new nonprofit organization, here are five important things to check off your to-do list to help you increase your likelihood of success.

1. Establish a purpose. The purpose of the organization will need to comply with Internal Revenue Services (IRS) requirements, which – for organizations seeking exemption under section 501(c)(3) of the Internal Revenue Code – must be charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals. You will be required to provide a statement of purpose in the organization’s articles of incorporation, so it should be a relatively concise statement of the organization’s purpose, but broad enough to encompass all of the intended activities of the organization.
2. Conduct market research. This is a step that is often overlooked by those wishing to start a nonprofit. However, it is important to take a good assessment of whether there are existing organizations that have a similar purpose, mission, or program that is intended for your new organization or whether there is a gap in the market for the type of activities your nonprofit will conduct. What is the level of need in the community for this organization? Is it possible to work as part of an existing organization or, if a new organization is started, an opportunity to partner with an existing organization? How will the new organization be different from existing organizations? Will your new organization be able to generate support (financial, programmatic, or otherwise) in light of these other existing organizations?
3. Develop a written program plan and budget. A written program plan should set forth the activities your organization will engage in and answer the question of how it will fulfill its stated exempt purpose through these activities. The program plan should align with a budget forecast for three years, which should include expected forms of income and expenses necessary to operate your organization and carry out its purpose.
4. Develop a written fundraising plan. A fundraising plan should identify the sources of income your organization will likely draw from. This can include donations from the general public as well as grants from government sources or other nonprofits and the sale of goods or services.  The plan should also include methods by which the organization plans to raise money, which can range from in-person solicitation, online fundraising (social media, websites, etc.), fundraisers (e.g., dinners, galas, other events) to direct mail. You should also determine where fundraising will occur: will it be conducted mostly in one concentrated local area, statewide, or nationwide? Consider how the organization will sustain itself in the long run.
5. Recruit a board of directors. State law determines the minimum number of directors a nonprofit should have. In certain states, the minimum is one. However, even if the minimum number of board members to create a nonprofit may be one under state law, the job of establishing and maintaining a nonprofit is much more than a one-person job and the IRS generally requires a minimum of three board members. The board of directors holds the responsibility of properly maintaining the nonprofit as a legal entity in and of itself, separate and apart from the founders of the nonprofit, board members, and any other interested stakeholders.  The board has fiduciary duties and is legally responsible for ensuring that the organization’s programs, operations, governance, finances, and legal compliance are in order.

Non-Profit Business Plan

While there are many things to do and consider when beginning your nonprofit, these are just five of the big bucket items to start with. Would-be nonprofit founders are well-advised to write a business plan for the nonprofit that covers all of these topics. A written business plan can be an effective tool for recruiting a board of directors and generating support for your nonprofit – financial or otherwise. The contents of a business plan can also be used to prepare the paperwork necessary to form and set up your nonprofit.

Next Steps in Forming a Non-Profit

The preparation phase of forming a nonprofit is critical to the success of the organization and should happen or at least be well underway before any documents are filed with a state agency to create the nonprofit corporation.  

When you are ready, The Geller Law Group can assist you with the paperwork involved in establishing your nonprofit and provide guidance on how to keep your nonprofit in compliance with all of the legal requirements governing such organizations.

The Geller Law Group provides advice and assistance to clients on a variety of legal issues faced by nonprofits and small businesses, including formation. If you wish to speak to a lawyer about your idea for a nonprofit, contact us to schedule a consultation.