10 Steps On How To Start A Nonprofit Organization In 2022

May 16, 2022
Authored by:
Gareth Mankoo

If you’re here with an idea and want to learn how to start a nonprofit organization for yourself, then more power to you. It’s a selfless act to even begin thinking about setting up a nonprofit to contribute to a better world.

However, not everyone entirely understands what a nonprofit organization truly is. Before you begin on your journey to learn how to start a nonprofit, it is important to completely understand its most basic definition.

What Is A Nonprofit Organization?

A nonprofit organization is one that is set up to achieve social benefit for the public while consciously ensuring that none of the proceeds are used for the personal profits of any benefactors. Now, that must’ve sounded heavy, but it was essential to include the second part of the definition.

The non-distribution constraint under which nonprofits operate means that the donations they raise go solely towards paying the expenses for their activities, while the surplus is used only for the larger cause. After all, that’s why they’re called nonprofits.

The Perks Of Starting A Selfless Business

While everyone sees the problems in the world, only a benevolent few have solutions and want to work on them to make the world a better place for others.

Other than good karma, putting your time, effort, and resources into starting a nonprofit organization has its perks:

1. A Sense Of Satisfaction

There are few joys that can match the joy of helping. Your beneficiaries often know who you are, and bringing them relief gives you a sense of fulfillment. It’s also wonderfully wholesome to see a problem that was nagging at you being solved or addressed, at least.

Helping others creates a sense of happiness and fulfillment.

2. Tax Exemption

Several countries, including the United States of America, offer tax exemptions for nonprofit businesses. As a result, even if you follow a classic business model, you can ensure that all the money you earn from goodwill and donations isn’t taxed, giving you more freedom to use it for your causes.

3. Become A Community Figure

Those who work for the good of the community are acknowledged by everyone around them. This isn’t for a claim to fame, but to be more than just your individual self, who seeks only the good of your family. As time goes on, you can use the social influence you gain to help even more causes.

4. Break Away From Your Regime

Your 9-to-5 job may pay your bills and help you afford a nice car, but chasing profits isn’t always fulfilling. Identifying a cause close to your heart and extending your job skills to do the community some good can have intangible, yet gratifying rewards.

What Are The Different Types Of Nonprofit Organizations?

There are three broad types of nonprofit organizations. There might be more or less, depending on the region you dwell in.

1. Charities

These are the most common kinds of nonprofit organizations and fall well within the classical definition of the genre of business. They could be charitable, religious, scientific, civic welfare, educational, healthcare, or any kind of organization that focuses on bringing good to a community or the general public.

Phin | Doctors Without Borders
Doctors Without Borders is one of the best examples of a charitable nonprofit

There are several resources available on how to start a nonprofit that is into charitable work.

2. Associations

When a group of people with a common thread of interest come together for the good of the larger collective, it can qualify as a nonprofit organization. This includes women’s rights groups, support groups, veterans’ welfare organizations, and associations for the differently-abled, to name a few.

Local students receive $47,500 from AMVETS
AMVETs is a volunteer-led organization that is exclusively open to over 20 million American veterans and works towards their welfare

3. Clubs

Nonprofit organizations can also include setups that are created for general pleasure, recreation, sports, and more.

TU launches #ResponsibleRecreation campaign - Trout Unlimited
Trout Unlimited is a nonprofit that brings together fishing enthusiasts and conservationists

These are generally closed groups and allow a finite number of memberships, which are distributed without discrimination. However, there are a few basic criteria that have to be met in order to be part of the collective.

How To Start A Nonprofit Organization In 10 Steps

Your idea of what nonprofit you want to start will be clear by now. So, let’s dive right into what it takes to start one that is destined for success.

Step 1: Define Your Purpose And Values

Since you have decided to begin a nonprofit that addresses a problem close to your heart, you need to set the guiding principles that encourage you to go on. This is critical because it not only reminds you why you started, but it also encourages new employees to adhere to these values with zeal.

Well-defined values can ensure that your organization works with integrity, authenticity, and a solid conscience. It also acts as a front before donors, giving them more encouragement to be a part of your setup.

Step 2: Identify The Timeframe

Time is of the essence while starting a nonprofit, and you need to account for it. While the nonprofit may be set up for something that is not time-sensitive, setting up the business itself can be time-consuming.

Here’s a sample timeframe that you alter for your nonprofit

As you scroll through the below points on how to start a nonprofit, you will realize what a potential timeline for your organization could look like. Then comes the registration, application for tax exemption, and so on.

All of this takes time, depending on which geography you are operating out of. Be patient and acknowledge that you cannot begin making an impact overnight.

Step 3: Strategize Your Funding

There are different ways to raise funding for your nonprofit. If you have an exclusive members-only club, then membership fees can take care of expenses. You could also organize events or fund-raisers to increase donations. Many nonprofits reach out to crowd-funding platforms or create their own donation drives.

Fundraising has largely gone online, and sites like GoFundMe do a fine job of helping you achieve your dreams.

Another effective way of raising funds is by attracting government grants. Reach out to your local authorities to find out the best way to access these grants.

Step 4: Factor In The Costs

Everything costs money. Factor in the following costs:

  • Office or home-setup
  • Payments to your team-members (which may not be a full salary, but a modest stipend if the work is voluntary)
  • Power and internet bills
  • Costs to conduct events
  • Paying your legal consultants
  • Organizing events
  • Printing marketing collateral like pamphlets and standees

And there’s more. Doing research into the many costs of this venture can grant you insight into whether or not you’re ready to take this head-on. Just always remember that kind acts of service are priceless. This may be an investment, but it’s for a beautiful cause.

Step 5: Be Diligent With Your Paperwork

The US has over a million and a half nonprofits. Every one of them has gone through stringent qualification criteria and rigorous paperwork. This is because nonprofits earn their privileges based on goodwill and a clean conscience. Ensure that you have professional help from solicitors and lawyers to draw up your paperwork.

It is important to ensure that all your Ts are crossed and your Is are dotted. Even minor discrepancies can have severe implications for your tax exemption and registration status.  

Step 6: Build Your Board

Begin small. Have a small, intimate group of board members who seek the common good of the nonprofit, share your values, and are ready to be invested in its success. Distribute the responsibility of the organization judiciously among every member and assign roles, succession plans, and bylaws.

Step 7: Create Your Bylaws

Having strong bylaws is critical for any organization. It insulates its board members, employees, and beneficiaries from malpractice. Make sure that every member of the board knows everything in the bylaws and signs off on each clause.

Here’s a great guide to creating effective bylaws:

Step 8: Brand Your Nonprofit

Many begin from here. But this is not how to start a nonprofit. It is best to brand your nonprofit after you have your budgets, timelines, board members, and value system in place.

This way, you can be truer to the cause. Give your nonprofit a memorable name and logo design, register its domain, and make sure that your core values are reflected in all your outbound communication.

Be mindful that you aren’t overpromising and underdelivering. Also, avoid spamming potential donors.

Step 9: Create A Business Plan

Now that you’re fully equipped to ‘go-to-market’ with your nonprofit, it's time to draw out your business plan. Identify quarterly, half-yearly, and annual goals. Fix a date for your annual meetings with the board to assess reports and results. Make this information public to win the trust of donors.

There’s nothing wrong with planning your nonprofit’s business like a profit-driven corporate business. Be aggressive and bold. Find partners in similar causes, influential people, and organizations who can prop you up in your early months. DonorBox has a useful guide to getting started.

Step 10: Check Your Compliance

Always check if you are compliant with the law. It is best to have a consulting lawyer on-board or as a consultant. Make sure that your income is transparent and available in the public domain, as are your expenditures for the nonprofit. No good deed should end up being punished.

Over To You

As time goes by, you will gradually gain more traction and your organization will earn more respect. Your assets will begin to swell and your actions will be seeing positive results.

It takes ample patience, especially in the early months, when you’re getting things into place. If you are operating in a cluttered category, you may need to find a distinguishing characteristic that makes donors and members look at your nonprofit more favorably.

How to start a nonprofit is one thing. How to ensure it thrives is another altogether.

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