Forming a nonprofit organization can be the most effective way to advance social causes, make an impact in your community, and create societal change. Establishing your initiative or project as a nonprofit can help you to more effectively accomplish your goals in various ways, including making your organization eligible for grants, allowing supporters to claim donations on their taxes, and limiting liability among the group’s members.
There are a number of resources that can provide critical support to guide you in starting a nonprofit organization. Enlisting the assistance of an agency that offers partner support services and fiscal sponsorship will allow you to take advantage of potential grants and funding opportunities while getting the support you need to manage administrative and operational functions.
Before beginning the process of starting a nonprofit organization, it is important to determine whether your organization meets the criteria to apply for 501(c)3, or tax-exempt, status and that forming a nonprofit is the most effective option. The process demands numerous requirements involving submitting applications, financial reports and having the proper operational infrastructure in place. Failing to fulfill certain prerequisites might impede your organization’s progress or prolong the application process, but there are steps that can be taken to give your nonprofit organization the best chance of approval and long-term success.
The following is a list of major criteria that should be considered to ensure that your organization’s application process runs smoothly. The checklist also details ways to accomplish each step of the process and includes important reminders that will help you avoid potential complications.
We’ll cover the following steps in our checklist to help you jump-start your nonprofit organization:
Step 1: Situational Research
Step 2: Establish Key Characteristics
Step 3: Fulfill Legal Requirements
Step 4: Assess Finances and Earn Funding
Step 5: Set Up Operational Procedures
Preparing to complete the steps in this checklist can help you navigate the application process and bring you closer to making your nonprofit organization a reality. We also recommend consulting with legal and tax experts before taking measures to create a new nonprofit to ensure you understand all aspects of the process and the requirements.
Step 1: Situational Research
In order for a nonprofit organization to serve its community and make a measurable impact, it is vital that its founders are familiar with its community members, their needs and the most effective ways to serve the community. It is also very important to determine whether your organization is truly in a position to meet an identifiable need in the community.
Researching demographics and the people you hope to serve will not only enable you to create an effective organization, but it will also connect you with groups and individuals that may provide crucial financial support.
It is also necessary to research whether or not another similar organization has already been established in the community and is already fulfilling the same need as your potential nonprofit. If similar charitable organizations already exist in the area, it may make it more difficult to gain the necessary support and truly make an impact in the community. It might be more effective to explore how you can build on the efforts that are relevant to your cause and are already in place.
Step 2: Establish Key Characteristics
Before seeking financial support for your nonprofit, it is important to establish a few components that are essential to an effective and tenable nonprofit organization. It is highly likely that foundations and individuals will explore certain aspects before deciding to provide any grants or financial support, which will be crucial to the viability and growth of your nonprofit organization.
Mission Statement
This statement should convey the purpose of your nonprofit organization and the goals you plan to accomplish. This mission statement should also identify which members of the community you are supporting and how you will support them. Formulating a definitive and meaningful mission statement will help provide potential funders, community members, and the general public with a better understanding of why they should become involved and support your new nonprofit.
Appointing a Board of Directors
Recruiting a board of directors who believe in the vision of a nonprofit is imperative to the initial launch of the organization, as well as its long-term success. This carefully selected group will lead the organization through the creation of a strategic plan, and make pivotal decisions that will determine how the nonprofit will accomplish its goals and reach its target community. An experienced board can also benefit new nonprofits in boosting credibility among their community members and supporters.
It is important to accurately assess whether the individuals chosen to participate on the board have the expertise and availability to contribute to the efforts of the nonprofit on a regular basis. This group will also work to guide the organization to succeed in its goals and maintain accountability for the organization.
Appointing an Executive Director
Naming an experienced executive director who can lead the efforts of the nonprofit will help your organization develop and execute a strategic plan to accomplish objectives. This individual will likely be involved in problem-solving and should have a track record of successfully managing operations.
Conflicts of Interest
When choosing a team of directors to lead your organization, it is crucial that you investigate whether there are any conflicts of interest tied to the operations of the nonprofit and the interests of its board members. Considering whether any conflicts of interest exist will help avoid potential doubt or skepticism around the integrity of your organization and its commitment to its cause. When applying for tax-exempt status, the IRS will require that you disclose whether any conflicts of interest exist and will determine approval based on the information you provide.
Develop Effective Programs
Part of your organization’s strategy will involve implementing relevant programs that benefit your target community and further your cause. Creating effective programs will not only help your nonprofit accomplish its mission, but it will simultaneously help your organization gain exposure, leading to more funding and outreach opportunities. The board of directors will manage the development of these programs, measure progress and determine whether they are accomplishing objectives.
Step 3: Fulfill Legal Requirements
File for Tax-exempt Status
Nonprofit organizations may be approved for different forms of tax-exempt status, with some becoming fully exempt. Becoming approved as a tax-exempt organization will help your nonprofit save on taxes tied to expenses, as well as allow donors to receive a tax deduction for their donations to the organization. In order to apply for 501(c)(3) Tax-Exempt Status, the group must file a 1023 form. The IRS can take from three months to a year to make a decision regarding the application. Providing accurate and complete information is crucial to earning tax-exempt status, and Heluna Health can guide your organization through the application process and help ensure all steps are completed accurately.
Most tax-exempt organizations are required to file a version of the IRS Form 990 with the IRS. This form indicates your group’s operations and finances and is open to the public. Each state has its own reporting requirements, which can vary.
Incorporating Your Organization
Incorporating your nonprofit can be an effective way to provide validity and structure to your organization. This process will register your nonprofit as a corporation with state and federal offices. Your organization will eventually file articles of incorporation with the secretary of state to create a nonprofit corporation–this form might also be referred to as the certificate of incorporation or corporate charter. Groups can reserve the name for their organization through your secretary of state before becoming approved for incorporation.
Communicating with your state or county registrar office will help provide your nonprofit corporation with up-to-date information and helpful support. Working with a fiscal sponsor can also empower nonprofit corporations to attract donors before it has been approved for 501(c)3 tax-exempt status.
Step 4: Assess Finances and Earn Funding
In order to ensure that your nonprofit can survive and thrive, it is good practice to establish diverse revenue streams. Groups may rely on individual donors for a large portion of their financial support, but can also receive other funds and grants when starting a nonprofit organization. These grants are offered by the federal and state governments, public and private foundations, charities and corporations. Our Benefits of Grant Writing Assistance post explains how partner support services can better prepare you for grant applications and increase your chances of approval. Other sources of revenue might include membership dues, fee-for-service models, and social impact investments. Exploring as many funding streams as possible will give you the best chance of growing your organization into a sustainable nonprofit.
Creating effective programs will also help bring in revenue from different sources. Once your organization is able to earn revenue, it must prioritize budgeting and financial recording so that funders can see how their financial support impacted the efforts of the nonprofit, and so your organization can maintain compliance with state and local laws. Financial support received by charitable organizations is reviewed by the attorney general or other state officials. Funding for your nonprofit might be determined by a number of factors, including the potential impact of your organization and whether any financial controls have been established.
Step 5: Set Up Operational Procedures
Creating a system by which your organization can operate effectively may involve implementing bylaws, securing a staff, investing in equipment and facilities, and creating a way to document your organization’s impact. Establishing a set of bylaws can help your organization create transparency and outline operational details, such as job descriptions and term limits. A formal structure and bylaws will help mandate the day-to-day operations of the organization and support accountability.
How We Can Help
Heluna Health is an organization that provides population health support and program development services that can enable your nonprofit organization to improve health outcomes in your community. We specialize in helping researchers, public-private consortia, public health agencies, and nonprofits build their capacity to develop and implement population health programs quickly and efficiently.To learn more about Heluna Health and how we can develop a customized approach to assist you, contact our team today by calling 800-201-7320. Let’s work together to ensure more people have the chance to live healthy and productive lives.
