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Critical Things to Know Before Starting a Non-Profit

Addressing a social issue or looking for ways to inspire change might really get your blood pumping. If so, starting a non-profit organization (NPO) might be the perfect outlet for your social consciousness and entrepreneurial spirit.

How to Starting a Non-Profit

However, similar to any business endeavor, there are steps you must follow in order to set up your non-profit legally and to prepare it for sustainable success.

Here are some of the most critical things to know when starting a non-profit.

1. It’s pretty much just like any other business.

While revenue and earnings will differ with a non-profit, the federal and state governments still view it as a business, meaning you’ll need to obtain the proper licenses and permits. Conduct a search on License123.com or a similar site to determine what licenses and permits you’ll need. In addition to general business licenses, you’ll also need industry-specific ones. For example, if your non-profit is a soup kitchen, you will need food, health and safety permits from the appropriate agencies. If you’re hoping to operate a medical clinic, you’ll need all the appropriate healthcare licenses.

It’s important to note that license fees and taxes are generally waived for non-profits.

2. You’ll need a solid foundation.

A non-profit organization is set up more like a corporation than a simple partnership. You’ll need to implement the following, not just for a strong start, but for continued viability as well.

  1. Articles of Incorporation: NPO articles don’t differ all that much from for-profit ones. They need to be filed with the appropriate state government office once complete.
  2. Apply for Tax-Exempt Status: You’ll need to apply with both the IRS for federal exemption and your state government.
  3. Board of Directors: You’ll want to have a strong board of directors, identify them as early as possible and hold your first board meeting.
  4. Create Bylaws: These are the operating rules for your organization.

3. Fundraising will be your main job.

Unlike a traditional for-profit, the goal behind a non-profit organization isn’t to solicit startup capital from investors and then pay them back. Instead, you’ll be soliciting money from donors with the idea that they will not see a financial return on their investments. While it is important to seek out donations from individuals, local, state and federal governments offer grants, loans and other programs to aid NPOs in furthering their missions. Additionally, other organizations provide loans to non-profits. You can conduct online searches to find out more.

On top of that, the rise in popularity of crowdfunding has opened up a new avenue of fundraising for non-profits. Some of the more popular sites include: FirstGiving, Kickstarter, Indiegogo and StayClassy.

4. Follow other general business startup steps.

Everything from a solid business plan to marketing and advertising initiatives will aid in the success of your non-profit organization, just as it would with a for-profit business.

By setting up your non-profit organization correctly in the beginning, including securing the proper licenses and tax-exempt status, you will help ensure that you and your organization can continue your mission well into the future.