There are a number of things to think about when starting a nonprofit organization.
Here is a list, along with the major steps to take.
Nonprofits are a means for organizing around a mission in a way that focuses
interest and effort while allowing for favorable tax treatment. As of 2015, there
were more than 1.5 million tax-exempt nonprofit organizations in the United
or about one for every 200 people. Of those organizations, nearly 1.1
million were 501(c)(3) public charities.2
Clearly, nonprofits are widely used to
address public-serving purposes. The following steps provide guidance when deciding
whether creating a nonprofit is the best route:
Think Long and Hard about Why, Where, and When It Makes Sense to
Start a New Organization. Remember: Most start-ups fail, whether for-profit
or not-for-profit. Ask these questions:
• Will this organization serve a niche that is already being served? If not,
• Do enough people care about it that funding is likely? If yes,
• What would the elevator speech be? This is a one minute explanation of the
organization, its purpose, activities, and its stakeholders. This will be important
for enlisting support of funders, volunteers, and staff. If the speech comes
easily to mind then,
• What funding sources are possible? If there are enough then,
• What other organizations are already providing a similar service? How would
this organization be different? If the answer is obvious, then perhaps it is time
to proceed.
Engage a Group of Interested People. A nonprofit is not owned or controlled
by any one person, not even the founder. It is accountable to multiple
constituencies: its board of directors and officers, the philanthropic community
within which it will secure funding, the stakeholders who will benefit from the
services rendered, and the volunteers it will engage, among others. Engage representatives
from all the constituencies the organization will touch to discuss its
creation and what its goals should be.
Develop a Plan. Nonprofits need a plan, just as businesses do. The plan sets
forth the vision, mission and goals, the methods or activities that will be used
to achieve the goals and pursue the mission, resources needed (financial capital,
human capital, and office space), and a timeline with target dates for when key
steps will be achieved. These steps include creation of the articles of incorporation
122 PART II Capitalizing on the Power of People, Money, Information
and bylaws, legal incorporation, and approval by tax authorities. The plan should
also include a description of start-up funding that specifies revenue sources. Additionally,
in an evaluation of opportunities and threats, the plan should specify the
organizations that have similar missions and it should explain how this one will
differ. Threats caused by competition for resources should be delineated and there
should be an explanation of how the organization will respond. The plan should
also contain an incremental vision for the organization in future years.
Draft the Articles of Incorporation and Bylaws. Bylaws are the organization’s
rulebook. They specify everything from how officers and directors are
selected to when meetings are held to when the fiscal year begins and ends. All
bylaws must comply with federal and state laws pertaining to nonprofit status.
Establish Leadership. The board of directors is the governing body of the
organization. Board members should be a source of information, commitment,
wisdom, and often, financial support.
Create a Budget. Will money come from donations, grants, service fees,
contracts, or some combination? Careful planning helps to reveal sources.
Establish Management. Start-ups may rely on the same people to manage
the organization as to lead it. As the organization grows, the need for staff will
expand. A website and logo will need to be created and maintained that markets
the organization, its mission, and its activities.
Think Again. Is a start-up nonprofit the right solution for the problem? Is
there a better way to address it? What will be the obstacles that pose the greatest
threats? Here are some alternatives:
• If starting a new nonprofit is driven by a desire to make an impact in a
certain area, then consider volunteering, serving on the board, or fund-raising
for an existing organization with an aligned mission. Such engagement
supports the interest while providing visibility into nonprofit operations
and whether an unmet need really exists.
• Alternately, establishing a local chapter of an existing global, national, or regional
nonprofit, like UNICEF, the American Cancer Society, or Goodwill Industries,
can be the best of both worlds. The capacity and name recognition of the larger
organization can be leveraged, while still allowing for a local grassroots focus.3
• Another alternative is fiscal sponsorship, where an existing public charity
“sponsors” a start-up effort or specific project. The arrangement can extend
the sponsor’s tax-deductibility for donations and qualification for grant funding
to the nascent activity, while avoiding the necessity to create an organization
that will compete for resources.
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• Finally, the boundaries between nonprofit and for-profit organizations continue
to blur. An important consideration is whether the identified social
purpose can be served more effectively through a private social enterprise
unbound by the restrictions placed on nonprofit organizations.4
Hands-On Activity: Determining the Need for a New Nonprofit
The goal of this activity is to simulate the early stages of establishing a new
nonprofit organization. Document the following tasks in a two-page professional
memo written for an audience of potential funders for the new enterprise.
Step 1: Identify a social need in which you are interested. The need could be
local, national, or international.
Step 2: Conduct an environmental scan for organizations that work in the
identified space. In addition to their name, include some discussion of the geographic
areas in which they operate and the level of organizational capacity (size,
employees, programs).
Step 3: Determine whether the existing organizations are sufficient to address
the selected problem by identifying whether there are gaps in services or
Step 4: Propose either a partnership with an existing organization, an extension
of a current program, or justify the need for an entirely new organization.
1. National Center for Charitable Statistics (NCCS). 2016. “Quick Facts about
Nonprofits.” Retrieved from:
2. Ibid.
3. Fritz, Joanne. 2016. “Alternatives to Starting a Nonprofit: You Can Do Good
Without Starting a Nonprofit.” The Balance.…
4. Ibid.
For Additional Information
Foundation Center. n.d. “Knowledge Base: Q: How Do I Start a Nonprofit Organization?”…