become

How to Start a Nonprofit in the USA 501(c)(3) [Step by Step]



Sharing buttons:

in this video I'm gonna show you

everything you need to know about how to

start a 501c3 tax-exempt nonprofit in

the u.s. I'll go over what documents you

need to prepare ahead of time where to

find application files the exact steps

you need to go through how much it'll

cost you and tips throughout the whole

process that can make things easier

along the way so the whole process can

be pretty confusing because there are a

lot of steps but I've broken down

everything into very simple terms for

you

so I'm Terry and I'm from wild apricot

and we make software for members of

organizations in over the last few years

I've worked with dozens of nonprofits

plus I wrote a complete guide on how to

start a non-profit from scratch so let's

just get into it

so first things first just some benefits

of starting a non-profit besides gaining

tax-exempt status once you incorporate

your nonprofit one thing that many

people don't consider is that you will

also be personally protected from any

liabilities of the organization and this

just means that if someone wants to sue

your nonprofit for a business-related

debt or injury or whatnot they can only

go after the corporate entity and not

the personal assets of its owners which

which I guess in this case are you mind

you there are also some things to avoid

once your incorporate for instance

nonprofits risk their tax-exempt status

if they attempt to influence legislation

you may also not distribute any of the

income you make at your nonprofit to you

your board members or any other members

of or directors of the organization in

the form of shares or dividends

everything you make must be recycled

back into the organization itself also

as a side note that filing to be

tax-exempt is a long and complex process

and many people choose to hire a lawyer

to help them out of course there are

also a number of free resources online

from the IRS and other sites like wild

apricots that can help you understand

what you need to know so with that being

said here are the steps I will cover in

this video first I'm gonna go over

registering your nonprofit name

appointing your board of directors

creating bylaws filing your Articles of

Incorporation with your state office

obtaining an employee identification

number or ein

and then applying for tax-exempt status

with the IRS and then at the end I'm

going to go over how to maintain ongoing

compliance so let's begin with step

number one which is to register a name

now you can't just pick any name for

your nonprofit you actually have to

check your Secretary of State's office

to see if the name you want is available

and if so you have to register it with

them and that can cost about twenty five

dollars usually and at this point it's

important to note that you are just

reserving your name until you file your

articles of incorporation you don't

actually have that name that you

registered yet but this $25.00 that you

pay just guarantees that no one else can

take your name until you file step two

appointing your board of directors now

the reason you need to do this before

you file for tax-exempt status is

twofold first you have to list out their

names and addresses when you file for

incorporation and fill out your tax

exempt forms and secondly your board

will help you create your bylaws which

are also required for incorporation it's

important to know that for the most case

board members cannot receive any

compensation for their service

you should also adopt a policy

addressing conflicts of interest ahead

of time just as a preventative measure

but the biggest reason you actually need

a board is to help your nonprofit make

decisions and manage finances and

marketing activities events members and

other functions so when looking for a

board of directors make sure your

candidates have experience in these

areas many nonprofits even appoint a

nomination committee to help bring in

more qualified candidates and narrow

down the applicants they have and if

you're not sure where to look for a

board of directors many new nonprofits

just start with their own network of

friends co-workers and even volunteers

there is also a couple of free websites

dedicated to helping you find the right

people for instance volunteer volunteer

match org is a really good one okay so

you have your board together it's time

to move on to step three which is

creating your bylaws your bylaws are

simply legal documents stating a formal

agreement between the organization and

the owners on things like how the

business is conducted and decisions are

made to create them you'll have to bring

in your board for your first board

meeting

and generally your bylaws should include

the following eight areas the first one

is your purpose which includes your

mission and services and the type of

nonprofit you are whether you will have

membership and member conditions and

dues also what type of members can vote

and the voting procedures themselves

when your annual meeting is and how

often you will have ongoing meetings

with members whether you will have a

calendar year or a fiscal year Pleader

board of directors officers committees

and corporate staff are any conflicts of

interest and compensation agreements

what happens in the event of a dispute

and other related topics and finally the

official date your bylaws come into

effect and if you need some help writing

out your bylaws the website nonprofit

ally has some great free templates that

can help you out so check out the

description of this video and I will

give a link to them there step for

filing your articles of incorporation

with your state office and your state

office this is the same place where you

registered your name in step 1 now each

state can have slightly different

requirements on what you must file so it

really depends on where you are but

generally your articles include your

corporation's name your address the name

and address of your registered agent and

this is just a person designated to

receive legal documents if your

nonprofit happens to be involved in any

legal issues and by the way you'll also

need a registered agent in each state

you plan on doing business and for your

articles you'll also need a statement of

your purpose which is just a few

sentences of who you are and what you

offer you will also need to say if you

will have members or no members and the

type of nonprofit you want to register

as for most nonprofits this is just a

501 C 3 but depending on if you are a

more specific organization like a

fraternity or a Chamber of Commerce this

may vary you will also need the duration

of your corporation so if you plan on

incorporating indefinitely or just for a

specific amount of time you will also

need the names and addresses of your

board of directors and the name and

address of the person or the people

incorporating the nonprofit now if

you're getting a little lost in these

steps it's okay don't worry I've

included a link in the description of

this video

with everything written out very plainly

for you so if you're getting lost make

sure you check that out so the cost to

file these articles varies by state but

it's usually around $100 in some cases

it can be even up to 250 dollars and

while you're filing your articles it's

also a good time to look into any state

licenses or permits that you may require

since each state has different

regulations on things like auctions

raffles construction activities and

whatnot so now you've filed your

articles of incorporation with your

state office before you can continue on

with the IRS

you will need what's called an employee

identification number or an EIN and that

is step number five your employee

identification number so this number is

a nine digit code that the IRS will use

whenever they interact with your

nonprofit and even if you don't have any

employees you still need one regardless

and so this step is pretty easy to get

you can just apply for your EIN on the

IRS website in about 15 minutes you just

fill out a simple questionnaire with

some questions about your nonprofit and

who you are and I will include a link in

the description of this video to exactly

where to get your EIN on the IRS and

just note that when you are filling out

your application online you have to do

it in the same 15-minute time frame that

they give you so make sure that you just

set aside some distraction free time to

do this okay so at this point you've

chosen a name you've gathered your board

you've created your bylaws you've

incorporated with your state office and

you've received your I your EIN you

finally have everything together to

apply for tax-exempt status with the IRS

so step six is applying for tax-exempt

status so form one zero to three is the

application form you need to fill out to

be recognized as a tax-exempt

organization with the IRS there is also

a form called form 1 0 - 3 - easy which

is a streamlined form you may be

eligible for that is a little faster to

fill out but I will include links to

both form 1 0 2 3 and form 1 0 2 3 -

easy in the description of this video

for you and just to note you will also

have to pay a fee to apply with form 1 0

to 3 which is $600 unless you're able to

apply for form 0 1 0 2 3 - easy which is

275 dollars now I'm only gonna cover

form 1 0 to 3 in this video because that

is the standard form and it is 28 pages

long and it can take up to 100 hours to

fill out which is a lot of time so you

don't have any room for mistakes because

you don't want to have to start the

process over again and some nonprofits

even hire a consultant or lawyer to help

them out with this process to make

everything go smoothly so I want to go

over the gist of this form and give you

some helpful tips when filling it out

now first of all just think of this form

as a basic business plan because that's

essentially what it is the IRS is making

you fill it out more or less to just

prove that you can hit the ground

running and you have the fundamentals in

place to be a successful nonprofit plus

you're doing what they require to get

tax exempt status in the form itself the

first thing you will have to do is state

whether you are a corporation an LLC or

an unincorporated association or trust

next you will also have to print out and

attach a copy of all those bylaws you

created earlier and their date of

adoption as well as a print out

narrative of your past present and

future planned activities as a

non-profit and these are just things

like the programs and services you

create and what type of members you will

have and how you will attract them you

will also need to include the names and

financial arrangements or compensations

of your officers directors employees and

any other stakeholders that you may have

plus attached copies of any leases

contracts loans and other agreements

your organization is made with any other

third parties as well as detailed

explanations of any negotiations you

have made so far you will also have to

detail any products or services you

intend on creating as well as attach the

description of any fundraising programs

you have coordinated or that you plan to

create in the future as well so next

comes the really really tricky stuff and

that is the financial part which can be

especially tough so the IRS wants you to

fill out financial data for a three-year

period and they

want to know things like taxes levied on

your behalf disbursements to members any

professional fees that you've incurred

plus a lot of other data and this is why

it is so important to start saving all

those receipts and invoices for

everything from day one and even if you

don't have any finances yet it's a

really good idea to start thinking about

them now because the IRS will require

you to project estimate revenues and

expenses into the future and if you

don't know where to start and you want

to get a better idea of what this might

look like for your organization I

recommend searching for public financial

documents of a local nonprofit or a

similar nonprofit to yours in your area

and using that as an example you will

also have to project two years of

revenue from your current tax year and

there are six main types of revenue that

the IRS is looking for and they include

gifts grants and other contributions

received membership fees investment

income taxes levied on your behalf which

I mentioned before

admissions merchandise sold or services

performed and any other unrelated

business income so most people I know

end up spending the majority of their

time on the financial section and once

you've completed that financial section

there's only really one major section

left and it may not even apply to you so

this last major section only applies to

very specific types of nonprofits such

as organizations providing homes for the

elderly or handicapped or low-income

housing grant scholarship or loan

providing opportunities if you are a

church a school a hospital and a few

other very specialized types of

organizations so if you are one of these

types of organizations you will have to

fill out a number of extra specific

questions but if you aren't one of these

organizations you are pretty much done

with form one zero to three so all

that's left now is to fill it in attach

any additional applicable forms to your

type of organization there's for

instance the form 881 which is about tax

information authorization or there's a

form about power of attorney or another

form about elections just any forms that

may be specifically applicable to your

nonprofit and at the end all you have to

do is enter your

ìin number on the bottom of the form and

then there's just a basic checklist to

make sure you filled out everything

properly and that is that now like I

said before this form is very complex

and takes a lot of time to fill out and

many people end up hiring a professional

to help them do this but if you do end

up completing it on your own and you

need some help there is a really great

free resource called form one zero to

three org that takes you through each

part of the form in much greater detail

with a lot of helpful tips along the way

and you may also be able to get some pro

bono legal help from your local bar

association so make sure you just check

with them first to see if you can get

that - plus it's also a really good idea

to check your state's nonprofit

association and connect with someone

there they should be very familiar with

helping new nonprofits to get their

tax-exempt status

plus you want to become a member to

access their resources and networking

opportunities as well so once you send

your application in there's really no

telling how long it will take to get

approved the IRS recommends getting in

touch with them if you don't hear from

them for about 60 days but I've known

some people to take longer or shorter it

really just depends so that's it

congratulations on applying to become a

non-profit you probably want to take a

really nice celebratory break because

this process can take so much work now

there's just one more thing that you

should be aware of and that is how to

remain in compliance with the IRS so you

keep your tax exempt status after you

receive your tax exempt status from the

IRS you must complete a form called form

nine nine zero every single year which

makes your financial records public and

this form is a 12 page document

outlining all of your financials from

the year things like grants revenues

compensation and other details now of

course you don't have to worry about

this until after you receive your status

but it's a good idea to start thinking

about it now and a really good reason to

keep solid track of your financials -

okay now that's it congratulations

you've applied to become a fully

tax-exempt nonprofit in the US and if

you want even more tips to start your

nonprofit successfully I've put together

a completely full guide with things like

how to set up your office on an absolute

shoestring budget like where to find

free computer equipment and software how

to hire your board the best way to find

in nurture supporters and I've included

a link to this guide in the description

of this video so I really hope you check

it out and if you're planning on

creating a membership type of

organization you can get a free 30-day

trial of wild apricot our software used

by over 25,000 membership organizations

in the US which makes it easy to attract

manage and retain members and finances

and I've included a link to that 30-day

trial in the description of this video

as well and that's all for now if you'd

like more videos on how to grow a

successful nonprofit please like and

subscribe