How to Start a Nonprofit in 8 Steps

How To Start a Nonprofit in 8 Steps
Updated August 29, 2023
Travis Crabtree
Written byTravis Crabtree
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When you hear the term “nonprofit,” you probably think of a charity or organization working towards a way to benefit the community, but they also benefit the economy. Nonprofits add millions of people with full-time positions to the American workforce and generate billions of dollars each year.  

Nonprofit organizations are also one of the most popular business structures, too. According to the National Center for Charitable Statistics, approximately 1.56 million nonprofits were registered in 2015. In 2018, Swyft Filings alone filed a little over 2,200 organizations — an average of 9 a day!

If you think a nonprofit is the right structure for your new business, keep reading. In this blog, we compiled the 8 essential steps for forming a nonprofit organization.

Step 1: Identify your nonprofit’s purpose

It’s important to identify your nonprofit’s purpose, for the sake of the organization. Additionally, in order to receive tax-exempt status, the articles of incorporation must include a purpose statement that falls under section 501(c)(3) of the Internal Revenue Code:

“... corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.”

It’s important to note that 501(c)(3) nonprofit corporations pursue charitable goals and are tax-exempt, whereas 501(c)(4) through 501(c)(29) are tax-exempt but do not have a charitable purpose. 

Step 2: Choose a name for your organization

Due to the eventual tax-exempt status and the philanthropic nature of most non-profits, you must use an identifying word in your new organization’s name to signify that you are incorporated.

The most common identifiers are:

  • Corporation

  • Company

  • Incorporated

  • Limited

You can find a complete list of company suffix requirements by state here.

You will also need to make sure that your preferred company name is available in your state. Be sure to search state and federal trademark listings to make sure your company is unique. Most nonprofits also elect to ensure their name accurately reflects their social purpose or cause.

You can see more tips for naming your business in our comprehensive guide here.

Step 3: Create bylaws for your organization

The bylaws serve as a guide for your nonprofit, as well as a requirement for when you file your nonprofit with the IRS. Bylaws may vary depending on your organization, but they should outline a few basic rules, including:  

  • When board meetings are held

  • Voting procedure

  • How to handle conflict

  • Who serves on the board

  • How to create or end committees

  • How to change or amend bylaws

We can help you create custom bylaws tailored just for you. Learn more about our bylaw creation services here

Step 4: Elect a registered agent

You must list a registered agent in your nonprofit filing, and provide the information of the person listed. A registered agent’s role is to receive any formal correspondence between government agencies and your business. In the event of a lawsuit or other legal action, all the contact information for the registered agent must be up-to-date.  

Step 5: Appoint and organize your leaders

Much like a corporation, nonprofits must appoint directors, executives, managers, and administrative staff to run the organization effectively.  The board of directors typically oversee the organization’s activities, hire the executive staff, and vote on major decisions for strategy and finance. The executive staff runs the daily operations and serves as the face(s) of the organization, and includes the president, vice president, and other chief officers. Managers work directly with clients and handle most of the day-to-day activities. Administrative staff tends to assist the managerial and executive staff with any needed program or entry-level work.

Most states require one director, but it is highly recommended to appoint three directors—one of which is not immediate family. This is due to the IRS rule for filing a 501(c)(3), and as a result, business owners must pay for an amendment to add directors. 

Step 6: File the Articles of Incorporation

Sometimes referred to as “Certificate of Incorporation” or “Charter Document,” this document is required in order to keep your organization in good standing with the state. The Articles of Incorporation include:

  • Organization name

  • Type of nonprofit

  • Purpose statement

  • Registered agent

  • Names of incorporators

  • Names of directors

  • Designation of stock or non-stock

  • Statement of whether membership-based or not

See our blog on incorporating your business to find more information on how to file the Articles of Incorporation.

Step 7: Apply for tax exemptions

The next step is to ensure you obtain 501(c)(3) status by filing a Form  1023 with the IRS. Before you can file paperwork, you need to apply for an EIN (Employer Identification Number). From there, you can follow the Form 1023 checklist to make sure you include everything in the application.

Once you receive approval at the federal level, you also need to make sure that the organization is exempt at the state and local levels — as in, avoiding state income tax, sales tax, and property tax.  Also keep in mind that after being approved for 501(c)(3) status, tax-exempt organizations have to file Form 990 with the IRS each year to maintain exempt status.

Step 8: Obtain the required licenses and permits

After you have successfully incorporated your nonprofit, you must obtain a business license to manage sales and employment taxes. The local business license allows the nonprofit to operate locally.  Depending on your state, fundraising activities might also be governed by the state.

Obtaining business licenses and permits can be a daunting task to undertake on your own. Let our team of experts find and apply for all of the permits your business may need. Learn more here.

Let us help you form your nonprofit organization!

There are many contextual issues that may affect your nonprofit’s incorporation, such as the industry and size of your organization. With this in mind, consider contacting a professional filing service before starting your new venture.  

The Swyft Filings team is ready to help you launch your nonprofit. Contact us today!

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Originally published on June 01, 2023, and last edited on August 29, 2023.

Frequently Asked Questions

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How much does it cost to form a corporation or LLC?

You can form a corporation or LLC with our help for as little as $0, plus state filing fees for incorporation. Filing fees vary depending on the state you incorporate in. For more information on specific states, check out our state guides on the Swyft Resource Center. You can also email us with specific questions or contact us at 877-777-0450.

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Swyft Filings accepts payment through Visa, MasterCard, American Express, PayPal, checks, and money orders. You can send any questions about payment to our email address or contact us at 877-777-0450.

Will I have to pay additional fees to Swyft Filings after completing my order?

It depends on what you ordered. If all you did was file your corporation or LLC, the price you paid when ordering is all you pay. You will have no further fees after that.

However, if you signed up for the Swyft Filings Registered Agent Service, you will be charged its initial fee three days after you place your order. From then on, you will be charged according to the terms of your subscription until you change your registered agent with the state or dissolve your company. If you change your agent or dissolve your company on your own, let us know so we can discontinue billing.

Other potential subscription-based options include SnapMailbox, 360 Legal Forms, and ComplianceGuard. If you opt for SnapMailbox or 360 Legal Forms, you will be charged a monthly fee after their respective 30-day free trials end. ComplianceGuard has an annual fee after a 14-day free trial. All three of these services are completely optional.

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Our team processes all Standard orders on a first come, first served basis. If you opt for Express or Same-Day Processing, we prioritize your order and send it to the front of the line. However, no matter how fast we get it out the door, you’ll still have to wait for your state to address your filing.

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