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How to Start a Nonprofit | Step 1: Research

Before starting a nonprofit, it is critical to examine the need for another nonprofit. This is particularly true in light of today's economy. There are currently over one million charitable nonprofits in the United States, but many constantly struggle to attract increasingly limited funding, and many organizations have overlapping missions. Most experienced people teaching others how to create a new nonprofit devote a substantial amount of time trying to persuade people that creating a nonprofit may sound at first blush like a good idea, but deserves deeper exploration. There may be better options to accomplish your goals. (Also, have you considered an option that has become more recognized recently which is to  form a private business that is commited to contributing a material, positive benefit to society? Read about certified B corporations.)

The following questions may help you determine whether creating another nonprofit entity is the correct path for you:

"Are we looking past the myths to the realities?"

Many people have misperceptions about nonprofits, such as: "Running a nonprofit is easy because a foundation will fund its operations" (Fact: Private foundations only support a fraction of charitable nonprofits. Every nonprofit has to work very hard to attract contributions) Myths about nonprofits.

"Where will we get not only start-up funding, but also operational funding to continue thereafter?"

Realtors stress "location, location, location." Founders of nonprofits have another mantra: "funding, funding, funding." Given the ever-growing competition for limited resources (board members are in short supply in some regions; dollars are increasingly scarce), make sure you have a realistic picture not only of what it will cost in time and treasure to create a nonprofit, but also how you will manage the day-to-day activities, and continue to attract revenue into the future. (Most nonprofits are formed to last "into perpetuity".) Make sure to research what will make your new organization stand above the crowd, because it makes little sense to go through the time and expense of creating a new nonprofit if it won't be sustainable.

What's the "business plan"?

To be successful, a nonprofit needs more than just people passionate about programs. It also needs an infrastructure strong enough to support those programs over time. Accordingly, invest quality time up front to develop a detailed business plan. Such a plan will provide the structured discipline to think through the critically important operational issues. Moreover, once the business plan exists, excerpts can be pulled from it to insert into the federal Form 1023 application for tax-exempt status.

"Do we really know what we are getting ourselves into?"

Even before creating a nonprofit ask this question, because once you incorporate at the state level and secure tax-exempt status from the federal level, then the real heavy-lifting begins: both internal (such as recruiting and orienting a great board, hiring talented staff, finding and equipping an office, setting up financial structures, etc.) and external (such as registering with the state before you can fundraise, launching your fundraising program, securing any required licenses or permits, making withholding tax deposits, and so much more). Plus, given the heightened scrutiny of nonprofits, you will need to have an ethics accountability program in place (including policies regarding conflicts of interests, compensation, travel, whistle-blower protection, and more).

Of course, there is no better teacher than experience. To get help - give help. By volunteering for other nonprofits, you will do three things: help develop your expertise, help make new contacts that may enable you to release your passion through an existing nonprofit, and help you make a difference today.