How to Start a Nonprofit

We receive many inquiries every year about how to take a great idea and turn it into a functioning nonprofit organization. Starting a nonprofit takes the time, commitment, research and dedication of a group of individuals passionate about meeting a specific need in the community.

What is a Nonprofit?

Nonprofits are corporations whose purposes benefit the public and which are exempt from income tax under Sections 501(c)(3) or 501(c)(4) of the federal Internal Revenue Code.

What Makes an Organization "Nonprofit"?

  •  The organization exists for some benefit to the public.
  • No person owns shares of the corporation or interests in its property, nonprofits are "owned" by the community.
  • The property and any income of the corporation are not distributed to any "owners", but instead are recycled into the corporation's public benefit mission and activities.

Things to Consider Before Starting a Nonprofit

  • Is there an organization already doing similar work in the community?
  • What unmet need will be addressed through your work?
  • How do you know this is the right way to go about meeting that need?

Revenue Sources for Nonprofits

  • Revenue can be generated from a variety of sources: donations, fundraisers, earned revenue from services and products, grants or borrowed funds. It's important to consider a healthy mix of revenue sources when you're planning to start a new nonprofit.
  • Nonprofits in California are regulated by the Attorney General's office and the Internal Revenue Services.

Reasons Not to Start a Nonprofit

  • You have a limited time special project that will benefit your community (this might be a good time to add a fiscal sponsor)
  • You would like to help someone in need (a sick friend or relative). Another options could be to work with a local bank to start an account that people can donate to.
  • You think a lot of grant money will be available (only about 10% of grant proposals are ever funded. Most successful nonprofits have diverse sources of revenue.
  • You have a service or product you want to provide below cost or donate, but want a tax deduction. Instead, consider volunteering or donating to a tax-exempt organization.
  • You feel your current work is not meaningful. Consider working for an existing nonprofit or for-profit with a sense of your mission.
  • You have important knowledge and perspectives to share. Consider writing a book, public speaking or joining a nonprofit board instead.
  • You want to do things your own way and not be fettered by rules and bureaucratic procedures. Nonprofits are accountable to donors, boards of directors, the IRS, Attorney General and the community at large. There are rules and policies that need to be followed to provide services in nonprofits

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