It’s a good thing that social activists start nonprofits with a passion, a purpose and—hopefully—enough bankroll to finance their budding organization. Starting a nonprofit is hard work. Few can cut it, though we’re confident you can. Begin with an inspiring task, like writing your nonprofit mission statement. Knowing why you’re going through the difficult planning and budgeting process may propel you through dreary days.
But after crafting your mission statement, it’s time to settle into the difficult but immensely important financial planning process. Planning for the funds you need to start—and sustain—your nonprofit will save you trouble in the long run (it might even save your nonprofit). Read on to review our list of the fees and finance-related tasks associated with starting a nonprofit.
Nonprofit executives will rightly tell you that a nonprofit is another form of a business. And like a business, you need more revenue than expenses. Create a business plan for your nonprofit so you know where the money’s coming from and where it’s going.
As you budget through your business plan, take a good look at your nonprofit’s revenue streams. Where did your current funds come from, and can you count on them to continue after the nonprofit startup process? The health and longevity of these revenue streams (individuals, the government, grants) need to be on your radar for a stronger nonprofit.
Before applying to the IRS for tax-exempt status, your new nonprofit needs to incorporate. Becoming a corporation typically involves choosing a legal business name, filing necessary documents with your state’s corporate filing office and creating bylaws to dictate how your organization will be run. The cost of incorporation depends on your state. In California, for example, filing to become a “C” Class nonprofit costs $100, but there’s no cost to become an “S” class corporation. We recommend comparing costs by state at BizFiliings.
You’ll also need to hold at least one meeting with your nonprofit board of directors and file for any applicable permits your corporation will need to operate legally. It is only after receiving your articles of incorporation (for a fee) that your nonprofit can apply for 501(c)(3) status.
Once your nonprofit is a corporation, you can apply for nonprofit status. It’s best to do so within 27 months of incorporating. You’ll receive a letter approving your application, rejecting it or requesting more information. Good news for your nonprofit’s finances—if your income is $57,000 or less you can use tax prep software for free e-filing.Your nonprofit will also need to file Form 1023. The standard filing fee for Form 1023 will cost you $750, but your fee will be reduced by $400 if you don’t expect revenue to exceed $40,000.
The financial considerations involved in starting a nonprofit require a lot of legwork and more than a little paperwork, but you will be rewarded with financial security.
How’s your new nonprofit’s revenue stream, and what can you do to keep it coming?
We are starting our organization on a shoe string with hopes of having some fundraisers. Our mission is to take in donated vehicles and place vehicles in to the families of the needy or handicapped / needy. We will use the vehicles as is / repair and use or sell. Some we will sell at auction and others as junk. It is obvious we won’t give away more vehicles than we have. We believe we will be making a contribution to our community by supplying some vehicles to the needy and cleaning up junk cars in the community. We are hoping some of the car dealers will make contribution as they could get a tax deduction. We live in a rural area with no public transportation. Now, tell me what chance so you think we have of surviving as a nonprofit.
Thanks for your comment, Gen. Fundraising will be increasingly important to your nonprofit as you work to provide cars to those who need them. Be sure to check out more of our articles on starting a nonprofit and fundraising to sustain your organization.
we are a basketball team trying to get a non profit tax id number so that we can open a bank acct . we need to know how to go about it and how much it cost