If you support a cause like animal welfare, human and civil rights, or community development, you may have first become involved on a casual or informal basis. For example, maybe you volunteer at a shelter every week or regularly raise awareness on your personal social media channels.
As time passes, though, it’s natural to wonder whether your passion merits starting your own nonprofit organization (NPO).
Take a moment to think of the nonprofits that have touched your life or do work you admire. These organizations are unique, but they likely share one thing in common: a change-maker acted on their vision for a particular cause and started their own NPO.
If they can do it, so can you! Forming a 501(c)(3) is similar to forming any other type of business or organization. The big question is whether it’s the right choice for you and your project.
What is a Nonprofit Organization?
An officially recognized nonprofit organization serves the local, national, or international community with the goal of public benefit rather than monetary profit.
In addition to serving some aspect of public good, a nonprofit must also demonstrate public support. Registered nonprofits are usually categorized as tax-exempt by the Internal Revenue Service (IRS), particularly if you form a 501(c)(3).
The registration process varies by state, so check your Secretary of State’s office to determine whether your project or group is eligible and identify your next steps.
8 Reasons to Form a Nonprofit
Now, let’s get into the actual reasons why you might decide to start a nonprofit.
1. To Do More Good
The number one reason to start a nonprofit is that there is a need in your community that isn’t being met through existing government agencies, for-profit, or other nonprofits. Consider why you want to start a new nonprofit rather than join an existing nonprofit. Thinking through this may open your mind to other possibilities and will also help differentiate your new organization from the others.
2. Tax benefits
Nonprofits are typically exempt from corporate income taxes. They may also receive some local tax exemptions and state tax benefits.
3. Ability to apply for more grants
Most grant-making organizations require a recognized status such as a 501(c)(3). Therefore, forming an NPO increases your eligibility to apply for grants from sources such as your local CDFI or larger national or international grant-making foundations.
4. Expanded fundraising opportunities
Achieving 501(c)(3) status doesn’t just open the door for grants. It also gives you the ability to engage in myriad new and exciting funding opportunities.
Many donors deduct contributions to nonprofits from their annual taxes. In turn, being classified as a 501(c)(3) and having tax-exempt status may make your project more appealing to business owners and individual donors.
5. Increased credibility
Registering as a nonprofit increases credibility with some donors, government agencies, business sponsors, and the community as a whole. It shows that you’re serious about your mission, and that any donations are going to a legitimate cause.
6. Nonprofit discounts
A variety of organizations and brands offer discounts to registered nonprofits which results in savings on services, software, office supplies, postage, advertising, and more.
7. Organizational longevity
Once you form a registered NPO, it’s easier to plan for the organization’s growth and continued legacy — even if you eventually leave the project. Essentially, 501(c)(3) status makes it easier to “pass the torch” on an important cause.
8. Easier time recruiting volunteers
Some workplace and school-based volunteer programs only work with registered nonprofit organizations. By starting your own nonprofit, you can more easily recruit supporters to help you fulfill your mission.
A No-Brainer, Almost…
With such compelling benefits, forming a nonprofit may seem like the obvious choice. However, there are also a few downsides to consider. The added expense and management oversight are the biggest drawbacks. Some people running smaller, short-term community projects may prefer to stay unincorporated or under the auspices of an existing nonprofit organization.
How to Start a Nonprofit Organization
The process of forming a nonprofit organization takes time. Here is a brief overview of that process.
This isn’t a comprehensive guide, by any means. As we mentioned previously, guidelines often vary by the state, and the nuances could be their own article or series. But, here are some basic tasks to get you started:
- Articulate your organization’s vision and mission. Take time to brainstorm and write your vision, mission, and organization’s values. Who do you want to serve? What unmet needs will your organization meet?
- Come up with a name for your nonprofit and ideally one matching available web domains and social media profile names – *check that the name you want isn’t already incorporated in your state or region
- Recruit board members and key positions
- Start with a solid foundation including a business plan and organizational structure
- Research your state’s incorporation process and incorporate. Other nonprofits in your community, your state’s Secretary of State, and local attorneys are all resources that may help navigate the process
- Secure tax-exempt status
- Secure a Charitable solicitation license, if required in your state
- Research the work and resources involved in maintaining 501(c)3 status
To some, the administrative hoops may seem cumbersome, especially for a small scope project. But to others, having this structure is beneficial to affecting real change and finding solutions to community problems.
Whether you plan to continue as a community project or form a nonprofit organization, a 360-degree productivity suite like UncommonGood can help you efficiently manage your marketing, fundraising, and operations in one affordable, intuitive platform.