5 common questions about starting a nonprofit organization
As Candid’s online librarian, I often receive questions about starting a nonprofit, what it entails, and whether it’s the best way to pursue a person’s particular passions. Starting a nonprofit organization can be an inspiring way to give back to your community and help those in need. However, it is important to understand this process before moving forward. Growing and sustaining a nonprofit may take years of effort and a great deal of determination.
Here we share some of the most commonly asked questions about starting a nonprofit.
How do I know if my idea is worth pursuing?
A good place to start is with a needs analysis. Do your homework to find out if organizations (nonprofit, for-profit, or government) are already doing the same or similar work in your community. It will be harder to get support if you are just duplicating existing services rather than improving or adding to them. Also find demographic or population data that shows a need for your services and explain how that need is not being met.
Are there alternatives to starting a nonprofit?
Forming a new nonprofit might be the most complicated way to act on your passion to serve your community. The biggest challenge for most new nonprofits is to develop and maintain reliable income streams. Estimates vary, but most experts agree that less than half of nonprofit startups survive beyond five years. Of those that survive, perhaps one-third are in financial distress.
You may want to consider alternatives that can let you essentially operate as a nonprofit but with far less effort and cost. Thus, you can focus your efforts on serving your community right now while you develop experience and support that will serve you well if you eventually decide to form a separate organization.
How do I explain my nonprofit’s purpose?
Developing your mission statement is a critical first step. It communicates your nonprofit’s purpose, what groups it serves, and how it will serve them. Every decision and action in your organization should support and further your mission.
We also recommend that you write a business plan. Just as with a for-profit business, a business plan can help a nonprofit describe how it intends to achieve its mission in more specific detail. It also can be used to outline a new project or venture.
Do I need to have a board of directors in place?
As your nonprofit’s governing body, your board fulfills a variety of roles and legal responsibilities. In order to carry out these duties effectively, the board will change as your organization grows and matures. While recruitment is an important step in this process, a systematic approach to board development, including orientation, training, evaluation, and the cultivation of prospective board members, is critical to ensuring its long-term success.
Are there educational materials on starting a nonprofit?
Candid offers an online course, Is Starting a Nonprofit Right for You? as well as a Nonprofit Startup Assessment. When you finish this free 75-point checkup, you can download a report of your results and access resources to build your skills.
To learn more, visit Candid’s knowledge base for the full article on starting a nonprofit, with even more resources, tips, and in-depth webinars.
Have a question? Ask our team of online librarians at [email protected] or via chat (available 9:30 a.m. to 5 p.m. ET, Monday-Friday).
The information provided in this article is intended to offer general guidance on how to form a nonprofit organization. Specific steps may vary for each state, and Candid recommends consulting with a legal or tax professional for detailed assistance.
Kate, Digital Communications Manager, Candid says:
In general, the answer is no. Nonprofits need to report salaries paid like every other organization (whether on a W-2 or a 1099) so the government would know the person received compensation.
Can one hide income from a non profit for tax purposes ?
Eli Richardson says:
My older brother's interested in starting a nonprofit this yea, but he wants to know more about what legal paperwork he'll need. It's good to know how building a business plan helps you identify your nonprofit's goals and how to reach them, so I believe your guide will help my brother for sure. Thanks for the information on creating a nonprofit from scratch. https://www.legalforgood.com/government-compliance
Nyavanhu Mapendere ( founder for ECIT) says:
Very insightful, I got enlightened and as a person who established a non -profit organization in 2020, I would like to be educated about the procedures needed to start looking for funding.
Thank you for such empowering ideas.