How to Start a Nonprofit 501(c)(3) Organization

The vast majority of grants are given to nonprofit organizations.  When you apply for a grant you will have to submit paperwork to prove to the grant funder that you are a nonprofit organization.

You cannot put the cart before the horse and find a grant opportunity and then start a nonprofit organization.  There are  many steps you need to go through before you can start searching for and be qualified for grants.

Below is a brief overview of the process of forming a nonprofit 501(c)(3) organization.

Formulate a Mission Statement

Nonprofit organizations exist to accomplish a mission.  Your mission statement is based upon your purpose, services and values.  Mission statements should be only one or two sentences.  It will be used on all your publications and funding requests. Your  Board of Directors should vote to officially adopt your mission statement.

Form a Board of Directors

Every state will have regulations that specify the minimum number of people for your board.  It is very important to recruit members who support your mission and are willing to give their time and talents to help accomplish it.

Develop a Budget

You need to develop a realistic budget and the Board of Directors has to approve it.  The budget is included on your IRS application for tax-exempt status.

File Articles of Incorporation

 Articles of Incorporation filed in your state.  They protect the Board of Directors and staff from legal liabilities incurred by the your organization.  This makes the corporation the holder of debts and liabilities, not the individuals and officers who work for your organization.

Develop a Record-Keeping System

Each state will have regulations concerning the documents you must keep.  Among these are:  financial statements, board meeting minutes, bylaws, and Articles of Incorporation.  You must develop a system of keep official files and records and keep them current.

Develop an Accounting System

Your organization needs to open a bank account and establish an accounting system.

File for 501(c)(3) Status

You should file for recognition of tax-exempt public charity status, 501(c)(3) within 15 months of the  date  when your organization was established, or when your Articles of Incorporation were filed.  This is a legal document and it is advisable to use an attorney to prepare it.  See

To apply for recognition of tax-exempt, public charity statusobtain Form 1023 (application) and Publication 557 (detailed instructions) from the local IRS office. The filing fee depends upon the size of the organization’s budget. The application is an important legal document, so it is advisable to seek the assistance of an experienced attorney when preparing it.

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Apply for a Federal Employee Identification Number

After you have filed your Articles of Incorporation you need to apply for a Federal Employee Identification Number (EIN).  It is a legal requirement and is used to identify your organization when filing tax documents.

File for State and Local Tax Exemption

Each state will have laws concerning various tax exemptions.  Contact your state and local Department of Revenue for more information.

Fulfill Charitable Solicitation Law Requirements

Each state will have laws concerning charitable solicitation, or fundraising.  Contact your state Attorney General’s office for information on the laws of your state.


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