How to Start a Nonprofit With No Money

Not your own 501(c)(3), because the state filing fee and the IRS user fee are unavoidable. Form 1023-EZ is $275 and the full Form 1023 is $600, plus your state's incorporation fee.

You can start the work with nothing, and you can accept tax deductible donations with nothing by using a fiscal sponsor, an existing charity that lets you operate under its exemption in exchange for a percentage of what you raise.

For most people asking this question, fiscal sponsorship is the answer. It removes the upfront cost, gives you deductible donations immediately, and leaves you free to incorporate later once the work has proved durable.

An existing 501(c)(3) organization that lets you run a charitable project under its tax exemption.

Donations to your project go to the sponsor, are deductible for the donor immediately, and are held for your project's use. The sponsor handles the annual return, usually provides insurance and financial administration, and charges a percentage of what you raise, commonly five to fifteen per cent.

Two models exist. In comprehensive sponsorship your project is legally part of the sponsor's organization. In a pre-approved grant relationship the sponsor regrants funds to a separate entity you run. Ask which is on offer, because the difference in control and liability is significant.

At minimum, a state incorporation fee, commonly under $150 though it varies widely, plus the IRS user fee of $275 for Form 1023-EZ or $600 for the full Form 1023.

Add state charitable solicitation registration where required, which some states provide free and others charge for.

Optional but worthwhile: an hour or two of nonprofit attorney time to check your articles of incorporation before filing, because a defective purpose or dissolution clause is the most common reason exemption applications are returned, and fixing it afterwards means another state filing and months of delay.

Not worthwhile: formation services charging several hundred dollars to complete forms you can complete yourself.

Almost never for start-up costs, and this catches people out.

Most foundations require a determination letter before they will grant, and many also want one or two years of financial statements or a filed Form 990. A brand new organization has neither.

There are narrow exceptions: some community foundations and some funders with an explicit interest in emerging organizations will support early-stage work, usually locally and usually in modest amounts.

Fiscal sponsorship changes this materially, because you apply under the sponsor's track record rather than your absence of one. Meanwhile, build individual giving, which has no eligibility criteria and is the money that proves to a funder that other people believe in you.

No, and one to two hours of nonprofit attorney time is the best-value optional spend available to a new organization.

Many organizations file successfully without any legal help, particularly on Form 1023-EZ, which is short and online.

Where an attorney pays for themselves is checking your articles of incorporation before you file with the state. The IRS requires a purpose clause limiting the organization to exempt purposes and a dissolution clause committing assets to another exempt organization, and generic state templates frequently omit both because the state does not require them.

Get advice if your situation is unusual: paying a founder, a board mostly from one family, activity overseas, or planned business activity.

Incorporation is often days. The exemption application is the long part: Form 1023-EZ is typically processed in weeks, the full Form 1023 takes considerably longer, and applications that generate questions take longer still.

The delay rarely stops you operating. If you apply within 27 months of the end of the month you formed in, recognition is generally retroactive to your formation date, so gifts received while you wait are covered.

Be honest with donors in the meantime. Say the application is pending and that deductibility depends on approval. Claiming status you have not been granted is not a technicality.

With a fiscal sponsor, donations are deductible from the day the agreement is signed.

Check first, because roughly 1.97 million nonprofits are registered in the United States and in most fields several already work on your issue locally.

Search your area, read the Form 990s of similar organizations free on ProPublica Nonprofit Explorer, and talk to two or three of them. You may find the work is already being done, in which case volunteering, joining a board, or running a programme inside an existing organization achieves the mission faster.

Founding makes sense when there is a genuine gap, when existing organizations will not or cannot fill it, and when you are prepared for the administration as well as the work.

Founding a fourth organization competing for the same small pool of local funding usually helps nobody, including the people you want to serve.

Two are large enough to change your budget.

Google Ad Grants gives qualifying nonprofits up to $10,000 a month in search advertising on Google.com. It is a grant rather than a discount and it requires a few hours a month of maintenance, since neglected accounts lapse.

TechSoup provides donated and heavily discounted software to eligible organizations, including QuickBooks Online Plus at an $80 annual admin fee for up to five users.

Beyond those: fundraising platforms such as Zeffy and Givebutter that charge the nonprofit nothing, funded by optional donor tips; free tiers of email and volunteer management tools; and community foundations, many of which will meet a new organization and advise before any application.