---
name: nonprofit-starter
description: |
  Step-by-step guide to starting a nonprofit organization including mission development, 501(c)(3) application, bylaws, board formation, fiscal sponsorship, fundraising, and compliance. Use when the user asks about nonprofit starter or needs help with related topics. Do NOT use for unrelated domains or when a more specialized skill exists.
license: Apache-2.0
metadata:
  author: foundry-skills
  version: "1.0.0"
  tags: "entrepreneurship strategy planning"
  category: "business-strategy"
  subcategory: "strategy-planning"
  depends: ""
  disclaimer: "none"
  difficulty: "intermediate"
---

# Nonprofit Starter

## When to Use

**Use this skill when:**
- The user wants to start a nonprofit organization from scratch, including mission development and 501(c)(3) application
- The user needs help writing bylaws, forming a board, or establishing fiscal sponsorship
- The user wants step-by-step guidance on nonprofit incorporation, compliance, or IRS filing
- The user is evaluating whether to form a nonprofit vs. a for-profit social enterprise

**Do NOT use this skill when:**
- The user already has a nonprofit and needs governance improvements (use board-governance instead)
- The user needs fundraising strategy for an existing organization (use fundraising-strategist instead)
- The user wants to write grant proposals (use nonprofit-grant-writer instead)

## Process

1. **Gather requirements.** Ask the user clarifying questions about their specific context, goals, constraints, and experience level.

2. **Analyze the situation.** Review the information provided and identify key factors, challenges, and opportunities relevant to nonprofit starter.

3. **Develop the framework.** Create a structured approach tailored to the user's needs, incorporating best practices and domain-specific considerations.

4. **Deliver actionable output.** Present specific, implementable recommendations with clear rationale, timelines, and success criteria.

5. **Address edge cases.** Proactively identify potential issues, alternative approaches, and contingency plans.

**Use this skill when:**
- User needs guidance on nonprofit starter
- User asks about nonprofit starter best practices or techniques
- User wants a structured approach to nonprofit starter

**Do NOT use this skill when:**
- A more specialized skill exists for the specific subtopic
- The request is outside the scope of nonprofit starter

## Questions to Ask First

Before diving into the process, I need to understand your situation:

1. What problem or need are you trying to address? Can you articulate it in one sentence?
2. Have you researched whether existing organizations already address this need? Could you partner instead of starting from scratch?
3. What geographic area will you serve? (Local, regional, national, international)
4. Who are the people you intend to serve? (Demographics, community)
5. Do you have a group of committed people willing to serve as founding board members?
6. What is your timeline? (Need to operate now vs. planning for 6-12 months out)
7. Do you have startup funds available? ($0 / Under $1,000 / $1,000-5,000 / $5,000+)
8. Is this your first time leading an organization?
9. Have you considered whether this should be a nonprofit, a social enterprise, or a for-profit with social mission?
10. Are you willing to make this a multi-year commitment?

## Step 1: Mission and Vision Development

### Crafting Your Mission Statement
Your mission statement is the foundation. It answers: Why does this organization exist?

**Formula**: [Organization] [action verb] [target population] by [method/approach] to [outcome].

**Examples**:
- "Green Future educates urban youth about sustainable agriculture through school garden programs to build healthier communities."
- "Paws Forward rescues abandoned dogs in rural Appalachia and connects them with loving adoptive families."

**Mission Statement Checklist**:
- Under 30 words
- Clear and jargon-free (a 12-year-old should understand it)
- Specific about who you serve
- Describes what you do and why
- Inspires action and support

### Vision Statement
Your vision describes the future world you are working toward.

**Examples**:
- "A world where every child has access to nutritious food."
- "Communities where all families have stable, affordable housing."

### Values Statement
3-5 core values that guide organizational behavior:
- Integrity, equity, collaboration, innovation, compassion, transparency, accountability

### Theory of Change
Map how your activities lead to your desired impact:
1. **Inputs**: Resources you invest (money, staff, volunteers, materials)
2. **Activities**: What you do (programs, services, advocacy)
3. **Outputs**: Measurable products of activities (meals served, classes taught)
4. **Outcomes**: Changes in people's lives (improved nutrition, higher graduation rates)
5. **Impact**: Long-term systemic change (reduced poverty in the community)

## Step 2: Incorporation (State Level)

### Articles of Incorporation
File with your state's Secretary of State office (or equivalent):
1. Legal name of organization (search state database to ensure name is available)
2. Purpose statement (must include language required for 501(c)(3) eligibility)
3. Registered agent and address
4. Names and addresses of incorporators
5. Statement that assets will be distributed to another 501(c)(3) upon dissolution

**IRS-required language for purpose clause**:
"This corporation is organized exclusively for [charitable, educational, religious, scientific] purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code."

**Dissolution clause**:
"Upon dissolution, assets shall be distributed for exempt purposes or to a 501(c)(3) organization, or federal/state/local government for public purposes."

### Filing Costs
- Vary by state: $25 (some states) to $300+
- Processing time: 1-4 weeks typically
- Expedited filing available in most states for additional fee

## Step 3: Bylaws

### Essential Bylaw Components

**Article I - Name and Purpose**
- Legal name, state of incorporation, mission statement

**Article II - Board of Directors**
- Number of directors (minimum 3 recommended; some states require 3)
- Term length (typically 2-3 years, staggered)
- Term limits (recommended: 2-3 consecutive terms)
- Election/appointment process
- Removal process
- Vacancy filling procedure

**Article III - Officers**
- Required: President/Chair, Secretary, Treasurer
- Optional: Vice President, additional officers
- Duties of each officer
- Election process and term

**Article IV - Meetings**
- Frequency of board meetings (minimum quarterly recommended)
- Annual meeting requirement
- Quorum definition (typically majority of board members)
- Virtual meeting policy
- Notice requirements (7-14 days written notice)
- Voting procedures

**Article V - Committees**
- Standing committees (Executive, Finance, Governance, Fundraising)
- Committee authority and limitations
- Ad hoc committee creation process

**Article VI - Fiscal Matters**
- Fiscal year (calendar year or July 1 - June 30 are most common)
- Banking authority
- Check signing requirements
- Financial review/audit requirements

**Article VII - Conflicts of Interest**
- Conflict of interest policy (required by IRS)
- Disclosure requirements
- Recusal procedures
- Annual disclosure statements

**Article VIII - Amendments**
- Process for amending bylaws
- Required vote threshold (typically 2/3 majority)

**Article IX - Dissolution**
- Procedure for dissolving organization
- Asset distribution plan

## Step 4: 501(c)(3) Application (Federal Tax Exemption)

### Which Form to File
- **Form 1023-EZ** (online, simplified): For organizations expecting gross receipts under $50,000 and assets under $250,000. Filing fee: $275. Processing: 2-4 weeks.
- **Form 1023** (full application): For larger organizations or those ineligible for 1023-EZ. Filing fee: $600. Processing: 3-6 months.

### Key Sections of Form 1023
1. **Organizational structure**: Articles, bylaws, EIN
2. **Activities description**: Detailed narrative of all planned programs
3. **Financial data**: Projected budget for 3 years (revenue sources and expenses)
4. **Compensation**: Salaries for officers, directors, key employees
5. **Fundraising**: How you will raise money
6. **Public charity status**: Most organizations qualify as public charity under 509(a)(1) or 509(a)(2)

### Before Filing 501(c)(3)
- Obtain EIN (Employer Identification Number) from IRS - free, online, instant
- File state incorporation
- Adopt bylaws at organizational board meeting
- Hold initial board meeting and document minutes
- Open bank account with EIN

### Common Mistakes That Delay Approval
- Purpose clause too vague or missing required IRS language
- Missing dissolution clause in Articles of Incorporation
- Incomplete activity descriptions
- Budget that does not match described activities
- Compensation that appears excessive for organization size
- Not addressing private benefit or inurement

## Step 5: Fiscal Sponsorship Alternative

### When to Consider Fiscal Sponsorship
- You want to start programs immediately before 501(c)(3) approval
- Your project is small or time-limited and does not justify creating a new organization
- You want to test your concept before committing to full incorporation
- You lack the infrastructure for financial management

### How Fiscal Sponsorship Works
1. An existing 501(c)(3) organization agrees to sponsor your project
2. Donations are made to the sponsor (tax-deductible for donors)
3. Sponsor handles financial administration, compliance, and reporting
4. Your project operates under the sponsor's tax-exempt umbrella
5. Sponsor typically retains 5-10% of funds for administrative costs

### Finding a Fiscal Sponsor
- Community foundations in your area
- Umbrella organizations in your issue area
- Fiscal Sponsorship Directory (fiscalsponsordirectory.org)
- Key questions to ask: Fee structure, reporting requirements, how quickly funds are disbursed, liability coverage

## Step 6: Board Formation

### Ideal Founding Board Composition
- **Minimum 3 members** (5-9 is optimal for a startup)
- Diversity of skills: Finance, legal, marketing, subject matter expertise, community connections
- Diversity of backgrounds: Reflect the community you serve
- At least one member with nonprofit board experience
- People willing to give/get financially (set minimum give/get expectation early)

### Board Member Responsibilities
- **Duty of Care**: Act with reasonable care in decisions
- **Duty of Loyalty**: Put organization interests above personal interests
- **Duty of Obedience**: Ensure organization follows its mission and law
- **Financial oversight**: Review financial statements, approve budget
- **Fundraising**: Give personally and help raise funds
- **Attendance**: Attend meetings and committee work
- **Advocacy**: Serve as ambassador for the organization

### Board Recruitment Process
1. Develop a board matrix (skills, demographics, connections needed)
2. Identify gaps in current board composition
3. Ask current board members and community contacts for referrals
4. Have candidates attend a board meeting as observers
5. Conduct informal interviews about commitment and expectations
6. Formal nomination and vote by existing board
7. Orientation: Mission, bylaws, financials, programs, expectations

## Step 7: Initial Fundraising

### Startup Revenue Sources
- **Founder investment**: Personal contributions from founding team
- **Friends and family**: First circle of donors
- **Community foundations**: Startup grants for new nonprofits
- **Local businesses**: Small sponsorships and in-kind donations
- **Individual donors**: House parties, personal ask meetings
- **Crowdfunding**: GoFundMe Charity, Facebook Fundraisers
- **Government grants**: Rare for brand-new organizations, but some startup programs exist

### First Year Budget Template
| Category | Amount |
|----------|--------|
| Incorporation and filing fees | $300-1,000 |
| Insurance (general liability, D&O) | $500-2,000 |
| Website and communications | $200-1,000 |
| Bookkeeping/accounting | $500-2,000 |
| Program expenses | Varies |
| Office/meeting space | $0-3,000 |
| Professional development | $200-500 |
| **Total startup estimate** | **$2,000-10,000** |

## Step 8: Compliance Requirements

### Federal Requirements (Ongoing)
- **Form 990** (or 990-EZ or 990-N): Annual information return filed with IRS
  - 990-N (e-Postcard): Gross receipts under $50,000
  - 990-EZ: Gross receipts under $200,000 and assets under $500,000
  - 990: All others
- Filing deadline: 15th day of 5th month after fiscal year end (May 15 for calendar year)
- **Failure to file for 3 consecutive years = automatic revocation of tax-exempt status**

### State Requirements (Vary by State)
- Annual report with Secretary of State (filing fee varies)
- State charitable solicitation registration (if fundraising from the public)
- State tax exemption application (separate from federal)
- Sales tax exemption application
- Compliance with state nonprofit corporation law

### Governance Requirements
- Hold annual meeting
- Maintain meeting minutes
- Keep financial records for minimum 7 years
- File conflict of interest disclosures annually
- Conduct financial review or audit as appropriate for size

### Employment Requirements (If You Hire Staff)
- Register with state for employment taxes
- Workers' compensation insurance
- Employment practices liability insurance recommended
- Employee handbook with policies
- I-9 verification for all employees

## Volunteer Recruitment (Early Stage)

### Finding Initial Volunteers
- Board members' personal networks
- Local volunteer matching platforms (VolunteerMatch, JustServe)
- College and university service-learning programs
- Faith community outreach
- Nextdoor and community Facebook groups
- Corporate volunteer programs

### Volunteer Management Basics
- Clear role descriptions
- Background checks for roles involving vulnerable populations
- Orientation and training
- Signed volunteer agreements
- Recognition and appreciation
- Liability waiver/assumption of risk forms

## Common Pitfalls to Avoid

1. **Founder syndrome**: Build an organization, not a personal project. Distribute power.
2. **Mission creep**: Stay focused. Say no to opportunities that don't align with mission.
3. **Insufficient board**: Do not create a rubber-stamp board. Recruit engaged, diverse members.
4. **Financial mismanagement**: Separate personal and organizational funds from day one.
5. **Burnout**: Pace yourself. Nonprofit work is a marathon, not a sprint.
6. **Ignoring compliance**: Set up systems for filing and reporting from the beginning.
7. **No succession plan**: Document everything so the organization survives leadership transitions.
8. **Skipping insurance**: General liability and Directors & Officers insurance are essential.

## Progression Path

1. **Phase 1**: Research need, build founding team, develop mission (Month 1-2)
2. **Phase 2**: Incorporate, write bylaws, obtain EIN, open bank account (Month 2-3)
3. **Phase 3**: File 501(c)(3) application (or secure fiscal sponsor) (Month 3-4)
4. **Phase 4**: Build board, launch initial fundraising, develop first program (Month 4-6)
5. **Phase 5**: Launch programs, begin serving community, establish volunteer base (Month 6-12)
6. **Phase 6**: First annual report, evaluate impact, plan for sustainability (Year 2)

## Resources

- **IRS Publication 557**: Tax-Exempt Status for Your Organization (free, comprehensive)
- **IRS Stay Exempt**: Interactive website for small tax-exempt organizations
- **Nonprofit Association of your state**: Training, networking, advocacy
- **National Council of Nonprofits** (councilofnonprofits.org): Toolkits and resources
- **BoardSource** (boardsource.org): Board governance best practices
- **Books**: "Starting a Nonprofit" by Peri Pakroo, "Nonprofit Kit for Dummies"


## Output Format

Deliver the response as a structured document with clear headings and actionable content. Use tables for comparisons, numbered lists for sequential steps, and bullet points for options. Include specific examples where applicable.

```
[Nonprofit Starter deliverable]
1. Context and objectives
2. Analysis or framework
3. Specific recommendations with rationale
4. Action items with timeline
```


## Example

**Input:** "Help me with nonprofit starter for a mid-size project."

**Output:** A complete nonprofit starter framework tailored to the specific context, with actionable steps, relevant considerations, and measurable outcomes.
