How To Start a Nonprofit in 12 Steps (2026)

Starting a nonprofit involves defining its mission, incorporating at the state level, applying for federal tax-exempt status, and setting up fundraising and operations.

The IRS counted 1,596,231 organizations recognized under section 501(c)(3) in fiscal year 2025. Applicants document their organization’s qualifying purpose and submit the required formation, governance, and financial records.

This guide explains each step of starting a nonprofit, including incorporation, the federal application process, fundraising, and day-to-day operations.

What is a nonprofit organization?

A nonprofit organization pursues a public, social, or member-focused purpose. It uses its revenue to fund that purpose and cannot distribute net earnings to owners or shareholders. A charity is one type of nonprofit and operates under section 501(c)(3).

A nonprofit can make money through donations, grants, membership fees, services, or products sold online. It can pay salaries and operating expenses and retain a surplus to fund future activities.

Federal 501(c)(3) recognition exempts mission-related income from federal income tax and makes qualifying donations tax-deductible. Some grants and state or local tax exemptions are limited to these organizations. 

To retain its status, a nonprofit must follow its exempt purpose, keep financial records, file required returns, and avoid private benefit. Board rules vary by state, and unrelated business income can still be taxable.

What to consider before starting a nonprofit

Starting a nonprofit corporation creates a separate organization with a governing body, a funding model, and ongoing reporting duties. No one owns a nonprofit or holds equity in it. Its governing body, usually a board of directors, oversees the organization and its assets.

Before filing, consider the following elements to see if a full nonprofit is right for you:

• Legal requirements
• Board selection
• Financial planning
• Strategic planning
• Compliance

Legal requirements 

Forming a nonprofit corporation and applying for 501(c)(3) status adds filing fees, board oversight, record keeping, and annual reporting.

A fiscal sponsor can receive and administer tax-deductible donations for a charitable project. An unincorporated association offers another structure for a group with a defined nonprofit purpose.

Incorporation creates a business entity separate from its founders, but liability protections, board requirements, and charity registration rules vary by state. Review instructions from your secretary of state and state charity regulator before filing.

Board selection

The board approves budgets, protects organizational assets, and oversees executive leadership. Board members also have legal duties of care, loyalty, and obedience. Board selection requires careful review of candidates. Choose people who can review finances, guide programs, help raise funds, and disclose conflicts of interest.

Financial planning

Estimate incorporation, insurance, program, staffing, and administrative costs for the first 12 months. Map when donations, grants, memberships, and sales will provide cash. Track restricted grants and donations separately from funds available for general operations. Running a nonprofit requires tight financial planning. Ensure you or someone on the board can accurately and reliably account for your numbers. 

Strategic planning

Specify who the nonprofit will serve, what it will provide, and how it will measure results. Set a focused first-year program scope and assign responsibilities across the board, staff, and volunteers. Use the plan to guide the initial budget and fundraising targets. Strategic planning also helps clarify your mission, shape your structure, and set realistic expectations for your nonprofit. It can even help determine whether a nonprofit is the right structure for your mission at all. 

Compliance

A nonprofit comes with legal obligations baked into its structure that founders should fully understand before filing. Violations can threaten your organization’s exempt status. To run a nonprofit, many states require you to track federal returns, state corporate reports, charity registrations, payroll filings (if the nonprofit has employees), and donor acknowledgments. Assign each filing to a board or staff member and record its deadline. 

The IRS automatically revokes tax-exempt status after three consecutive years of missed required returns.

How to start a nonprofit in 12 steps

Starting a nonprofit organization requires more than just passion for your mission. Build your organization step by step: 

• Build a solid foundation
• Create a business plan
• Pick a name
• Choose your structure
• Officially form your nonprofit
• Get an EIN and open a bank account
• Appoint a board of directors
• Draft the bylaws and conflict of interest policy
• Start fundraising
• Build a team
• Launch your nonprofit
• Start marketing your nonprofit

1. Build a solid foundation

Identify the community your organization will serve. Use population data and local research to document the need for its work.

Write a mission statement that:

• States what the organization does and whom it serves
• Uses direct, specific language
• Leaves room for programs to change

2. Create a business plan 

Use a nonprofit business plan to estimate revenue, expenses, and the share of funding expected from donations. Include:

• Executive summary. State your mission, document the community need, and explain your response.
• Offerings. Define your programs, services, products, and intended results.
• Marketing plan. Explain how you will reach donors, volunteers, and the people you serve.
• Operating plan. Map daily activities, organizational structure, and responsibilities.
• Financial plan. Include a startup budget, revenue sources, projected cash flow, balance sheet, and income statement.

Research organizations serving the same community to identify duplicated services and potential partners. Use the IRS Tax Exempt Organization Search to find registered tax-exempt organizations in the US.

3. Pick a name 

Choose a name that reflects your mission and distinguishes the organization from others in your state. Check your state’s business filings database and charity registries to verify availability, as well as the official USPTO Trademark Database for federal conflicts. Use Shopify’s business name generator to generate initial ideas. 

4. Choose your structure

The IRS grants and oversees federal tax-exempt status under more than 30 classifications. A nonprofit does not receive federal tax exemption automatically, and the tax treatment of contributions depends on its classification.

Five common types of nonprofits:

501(c)(3): Charitable organizations

These organizations pursue religious, educational, charitable, scientific, literary, and other approved purposes. The category includes public charities, private foundations, and organizations that foster national or international amateur sports competition.

About 1.6 million of the roughly 2.1 million tax-exempt organizations and related trusts tracked by the IRS in fiscal year 2025 were 501(c)(3) organizations. A 501(c)(3) can be a fiscal sponsor for charitable projects, and qualifying contributions are tax-deductible.

501(c)(4): Civic leagues and social welfare organizations

These organizations promote social welfare through civic, community, and advocacy work. They can lobby in furtherance of that purpose. Political campaign activity cannot become their primary activity, and contributions are not deductible as charitable gifts.

501(c)(5): Labor and agricultural organizations

Labor unions and agricultural associations use this classification to improve working conditions, products, or occupational efficiency. Contributions are not deductible as charitable gifts, although some dues can qualify as business expenses.

501(c)(7): Social and recreational clubs

These membership organizations provide recreational or social activities. Examples include country clubs, hobby groups, sports clubs, and fraternities. Contributions are not deductible as charitable gifts.

501(c)(9): Voluntary employees’ beneficiary associations

A voluntary employees’ beneficiary association provides life, health, accident, or similar benefits to employees, their dependents, or designated beneficiaries. 

Members share an employment connection through an employer, collective bargaining agreement, or labor union. Pension plans use separate tax provisions.

5. Officially form your nonprofit

State formation and federal tax exemption are separate actions. Your state creates the nonprofit corporation, and the IRS grants federal tax-exempt status.

State filing rules differ, but the process may include:

• Filing articles of incorporation under the organization’s name
• Including the purpose and dissolution clauses used for 501(c)(3) status
• Appointing the initial board and registered agent
• Submitting required contact information to the secretary of state
• Paying state formation fees
• Adopting bylaws and recording the board’s initial decisions

Most states require charitable solicitation registration before a nonprofit asks their residents for donations. Online fundraising, crowdfunding, and social media campaigns can create registration duties in multiple states. Registration fees, renewals, and exemptions differ by state.

Apply for IRS tax exemption

Submit Form 1023 to apply for recognition under section 501(c)(3). Eligible organizations can use Form 1023-EZ if annual gross receipts have not exceeded, or are not projected to exceed, $50,000 in the applicable three-year periods and total assets do not exceed $250,000. Other eligibility restrictions apply.

After approval, the IRS issues a determination letter confirming the organization’s tax-exempt classification and effective date.

Legal disclaimer: This information is for general educational purposes and does not constitute legal or tax advice. State and federal rules differ by organization. Consult a qualified attorney or tax professional about your filing obligations.

6. Get an EIN and open a bank account

Apply for an employer identification number after forming your nonprofit. The IRS issues EINs for free. Apply online for immediate issuance, or submit Form SS-4 by mail or fax.

Use the EIN and your formation documents to open an account in the nonprofit’s name. NerdWallet’s August 2026 nonprofit banking list mentions:

• Axos Bank: High-yield business savings
• US Bank: National branch banking
• Relay: Non-bank account
• nbkc bank: Business money market account

7. Appoint a board of directors

State law and your bylaws determine the board’s size and composition. Most states require at least three directors. Choose independent members who can oversee finances, leadership, and compliance.

The board hires and supervises the executive director, approves budgets, and monitors the organization’s activities. Follow your bylaws when appointing or electing directors; voting authority may belong to the members or the existing board.

The board also elects its officers. Common positions include president, vice president, secretary, and treasurer. Their duties and terms vary by state and organization.

8. Draft the bylaws and conflict of interest policy

Your nonprofit’s bylaws describe how your organization will operate, make decisions, choose officers, and conduct board meetings.

Your conflict of interest policies protect the nonprofit by preventing officers, directors, and key employees from using it for personal interests. Make sure your board approves these policies and keeps them current.

9. Start fundraising

List your startup and first-year costs, then assign a funding source to each. If you have little or no startup money, begin with a small program. Recruit volunteers, request donated space or professional services, and use donations or crowdfunding for cash expenses.

Funding options include:

• Grants. Apply for funds for a specific program or expense. Applications and reporting take time, and some awards cover one grant period.
• Individual donations. Request one-time or recurring gifts from people familiar with your work.
• Crowdfunding. Set a funding goal, deadline, and specific use for the money.
• Startup accelerators. Programs can provide mentorship, workspace, fiscal sponsorship, introductions, and program development.
• Earned income. Sell merchandise, event tickets, memberships, or services related to your mission.

Shopify apps can add fundraising features to your online store:

• Zestard Easy Donation adds donation pages and custom-amount widgets.
• ShoppingGives lets businesses donate part of each sale and offer customer roundups for selected nonprofits.

10. Build a team

Strong leaders drive successful nonprofits. Find partners who truly believe in your mission and bring valuable networks to support your organization.

Build a leadership structure with a full board of directors and executive director. They’ll handle regulatory compliance, make high-level strategic decisions, and oversee key hiring. You’ll also need dedicated paid staff or volunteers to carry out your mission.

11. Launch your nonprofit

Once you receive the required approvals and funding, launch your programs and fundraising campaigns. Track donations, expenses, grants, board decisions, and program results from day one.

Most tax-exempt organizations file an annual Form 990 series return, though the specific form depends on elements like gross receipts, assets, and structure. 

Organizations with annual gross receipts of $50,000 or less file Form 990-N. Private foundations file Form 990-PF. Those with gross receipts below $200,000 and assets below $500,000 can file Form 990-EZ. Organizations that meet or exceed either threshold file Form 990. 

12. Start marketing your nonprofit

After launch, create a marketing plan for reaching donors and community partners. Choose channels based on each audience and the goal of the campaign. For example, social media can build awareness, and email can keep donors informed.

An ecommerce website complements that outreach. It gives people a place to learn more about your work, make a donation, or buy merchandise. 

Create an online store with Shopify, then take advantage of the following tools for nonprofits:

• Shopify Payments and Shop Pay. Accept online payments and provide a faster checkout.
• Shopify Messaging. Send branded emails to selected subscriber groups.
• Blog and SEO tools. Publish updates that people can find through search.
• Marketing reports. See which campaigns generate website traffic and sales.
• Donation apps. Add custom donation amounts and campaign pages.

Time needed to start a nonprofit

Starting a nonprofit takes time. The timeline depends on how quickly you organize your documentation and complete your tax exemption forms. This stage often takes several months.

After submitting your forms, expect to wait 3 to 12 months for an IRS decision. If your organization makes less than $50,000 annually, you may qualify to file Form 1023-EZ for faster processing in two to three weeks.

Getting paid as a nonprofit owner

A nonprofit has no owner, but a founder can receive pay for work performed as an executive director or employee. Compensation can include salary and benefits, which the IRS evaluates together.

The IRS defines reasonable compensation as the amount a similar organization would pay for comparable work. A board committee with no conflict of interest usually sets the amount.

For context, Candid’s 2025 Nonprofit Compensation Report found median CEO or executive director compensation of $42,844 at organizations with budgets of $250,000 or less. That number rose to $62,835 for those with budgets of up to $500,000. 

How much does it cost to start a nonprofit?

At minimum, a new 501(c)(3) pays a state incorporation fee and a federal tax-exemption fee. The IRS charges $275 for Form 1023-EZ and $600 for Form 1023. Form 1023-EZ is limited to organizations that meet the IRS eligibility rules. An EIN is free when requested directly from the IRS.

Other startup costs depend on the state and how the nonprofit will operate:

• State incorporation. Each state sets its own filing fee for articles of incorporation.
• Additional state filings. Name reservations and initial reports can carry separate charges.
• Fundraising registration. Most states require registration before an organization asks residents for donations. Filing and renewal fees vary.
• Professional services. Attorney or accountant fees apply when the organization hires outside help.
• Insurance. Coverage can include general liability and directors and officers insurance.
• Website and software. Budget for a domain, ecommerce platform, bookkeeping system, and other operating tools.

Use state sources to calculate the total. The National Association of Secretaries of State links to each state’s corporate filing office. That office lists the current nonprofit forms and filing fees. The National Council of Nonprofits can direct you to your state’s nonprofit association for local guidance.