starting a nonprofit
Filing the paperwork to establish a nonprofit is often the easiest step. The real challenge lies in sustaining the organization over time. That’s why it’s essential to carefully consider your mission, financial capacity, and the broader environment in which you operate, as well as the legal responsibilities that come with forming a nonprofit organization. We recommend reviewing the information provided on this page, along with the accompanying workbook, to help guide your decision-making.
While we are unable to offer individualized assistance with starting a nonprofit, we are happy to schedule a call to answer basic questions once you have completed the workbook.
What is a Nonprofit?
A nonprofit is a type of corporation established to serve a public or charitable purpose, rather than to generate a profit for its owners or shareholders.
Two main differences between a nonprofit and a for-profit organization.
- A nonprofit does not have an owner.
- A nonprofit does not share profits. Any money left over at the end of the year is reinvested in furthering the organization's mission.
The topic of ownership is often misunderstood; we encourage you to watch this five-minute video from Foundation Group on Who REALLY Owns a Nonprofit.
View 5-Minute Video from the Foundation Group
501(c)(3)
Many groups interested in forming a nonprofit seek 501(c)(3) tax-exempt status. There are different types of 501(c)(3) organizations: public charity, private foundation, and private operating foundation. Watch this video for important information about the different types of 501(c)(3) organizations.
Different Types of 501(c)(3) Organizations Video
Here are a few characteristics specific to 501(c)(3) public charities:
- Offers the highest level of tax deduction for a donor.
- Different from other types of tax-exempt organizations in that they must benefit the broad public interest.
- Must be organized and operated exclusively for one of the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national and international amateur sports competition, and preventing cruelty to children or animals.
- No part of the net earnings may inure to the benefit of any private shareholder or individual.
- Cannot participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office.
- Permitted to engage in legislative activities, but it cannot be a substantial part of their activities.
There are specific requirements to be tax-exempt under 501(c)(3) of the Internal Revenue Service.
See this 9-minute video from Foundation Group for assistance in understanding the IRS’s definition of charitable purposes.
Other Types of Nonprofits
There are many other types of tax-exempt organizations, including these more common types:
- 501(c)(4) – Civic Leagues, Social Welfare Organizations, Trade Unions; greater flexibility with lobbying and political campaign engagement.
- 501(c)(6) – Business Leagues, Chambers of Commerce; greater flexibility with lobbying and political campaign engagement.
- 501(c)(7) – Social and Recreation Clubs
For a complete list, see: https://www.irs.gov/charities-non-profits/other-tax-exempt-organizations
Exploring the Nonprofit Path: A Workbook for
Decision and Formation
Coming Soon! We developed this workbook to support individuals and groups exploring nonprofit formation, as well as those who have recently obtained nonprofit status and need to further develop their purpose, understand their field, and establish an effective operating model. The workbook is specific to 501(c)(3) public charities.
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