So you want to start a nonprofit?
Every day, individuals like you are inspired to start a nonprofit to help serve your community. Starting and sustaining a nonprofit are not easy tasks, but we applaud your commitment to helping others. This page will walk you through some of the questions to ask before starting a nonprofit, filings you’ll need to complete at the federal and state level, and the standard policies and procedures that your new nonprofit will want to have in place.
We offer this guide for informational purposes only and encourage you to consult with local legal counsel familiar with tax-exempt law to assist you in ensuring your new nonprofit is compliant with all federal, state, and local requirements.
Initial questions to ask yourself
There are many ways to make in impact in your community and starting a nonprofit is just one. Starting and sustaining a nonprofit can be significant challenges, so it might be beneficial to ask yourself the following questions:
- Are you a program or an organization?
- Is there a demonstrated need in the community for a new nonprofit with the mission you envision?
- How do you want to spend the majority of your time – providing direct services to people in need or ensuring you have your organizational and administrative ducks in a row?
Research other local organizations
You’ll want to make sure there isn't another organization near you trying to accomplish the same mission with whom you could collaborate or use as a fiscal/administrative agent. That is, if your answer to question #3 in the previous section was to spend your time providing direct services, it might be to your advantage to find a similar organization who would take your program under their administrative wing, allowing you to chase funding together while leaving the administrative burden largely to the already established organization.
- Find out about nonprofits already active in the area you’re passionate about and join their efforts as a volunteer, a board member or even as staff. Check out our Community Compass to search for area nonprofits.
- Research the list of nonprofits already active in the same area, identify the three most compatible with your ideas and meet with them to explore partnerships such as a special project or initiative.
- Learn about national organizations in the area of your interest and see if a local chapter is needed/already exists in your geographic area.
- Identify if your effort will be small or local, consider forming an unincorporated association or club.
- Gather information. If you want to create an organization to fund activities or certain needs of others (i.e. scholarships, family emergency funds for a specific population) explore sponsorship of the fund by a local Community Foundation or other group.
Consider the advantages to partnering with an existing organization
- Reduced administration, shared liability = decreased possibility of burnout = desire to continue long-term
- More time doing what you really want to do (delivering the service/program)
- Leveraging an existing reputation
- Joining forces for grant funding rather than competing for money
- Collaborative projects, shared expertise
If you've determined the need for a new nonprofit, you’ll want to build a strong foundation
We’ve developed a Guidelines & Principles website for existing organizations to take online assessments, search a resource database, and find sample documents. It is also helpful for those considering starting their own organizations because it paints the full picture requirements and best practices to succeed as a nonprofit in Nebraska and Western Iowa.
When you are ready, we encourage you to check out our How to Start a Nonprofit in Nebraska wiki, as well as a Comparison of 501c Organization Types wiki, to help you determine what kind of nonprofit best suits the need you’re addressing.
You’ll want to consider WHO will be involved, especially in regards to the board requirements. While you likely have had help from friends and family, a nonprofit board has legal and ethical responsibilities, so you’ll need to be intentional when selecting the initial board (see video from NEO Law Group).
You’ll also need to think about WHAT you need to do and WHEN complete each step. The Internal Revenue Service (IRS) has clear expectations in many areas including those are the mission, organizing documents, how nonprofits are governed as well as their management policies, use of financial statements, reporting on Form 990 and issues of transparency and accountability. As such, clarify your mission, goals and exactly who you would serve. Also, define your organization's purpose, develop a detailed business plan and create your bylaws. Reviewing bylaws of several existing organizations may be helpful, but remember that organizations' structures and purposes vary. What may sense for one organization may not make sense for yours.
Understand the paperwork needed to incorporate on the State level
The first step in the process it to Incorporate in Nebraska by filing Articles of Incorporation with the Secretary of State on their website or call 402.471.4079 (a $10.00 fee, plus $5 per page, is required to incorporate in Nebraska).
In addition, the Nebraska Attorney General's Office represents the State in the enforcement of the Nebraska Nonprofit Corporation Act, learn more on their website or see Neb. Rev. Stat. §§ 21-1901-21-19,177.
Understand the paperwork needed to apply for exemption on the Federal level
After completing the requirements necessary for state filing, you’ll next want to apply for a Federal Employer Identification Number (EIN) and Federal Tax-Exempt Status. The EIN is used by the IRS to track reports and your 1023 tax exempt application, while your 501(c)(3) status is required before you can receive grants or tax-deductible contributions. The IRS Publication 557 Tax-Exempt Status for Your Organization and Publication 4220 Applying for 501(c)(3) Tax-Exempt Status are helpful guides for navigating this process.
- Complete IRS Form SS-4 to apply for your Federal EIN.
- Complete IRS Form 1023-EZ for small organizations with gross receipts of $50,000 or less and assets of $250,000 or less (exceptions include churches, schools, and organizations with mailing addresses outside the US).
- Complete IRS Form 1023 for a regular application for tax-exemption.
The process can take anywhere from 3-24 months. While not difficult but lengthy (if completing the regular IRS Form 1023), you may want to ask a lawyer or accountant who is experienced with the nonprofit sector to review your bylaws and application for tax-exemption before submitting it to the IRS.
As you proceed, be sure to check with an attorney or CPA who is knowledgeable about nonprofit accounting about other needed financial documents and filings.
You’ve attained your tax-exempt status, now what?
Once you have received your determination letter from the IRS, the real work begins. There may be additional filing requirements to receive recognition as tax-exempt from your state and local institutions. Be sure to check with local legal counsel to ensure you are compliant with local initial filing requirements. You may also want to review the IRS resources at their Stay Exempt website for information on how to maintain your tax-exempt status.
Nonprofit Association of the Midlands is here to help you along the way. Check out our Guidelines and Principles Wiki to review how your nonprofit organization meets our Legal Compliance and Infrastructure Checklists, or take our Infrastructure or Practices Assessments.
Some additional resources:
IRS: Before Applying for a Tax Exempt Status
IRS: Starting a Nonprofit
Lincoln Community Foundation: How to Start a Nonprofit in Nebraska
Nebraska Nonprofit Corporation Statutes
Nebraska Department of Revenue Nonprofit Organizations – General Information
Sample Nonprofit Bylaws
For more information and resources, please contact Dan Walsh at firstname.lastname@example.org
Thanks to the National Council of Nonprofits for allowing reuse of parts of their webpage.
Photo taken by Steven Depolo.