Starting a nonprofit organization is a rewarding experience. Nonprofits meet the needs of underserved populations and ensure no one goes without essential services. But starting a business, especially a nonprofit, requires planning and preparation. Here are nine things every nonprofit startup needs to know.

You Can’t Do This Alone

Every nonprofit organization requires at least three unrelated board members. While you might want to do all of the work for your organization, finding a team of people who share your vision is essential. Make sure everyone also shares the workload, too.

Nonprofits Are Legal Corporations

Every nonprofit organization is a legal corporation registered with the state and federal governments. Incorporation sets the organization up for legal operation in the state. It prepares the nonprofit to file for federal tax-exempt status. The process for forming a legal corporation varies by state. Generally, it requires Articles of Incorporation and a federal Employer Identification Number (EIN). Once established, nonprofit corporations can open a bank account, rent an office, and begin operations. In most cases, however, you must still ask for public donations.

Tax-Exempt Status Takes A Long Time

Tax-exempt status is the most critical step in the formation of a nonprofit. Once recognized as tax-exempt by the IRS, the organization no longer pays federal and (in many cases) state corporate income taxes. The average person spends eight to ten hours filling out the IRS tax-exempt application. Once submitted, the IRS can take many months before issuing a determination. While waiting for status, you are free to operate. However, there may be restrictions on soliciting donations.

Every State Has Different Rules

More than applying for federal tax-exempt status, it is needed in most states to start asking for donations. Nonprofit organizations must file additional state documents with various agencies to complete the registration. Knowing which documents your state requires is the difference between operating smoothly and facing hefty penalties and late fees. It’s essential to clarify and understand the requirements for charity registration and state tax exemptions in your state.

Marketing Is Not A Dirty Word

Most people starting a nonprofit do so because they’re passionate about their organization’s purpose. This drive is crucial for the organization’s success. However, no matter how devoted the Board of Directors is, potential donors and those needing your organization’s services will not know the opportunity exists without marketing. Unfortunately, many nonprofit organizations don’t focus enough time or energy on marketing. They often think they can’t afford the cost or that by starting a nonprofit, volunteers and donations will automatically arrive. Not only will potential volunteers and donors not know your nonprofit exists without proper marketing, but they won’t want to engage.

Most New Nonprofits Cannot Apply For Grant Money.

With few exceptions, most foundations will only consider a grant application with an established, diversified, successful fundraising history. To build toward applying for grants, a nonprofit startup needs a fundraising plan largely built upon personal donations. As the organization develops results, local businesses may be willing to provide in-kind or financial sponsorships. These funds help make an immediate difference and establish a case for eventual grant applications.

Volunteers Always Come Before Paid Staff

While many nonprofits will eventually have the funding necessary to hire paid staff members, all will rely on some form of volunteers. Organizations that thrive have detailed plans for recruiting, training, encouraging, and maintaining volunteers. Volunteers who feel under-utilized or under-appreciated will never return or, worse, tell their friends and family about their bad experience with your nonprofit. On the other hand, volunteers who are motivated and excited about the organization will work hard and act as free marketing in the community for your cause.

Strategic Planning Ensures Uniformity

All nonprofits require ongoing attention and management, otherwise known as governance. One vital form of governance is strategic planning, which involves working toward a set of goals and evaluating the organization’s current strengths and weaknesses. A detailed strategic plan ensures everyone involved with the nonprofit has a role in the organization’s direction, from the Board of Directors to every volunteer. Strategic plans are not one-time endeavors and should be updated every one to three years.

Compliance Prevents Penalties and Fees

After completing each fiscal year, nonprofit organizations must comply with year-end reporting at the state and federal levels. Please abide by these requirements to avoid incurring penalty fees, revoking tax-exempt status, and even having your corporation dissolved by the state. While not as exciting as the nonprofit’s mission, annual compliance is crucial.

Though nonprofit organizations are essential to every community, starting one can be a time-consuming and often complicated process. When questions arise, don’t hesitate to contact a nonprofit consultant to ensure all necessary legal and organizational requirements for your nonprofit startup are correctly tackled.