- 1). Make certain your charity's funding base is varied. Charities that receive money from only a few large donors are more likely to be classified as private foundations by the IRS; charities that receive money from several unrelated sources stand a better chance of being eligible for 501(c)3 status. Unfortunately, there is no set number of sources you will need; it is a judgment call by the IRS.
- 2). Establish a board of directors. You should have at least three unpaid members on this board; some states require more. To determine your state's requirements, check with your state treasury department.
Select your directors based on their varied talents, the gifts they have to offer your nonprofit (free legal help is always a bonus) and their ability to help shape your programs into something that will genuinely help your community. - 3). If you don't have one yet, let your board of directors help you choose a name for your charity.
With the help of your board, compose a mission statement and establish a website. Your mission statement should, in as few words as possible, define the intent of your nonprofit and how it plans to go about achieving its goals. For instance, a mission statement for an afterschool program might be: "to create and maintain challenging, educational and community-building projects and programs for young people aged 12 to 17 to participate in after school and on weekends."
At the same meeting, your board should draft bylaws. Your board's secretary should be in charge of ensuring bylaws are edited and completed for each meeting to include any fresh changes. You must also maintain minutes from each meeting. All of these records, as well as your financial statements, articles of incorporation and other important documents, must be maintained for your state to review when necessary. Contact your state secretary's office to find out what their exact requirements are. It is likely some of these documents must be kept for public review; it is easiest to post these documents on your website. - 4). File articles of incorporation. This is easiest to do when you have a lawyer draft them for you, but you can use online or offline services to draft your own and file them with your state. Once your charity is incorporated, file for a federal Employer Identification Number (EIN).
- 5). Develop a budget and an accounting system. It is wise to consult with an accountant experienced in nonprofits when you do this, to avoid mistakes that can cost your nonprofit a fortune.
While you are doing this, file for any licenses and permits your organization may require. - 6). File for 501(c)3 status with the IRS. It is wisest to use an attorney to do this, but you can do it without an attorney if you have more time than money and feel confident that you will not make any errors. Make sure everything you put in your application is completely accurate.
Once you get approval back from the IRS, you are in business.
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