Grassroots Guide to Forming a 501(c)(3) Nonprofit by Derek Goodman

Grassroots Guide to Forming a 501(c)(3) Nonprofit by Derek Goodman

Derek Goodman is the Creator and Owner of Inbizability. Visit Inbizability.com for more information on how to grow your small business.

You’ve been doing great work as a grassroots organization. Now, you’re ready to make things official and become a 501(c)(3) nonprofit organization.

It can be intimidating to take the leap from an unincorporated association to a registered charity. Becoming a 501(c)(3) nonprofit is a slow process that involves complex paperwork and fees. However, there’s also a lot to gain by formalizing your grassroots organization as a 501(c)(3) nonprofit. Here’s how to get started courtesy of Sherre Webb Life Coaching.

What are the pros and cons of starting a nonprofit?

Why should you go through the trouble of organizing as a 501(c)(3) nonprofit corporation?

  • Organizing as a nonprofit confers valuable benefits including tax exemptions and personal liability protection. As a 501(c)(3) nonprofit, you’re also eligible to apply for grants.
  • Starting a nonprofit comes with drawbacks too, especially for smaller organizations. Receiving and maintaining 501(c)(3) status takes time and money that may detract from a grassroots organization’s mission.
  • Grassroots organizations that want to fundraise without the complexities of nonprofit management can seek fiscal sponsorship from an established organization.

What does it cost to start a nonprofit?

Forming a nonprofit and applying for tax exemption isn’t free. Here’s what organizations can expect to spend to establish a nonprofit.

  • The first step is establishing a legal entity in your state. The process varies from state to state, but incorporating a nonprofit is similar to starting a for-profit business. Find out everything you need to know about launching your nonprofit.
  • Applying for tax exemption is where nonprofits spend the bulk of their startup costs. The fee to apply for 501(c)(3) status is either $600 or $275 depending on the form used. Many organizations hire an attorney to help file Form 1023.
  • Charitable organizations also must register in each state where they fundraise. These costs add up for organizations that fundraise across state lines. Check here for a complete list of charity registration requirements and fees.
  • Other costs to factor into a nonprofit’s startup budget include staff, facilities, program, and administrative expenses.
  • A logo, business cards, and other marketing materials will also be necessary. Use free online tools to create a logo and look for a business card template online to save money on design.

Where can I get help starting a nonprofit?

Once you’ve established your nonprofit organization, use these resources to start working toward your mission.

Becoming a 501(c)(3) nonprofit organization lends credibility to grassroots organizations and gives community groups access to important financial benefits like tax exemption and grant opportunities. However, 501(c)(3) status isn’t right for every group. Before establishing your organization as a 501(c)(3) nonprofit, consider the benefits, drawbacks, and responsibilities of running a nonprofit.