Usually, when people in the United States ask about starting a nonprofit, what they really want is information about how to start a publicly supported charitable nonprofit, which is exempt from U.S. federal income taxes and which can receive tax-deductible donations. Under U.S. law, there are other forms of nonprofit organization that can NOT receive tax-deductible donations, so just "starting a nonprofit" is not enough.
Here is the process in 10 steps (not 10 easy steps, unfortunately):
- Incorporate as nonprofit or non-stock corporation in a U.S. state or the District of Columbia (process differs by state).
- Apply to the I.R.S. for recognition as having a "charitable purpose" and being "publicly supported." (Complete and send IRS Form 1023)
- Eventually, the IRS makes a temporary determination with a "determination letter."
- Get additional recognition from state and local governments for various additional charitable exemptions, such as sales tax, property tax, etc. If the organization works in more than one state, each state's requirements need to be met. There is little reciprocity in this field.
- Get any state or local licenses needed for the activities you plan to perform. Make sure your activities are consistent with any zoning regulations.
- If you plan to pay people to work, understand that charitable organizations have nearly all the same obligations as for-profit employers for employment taxes, workers compensation, and unemployment taxes. The organization cannot use its charitable purpose to avoid these obligations.
- Set up your operation: employee benefits, occupancy (rent & utilities), property, liability, and professional insurance (if needed), banking relationships, a way to keep books, business systems such as telephones and copiers, computer systems and software, and business supplies.
- Obtain directors and officers liability insurance (D&O) to protect board and staff in the case of lawsuits.
- Do annual or other periodic filings with the IRS (IRS Form 990) and with other state agencies (each state differs).
- After a few years, the IRS will ask you to verify that your fund raising has met the test for you to receive final determination as a publicly funded organization.
This is a very brief and general summary, provided for information only. The Internet is no substitute for advice from competent professionals (such as lawyers and accountants) with experience in the field.