How Hard Is It to Start a Nonprofit?

Employment in the for-profit business sector has grown by two to three precent over the last 10 years — that’s compared to 20 percent in the nonprofit sector. Data gathered from the Bureau of Labor Statics shows that, in 2012, nonprofits accounted for over 11 million jobs in the United States, and to educated, diverse, and socially conscious millennials entering the workforce, nonprofits can seem like a good alternative to their profit-driven relatives.
New Chapter Coaching specializes in providing leadership development and capacity-building services to help nonprofits. Jessica Macy, New Chapter’s senior associate, says that a nonprofit “is filling a community need that no one else has filled.”
Nonprofits can be a great way for people to be at the forefront of social change — entrepreneurial types may even be tempted to start their own nonprofit. For these people who have a passion for helping others, giving back to their community, or bettering their society, Macy lays out the path to follow:
 

Assess Your Need

There is one crucial question to ask yourself before considering creating your own nonprofit: Is there a need?
A simple question, sure, but it’s one that many unsuccessful nonprofits failed to answer before starting. Macy has spent many years in the nonprofit industry and stresses the importance of doing your homework.
“See who else is doing what you’re trying to do,” she says. “There might be groups already doing that work.” And the more organizations there are with a similar purpose, the harder it will be to get funding and support. But, if you can answer that question to complete satisfaction, here are the steps you take next:

• Step One: As Macy explains, a nonprofit is still a business, and with all businesses, you must create a business plan. This is a good place for individuals to formulate the mission, budget, and timetable. The timetable should be reasonable, since most people starting up nonprofits hold other jobs and positions. Macy believes this is also a good time to establish who your board members will be — she says it’s vital to select individuals who have an unwavering commitment to the cause.
• Step Two: Now is the time to delve into the dense legality surrounding nonprofits. After you’ve finalized the base for your organization, you have the option to incorporate your business. Harbor Compliance, a company that helps nonprofits navigate legal requirements, says that incorporation “provides limited liability protection,” but isn’t mandatory. The laws and regulations, as well as fees for incorporating, vary state to state — NOLO, an online legal guide, has a handy run-down of Missouri’s requirements. The only universal task is filling your nonprofit with the IRS.
• Step Three: In order for your nonprofit to receive tax-exempt status, the IRS requires the organizations to apply for 501(c). Which particular application you submit is dependent on the classification of your nonprofit. There are 29 distinctive types of 501(c) organizations, with the most common being 501(c)3s, according to Nonprofit Hub. In Columbia, Macy believes that the most common groups are social service nonprofits, with a good percentage being arts and civic groups.
• Step Four: After the IRS has responded with their determination letter (be patient — this can take up to a few months), you are free to begin your ongoing compliance. This is a good place to review the local laws about additional filings. This step requires your organization to register with the state’s agency, which is usually managed through the Attorney General. For Missouri in particular, more information regarding these forms can be found on Missouri Attorney General Josh Hawley’s website under “For Nonprofits.” Data from the independent sector shows Missouri has over 32,000 nonprofit organizations that generate over $46 billion in annual revenue.

 
In Columbia, there haven’t been too many startup nonprofits in the past few years, so there is room to grow — “But only some make it,” Macy warns. “There is a real high probability of failure and a lot of it depends on your budget size. The more money you have, the higher the chance for success.” So what is her best advice? “Make sure to stay in touch with the people you’re serving and make sure that your mission is always at the forefront.”