Four Questions To Ask Before Starting A Nonprofit

What is a nonprofit organization? A nonprofit is a legal entity that provides some sort of public benefit. The organization’s primary purpose cannot be to make a profit that will be distributed to shareholders but to fulfill the mission of the organization. While there are many ways to serve the community with a for profit business or through personally volunteering your time, forming a nonprofit means that:

  1. Your organization doesn’t have to pay federal income taxes, AND
  2. If you are a 501(c)(3) nonprofit, you can receive contributions that are tax-deductible and grants from private foundations

These are benefits that can further your work in the community!

If you considering starting a nonprofit organization, here are 4 questions you should ask yourself before you do:
  1. Is there a need for the nonprofit in the community? You should conduct research, meet with community leaders, and talk to those who will potentially benefit from your services to make sure there is a need for the nonprofit. Based on the need and desired impact, you and your stakeholders need to create a mission statement. The programs and services you offer should support your mission and lead to the outcomes you’d like to see in the community.
  2. Do you have community support? To get your nonprofit started, you’ll need the support of community members, volunteers, people willing to support financially, and of course the people who will benefit from the services. To legally incorporate as a nonprofit, you will have to have a minimum of 3 persons to “govern” or lead the organization.
  3. How will your nonprofit make money? There are lots of different ways to generate revenue for nonprofits. If your constituents can’t pay for part or the full cost of your service or product, you should consider charging a sliding scale fee or offering it for free. But, you will have to find a way to cover additional costs. This could come from donations from individual donors or private foundations, government grants, and corporate sponsorships.
  4. Is incorporating as a nonprofit the best way to fulfill your organization’s mission? If so, you will have to commit to the standards of reporting, financial management, transparency, and governance by a Board of Directors or members.

Sarah Balch

Director of Operations, BizStarts