How do I start a nonprofit organization?

Considerations Before Starting a Nonprofit

If you are interested in starting a nonprofit, consider the below before creating an organization.

• Volunteering – Volunteering will help you learn about the structure, operations, and services of an organization, and will help to give you the experience you’ll need to be successful.
• Research existing organizations – Ensure that you aren’t duplicating services  and that you have something unique and beneficial to give to the community you are looking to serve. Conducting research will also help you determine if your cause would be better served as a project under an existing organization rather than creating a new organization. You can also identify similar organizations that may be potential partners in the future (or as fiscal sponsors).
• Mission and programs – Ask yourself what need are you trying to meet and the intended impact. Your mission statement identifies your organization’s core purpose and guides decision making. You’ll also want to consider how you will achieve your mission and what services or programs your organization will provide.
• Financial sustainability – Ask yourself how you will fund the start-up costs and on-going operations. Consider developing a business plan to help understand the operational and financial needs. Determine how you will attract funding and a diversified revenue stream. 
• Board members – Unless otherwise provided in the articles of incorporation, a Colorado nonprofit must have a board. You’ll want to carefully consider who will sit on your board. 

You can find more information on considerations before starting a nonprofit from the Colorado Secretary of State,  Foundation Group and National Council of Nonprofits. 

Guidelines for Starting a Nonprofit

Below are the basic guidelines for starting a nonprofit. For more detailed information, view Community Resource Center’s Nonprofit Start-Up Workbook. 

Developing bylaws and setting up the board of directors

Bylaws govern the internal structure of the organization, including the governing board by:

1. Structuring the board of directors
2. Creating the operational and administrative mechanisms
3. Drafting those structures and mechanisms into bylaws

The composition and recruitment of the board of directors is critical. In particular, it is important to carefully select the initial directors and to determine the manner by which future directors are selected.

Incorporating as a nonprofit corporation in Colorado

Incorporation is a relatively simple procedure. The Articles of Incorporation must contain language required by the IRS to obtain charitable status.

Submit Articles of Incorporation to:

Colorado Secretary of State
Business Division
1560 Broadway,Suite 200
Denver, CO 80202-5169

Information: (303) 894-2200
Fax: (303) 869-4864
Web Site: www.sos.state.co.us
Filing Fee: $50

Developing policies to meet the requirements of the Internal Revenue Code

Policy documents you must develop to meet IRC requirements include:

• Compensation
• Conflict of interest
• Document retention
• Whistle-blower policies

Also prepare documents to comply with state law, annual reporting requirements, and establish recordkeeping systems.  See Principles & Practices for Nonprofit Excellence in Colorado.

Obtaining tax-exempt from the IRS, and filing for an EIN

In this step you must obtain tax-exempt charitable status from the IRS.

The application process (Form 1023 or Form 1023ez) is the most time consuming part of the process. Generally, the two substantive pieces of information required by the IRS are:

• A statement of activities specifically detailing the proposed activities of the new organization
• Estimated budgets for three years

Frequently, the IRS review of the application includes a request for additional information. The purpose of this information is to determine whether or not the organization’s purposes and proposed activities qualify as charitable under the Internal Revenue Code.

Budget information is used to determine if the organization is “publicly supported”. Together they indicate whether or not an organization can qualify as a charity eligible to receive tax-deductible donations. Also, note that actual financial information will be required after the expiration of a five year period to confirm that the organization is publicly supported.

Submit IRS Form 1023, Application for Recognition of Exemption to:

Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192

Information: (800) 829-1040
Forms: (800) 829-3676
Web Site: www.irs.gov/charities
Filing Fee: $850 ($400 if revenues less than $10,000/year)

You’ll also need to obtain a Federal Employer Identification Number (EIN) by filing Form SS-4. 

Register as a Charitable Organization with the Colorado Secretary of State

Before soliciting charitable contributions or engaging charitable sales promotions, charitable organizations must register online with the Colorado Secretary of State, along with any other states in which it plans to solicit funds. 

Register online through:

Division of Public Charities
Colorado Secretary of State
Business Division
1560 Broadway
Suite 200
Denver, CO 80202-5169

Information: (303) 894-2200
Fax: (303) 869-4864
Web Site: www.sos.state.co.us
Filing Fee: $10

Consulting with Legal Counsel

Finally, in consultation with legal counsel, you must establish:

1. A Board meeting minute policy and other corporate record keeping practices
2. Risk management and insurance
3. Contracts and relationships with third parties

Also note that after start-up, legal questions frequently come up, such as those on: maintaining tax exemption, governance and board procedures, liability, licensing and intellectual property, charitable contributions, employment matters, contract review and drafting, and real estate matters.

Helpful Links

• Applying for Tax-Exempt Status Mini Course
• IRS Nonprofit Life Cycle
• Colorado Secretary of State – Charities
• Colorado Department of Law – Charities
• Colorado Department of Revenue

Additional Resources

• Business Member Directory – Colorado Nonprofit Association has a couple of business members that provide guidance and assistance with starting a nonprofit. 
• Nonprofit Hub’s Starting a Nonprofit Webinar Series – Nonprofit Hub hosts a three-part webinar series that guides you through the process of launching a nonprofit. (Cost is $99, includes all three webinars, downloadable workbooks, and 30-minute office hours with Randy Hawthorne, Executive Director and Co-Founder of Nonprofit Hub) 

Disclaimer

These articles, samples, and resources are offered for informational purposes only and should not be construed as professional advice. If used, your organization should tailor samples to best fit the organization’s specific circumstances. We encourage your organization to seek appropriate professional assistance as needed.