How to Start a Nonprofit: Step-by-Step Guide and Checklist

A neighbor runs a free tutoring night at the public library. Twenty kids show up every Tuesday, a local hardware store wants to give $5,000, and the owner asks the question that stops most volunteer projects cold: "Are you a 501(c)(3)?" That's usually the moment people start searching for how to start a nonprofit.

The short version: you form a nonprofit corporation under your state's law, get a free employer identification number (EIN) from the IRS, apply for federal tax exemption on Form 1023 or Form 1023-EZ, handle state tax exemption and charitable registration where your state requires it, and then file a Form 990-series return every year. None of these steps is hard on its own. Problems usually come from doing them in the wrong order or from skipping the clauses and records that connect them.

This guide walks through the federal path step by step, shows how state rules differ using Texas as a worked example, and ends with a checklist you can hand to your founding board. It's general information, not legal or tax advice. For your specific situation, talk with a nonprofit attorney or CPA in your state.

Before You File: Is a New Nonprofit the Right Vehicle?

A new 501(c)(3) is a long-term commitment: a board that meets, books that reconcile and filings every year. Before you file anything, answer three questions honestly.

1. Is the need real and unmet? Talk to the people you want to serve and to the organizations already working nearby. If a food bank runs a pantry two blocks away, your energy may go further as their volunteer coordinator.
2. Can you sustain it for three years? Funders, board members and the IRS all ask whether you can keep going after the launch excitement fades. If you can't name your first 20 donors or your first three revenue sources, start there.
3. Is 501(c)(3) the right status? Charitable status fits organizations that serve a public purpose: charitable, religious, educational, scientific and literary work, testing for public safety, fostering amateur sports competition, and preventing cruelty to children or animals. If your group mainly serves its own members, a different structure may fit better.

If you're building a trade group, professional society or social club, read how to start an association instead, or how to start a car club for a hobby club. The incorporation steps overlap, but the tax status and funding model are different.

What It Costs to Start a Nonprofit

Federal costs are fixed and modest. State costs vary, and professional help is the biggest variable.

The IRS user fees come from Appendix A of Revenue Procedure 2026-5, effective December 29, 2025. The IRS updates its user fee schedule every year, and Pay.gov fills in the current amount when you file, so check it again on the day you submit.

For a small Texas charity that qualifies for the streamlined form, the government fees come to $300: $25 to the state and $275 to the IRS. Everything else, such as insurance, bookkeeping, a website and program supplies, depends on your plans, so get real quotes before you set a first-year budget. That's exactly why the next step matters.

Step 1: Define Your Mission and Write a Lean Plan

The IRS application asks what you'll do, who will do it, where, how often and how it's paid for. Start with a one-sentence mission that names who you serve, what you do and the change you want. Our guide to writing a mission statement includes a workshop format and examples. Then write a short plan covering programs, a first-year budget, three-year projections and who is responsible for what.

There's a practical reason to do the numbers early. According to the Form 1023 instructions, an organization that has existed for less than one year must provide projected revenue and expenses for the current year and the next two years. A nonprofit business plan gives you those figures before the application asks for them.

Step 2: Recruit a Founding Board

Your state's nonprofit law sets the minimum number of directors and officers. Texas, for example, requires at least three directors, a president and a secretary, and the same person can't hold both officer roles. Other states set different minimums, so check your secretary of state's guidance before you finalize the slate.

Beyond the legal minimum, look for:

• Independence. Form 1023 asks about family and business relationships among your officers and directors. A board made up of the founder, a spouse and a cousin invites questions about private benefit.
• Complementary skills. You want someone who reads financial statements, someone rooted in the community you serve and someone comfortable asking for money.
• Time. A founding board handles filings, policies and the first fundraising asks, so recruit people who can commit for at least two years.

For recruiting, board size and orientation, see how to build a nonprofit board of directors. For what directors are responsible for once they're seated, see nonprofit board responsibilities.

Step 3: Incorporate in Your State

Many founders form a nonprofit corporation, which gives the organization a legal identity separate from its volunteers. You create one by filing articles of incorporation with your secretary of state or equivalent agency; Texas calls the document a certificate of formation. Expect to provide:

• the organization's legal name, after checking that it's available,
• a registered agent and a registered office address in the state,
• the initial directors, if your state requires them in the filing,
• a statement of purpose,
• whether the corporation will have voting members.

Here's the part many founders miss: state forms are built to satisfy state law. For federal exemption, your organizing document must limit your purposes to those described in section 501(c)(3), and it must dedicate your assets to exempt purposes if the organization dissolves. The Form 1023 instructions include sample wording for both a purpose clause and a dissolution clause. The Texas Secretary of State says plainly that its standard nonprofit form meets minimum state requirements but doesn't include the additional statements the IRS might require. Add those clauses before you file, so you don't have to amend later.

If you were considering a nonprofit LLC, note that LLCs can't use the streamlined Form 1023-EZ.

Step 4: Adopt Bylaws and a Conflict of Interest Policy

Bylaws are your internal operating rules: board size and terms, officer duties, meeting notice and quorum, committees, membership and amendments. Your bank, accountant and future board members will rely on them. Our bylaws guide covers the essential clauses one by one.

A conflict of interest policy isn't required to obtain tax-exempt status. Form 1023 still asks whether you have one, and the instructions include a sample policy you can adapt. Most founding boards adopt both documents at their first meeting, along with these decisions:

• electing officers,
• setting the fiscal year (the calendar year is simplest),
• authorizing a bank account and naming who can sign,
• ratifying actions taken by the incorporator,
• approving the plan to apply for federal and state tax exemption.

Record every decision in minutes and keep them with your formation documents as your corporate record book.

Step 5: Get an EIN After You're Legally Formed

Every nonprofit needs an EIN, even with no employees. Banks ask for it, and the exemption application requires it. You can apply online at irs.gov for free and receive the number immediately if the application is approved.

Timing matters more than most people expect. The IRS tells exempt organizations not to apply for an EIN until they're legally formed. Nearly all exempt organizations lose their status automatically if they fail to file a required annual return or notice for three consecutive years, and once you have an EIN, the IRS presumes you're formed and that clock starts running.

Step 6: Apply for 501(c)(3) Status

According to the IRS exemption requirements, a 501(c)(3) organization must:

• be organized and operated exclusively for exempt purposes,
• make sure none of its earnings inure to any private shareholder or individual,
• not attempt to influence legislation as a substantial part of its activities,
• not participate in any campaign activity for or against political candidates.

Most organizations apply on one of two forms, both filed electronically on Pay.gov. Churches and organizations with gross receipts normally of $5,000 or less may be treated as exempt without applying, though some still apply so donors and grantmakers can verify their status.

Form 1023 vs. Form 1023-EZ

Before you can file Form 1023-EZ, you must complete the eligibility worksheet in the Form 1023-EZ instructions. A single "Yes" answer means you must use Form 1023. You don't submit the worksheet, but you should keep it with your records.

The streamlined form is faster, but not automatically better. Choose the full Form 1023 if your activities are complex, you expect to pass $50,000 a year soon, or you formed more than 27 months ago and want exemption back to your formation date, which the 1023-EZ instructions say requires the full form.

The 27-Month Rule

If you file within 27 months after the end of the month in which you were legally formed and the IRS approves the application, your exemption generally takes effect on your formation date. File later, and it typically starts on the date you filed. Put the 27-month deadline in your board calendar the day you incorporate.

After You Apply

While your application is pending, you still owe any annual return that comes due; you mark it as application pending. Once approved, you receive a determination letter. Keep it permanently, because state agencies, banks and grantmakers will ask for a copy. Your approved application and annual returns are public documents, so don't put social security numbers on them.

Step 7: Handle State Tax Exemption and Charitable Registration

Federal exemption doesn't settle your state obligations. Three separate things vary by state:

1. State tax exemptions. Exemption from state franchise, income, sales or property taxes often requires its own application, usually with your IRS letter attached.
2. Charitable solicitation registration. The IRS notes that many states require organizations to register with a state agency before soliciting residents for contributions, exempt certain categories, and may require periodic financial reports. Some cities and counties have their own rules. The National Association of State Charity Officials maintains links to each state's agency on its website, nasconet.org.
3. Ongoing state reports. Many states require an annual or periodic report to keep the corporation in good standing.

If you plan to solicit donors in several states, check each state's rules before you launch a campaign there.

Worked Example: Starting a Nonprofit in Texas

Here's how the steps play out for a fictional group, Hill Country Reading Buddies, a tutoring program in a Texas county seat with a projected first-year budget of $32,000.

Sources: Texas Secretary of State nonprofit FAQs, the Texas Comptroller's 501(c) exemption page and the Texas attorney general's registration page.

Two Texas lessons apply everywhere. State tax exemption isn't automatic: the Secretary of State notes that a Texas nonprofit must apply with both the IRS and the Comptroller. And your legal name must match exactly across every document.

Step 8: Stay Compliant Every Year

Your annual IRS filing depends on your size. The thresholds below come from the 2025 Instructions for Form 990-EZ.

Returns are generally due by the 15th day of the fifth month after your tax year ends, which is May 15 for a calendar-year organization. Missing three years in a row triggers automatic revocation, and reinstatement takes a new application.

Other recurring duties:

• Donor acknowledgments. Donors need a written acknowledgment for any single contribution of $250 or more to claim a deduction, and you must give a written disclosure when a donor pays more than $75 and receives goods or services in return. See our guide to donation receipts.
• Public inspection. Your exemption application and recent annual returns must be available to anyone who asks.
• State reports and renewals. Track the deadlines for your state report and any charitable registration renewals.
• Governance. Hold board meetings, keep minutes and review the conflict of interest policy each year.

Set Up Operations That Make Compliance Easy

• Open a bank account in the organization's name using the EIN. Never run nonprofit money through a personal account.
• Use expense categories that match Form 990. Form 990 reports expenses by program services, management and general, and fundraising. Tagging transactions that way from day one saves hours at filing time.
• Keep donor and member records in one place, including gift history for acknowledgments and contact preferences.
• Write your first fundraising plan. A simple nonprofit fundraising plan with three revenue sources and a calendar beats a vague goal.

If spreadsheets start multiplying, a shared system helps. campai lets you link incoming payments to donations, record monetary and in-kind gifts, and create donation acknowledgments as PDFs from your own templates in batches, as described on the donations and fundraising page. Your organization stays responsible for the acknowledgment wording. You can see how it fits small charities on the nonprofits solution page.

Nonprofit Startup Checklist

Copy this table into your board's shared drive and assign an owner to each row.

Frequently Asked Questions

How much does it cost to start a nonprofit?

Federal fees are $275 for Form 1023-EZ or $600 for Form 1023 under Revenue Procedure 2026-5, and the EIN is free. State incorporation fees vary; Texas charges $25. Legal and accounting help, insurance and basic tools usually cost more than the government fees.

How long does it take to start a nonprofit?

Incorporation can take days to a few weeks, depending on your state. IRS processing time varies with the form and workload, so check the current processing times on irs.gov when you file, and file well within the 27-month window.

Can I start a nonprofit by myself?

You can do much of the work alone, but you can't run it alone. State law sets a minimum number of directors; Texas requires three. Even where a state allows fewer, a board of unrelated, engaged people protects the mission and reassures donors.

Can I get paid by the nonprofit I start?

Yes, nonprofits can pay reasonable compensation for services actually provided. What a 501(c)(3) can't do is let its earnings benefit insiders. If an insider receives an excess benefit, the IRS can impose excise taxes on that person and on managers who approved it. Document how you set pay and have disinterested directors approve it.

Can we accept donations before the IRS approves our application?

You can receive money, but be transparent. If you apply within 27 months of formation and the IRS approves, exemption generally applies back to your formation date. Until then, tell donors your application is pending and that deductibility depends on the outcome. Some founders use a fiscal sponsor during this period.

Do I need a lawyer to start a nonprofit?

Not necessarily; small charities often form and apply on their own using the IRS instructions. Hire an attorney or CPA if your programs are unusual, you'll hold significant assets, or you're unsure which tax status fits.

Next Steps

1. This week: Write your one-sentence mission and list ten people you'd want on the board.
2. Within 30 days: Hold an organizing meeting, confirm your state's board minimum and draft bylaws.
3. Within 60 days: File your articles with IRS-ready clauses, get the EIN and open the bank account.
4. Within 90 days: Complete the 1023-EZ eligibility worksheet, then file Form 1023-EZ or Form 1023 on Pay.gov.
5. Before your first campaign: Confirm state tax exemption and charitable registration, and set up the records you'll need for acknowledgments and your first Form 990-series filing.