How to Start a Nonprofit Organization — Step-by-Step Guide (2026)

Starting a nonprofit organization is one of the most meaningful things an entrepreneur can do — but it's also one of the most misunderstood processes. A nonprofit isn't just a business that doesn't make money. It's a specific legal structure with its own formation requirements, tax rules, and ongoing obligations. This guide walks you through every step, from choosing your structure to applying for federal tax-exempt status.

QUICK ANSWER
To start a nonprofit organization: (1) choose a name and nonprofit structure, (2) appoint a board of directors, (3) file Articles of Incorporation with your state, (4) create bylaws, (5) apply for an EIN, (6) apply for federal tax-exempt status with the IRS (Form 1023 or 1023-EZ), and (7) register with your state for charitable solicitation if required. The process typically takes 3–12 months from start to IRS approval.

IN THIS GUIDE

1. What is a nonprofit organization?
2. Types of nonprofit structures
3. Step-by-step: how to start a nonprofit
4. How much does it cost?
5. State-specific requirements
6. Can an LLC be a nonprofit?
7. Frequently asked questions

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What Is a Nonprofit Organization?

A nonprofit organization is a legal entity formed to pursue a mission — educational, charitable, religious, scientific, or public benefit purposes — rather than to generate profit for owners or shareholders. Any revenue the organization earns must be reinvested into furthering its mission, not distributed to individuals.

The term "nonprofit" is often used loosely, but legally it refers to organizations that have been recognized as tax-exempt under federal and/or state law. The most common type is a 501(c)(3) organization — which is exempt from federal income tax and allows donors to deduct their contributions on their personal tax returns.

IMPORTANT DISTINCTION
"Nonprofit" does not mean the organization can't generate revenue or pay employees. Nonprofits can earn income, pay competitive salaries, and even run profitable programs — as long as surplus funds are reinvested into the mission rather than distributed to members or shareholders.

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Types of Nonprofit Structures

Before filing anything, you need to choose what type of nonprofit you're forming. The most common types under IRS Section 501(c) include:

501(c)(3) — Charitable, Religious, Educational

The most common nonprofit type. Includes charities, churches, schools, hospitals, and scientific organizations. Donations are tax-deductible for donors. Eligibility for most grants and government funding. This is what most people mean when they say "nonprofit."

501(c)(4) — Social Welfare Organizations

Civic leagues and organizations operating for the promotion of social welfare. Donations are generally NOT tax-deductible. Allowed to engage in more political activity than 501(c)(3) organizations.

501(c)(6) — Business Leagues and Trade Associations

Chambers of commerce, professional associations, and real estate boards. Focused on improving business conditions for a particular industry or profession rather than individual profit.

501(c)(7) — Social and Recreational Clubs

Organizations organized for pleasure, recreation, and other non-profitable purposes. Includes hobby clubs, country clubs, and fraternal organizations. Members must share a common interest.

For most founders starting a nonprofit to serve their community or pursue a social cause, 501(c)(3) is the right choice. The rest of this guide focuses on the 501(c)(3) formation process.

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How to Start a Nonprofit — Step by Step

1. Choose a Name

Your nonprofit's name must be unique in your state and cannot be misleading about your organization's purpose. Check availability through your state's Secretary of State website before committing. Consider also checking whether the domain name is available for your website.

Your name should clearly reflect your mission — donors and grantmakers will research you, and a vague or confusing name creates unnecessary friction. Avoid names that imply government affiliation or suggest you're a law firm.

2. Appoint a Board of Directors

Every nonprofit corporation must have a board of directors — the governing body that oversees the organization's mission, finances, and legal compliance. Most states require a minimum of 3 directors, though some allow just 1.

Your initial board should include people with:

• Commitment to your mission
• Relevant professional skills — finance, legal, marketing, fundraising
• Community connections that can help the organization grow
• Willingness to be legally and financially accountable

Board members of a 501(c)(3) typically serve without compensation, though reasonable reimbursement for expenses is permitted.

3. File Articles of Incorporation

To legally create your nonprofit, you file Articles of Incorporation (sometimes called a Certificate of Incorporation or Charter) with your state's Secretary of State. This document typically includes:

• Organization name and principal address
• Statement of nonprofit purpose
• Names and addresses of initial directors
• Name and address of your registered agent
• A dissolution clause (required for 501(c)(3) — must state that assets go to another exempt organization if dissolved)

You must have a registered agent with a physical address in your state to receive legal documents on behalf of the organization. Brendat provides registered agent service in all 50 states.

⚠️ Critical for 501(c)(3)
Your Articles of Incorporation must include specific language about your charitable purpose and dissolution — the IRS will reject your 501(c)(3) application if these clauses are missing or incorrectly worded. Brendat's nonprofit formation service includes properly drafted Articles that meet IRS requirements.

4. Create Bylaws

Bylaws are the internal rules that govern how your nonprofit operates. Unlike Articles of Incorporation (which are filed publicly), bylaws are an internal document. Your bylaws should cover:

• How the board is structured — number of directors, terms, how they're elected
• How meetings are conducted and how often they occur
• Voting procedures and quorum requirements
• Officer roles and responsibilities (President, Treasurer, Secretary)
• How bylaws can be amended
• Conflict of interest policy

The IRS will ask for a copy of your bylaws when you apply for 501(c)(3) status. Make sure they're complete and properly adopted by your board before filing.

5. Get an EIN (Employer Identification Number)

Your nonprofit needs an EIN from the IRS before you can open a bank account, hire employees, or apply for tax-exempt status. An EIN is free to obtain directly from the IRS — apply online at IRS.gov, or Brendat can handle the EIN application as part of your nonprofit formation package.

Even if your nonprofit has no employees right now, you need an EIN. It's your organization's federal tax identification number and is required for virtually every financial and legal transaction.

6. Apply for Federal Tax-Exempt Status (IRS Form 1023)

This is the most important — and most complex — step in starting a 501(c)(3). You must apply to the IRS for recognition of your tax-exempt status. There are two application options:

• Form 1023-EZ — simplified application for smaller organizations (projected annual gross receipts under $50,000 and total assets under $250,000). Filing fee: $275. Processing time: 2–4 weeks.
• Form 1023 — full application for larger or more complex organizations. Filing fee: $600. Processing time: 3–12 months.

The application requires detailed information about your organization's activities, finances, governance, and how you plan to operate. Incomplete applications are returned and cause significant delays.

BRENDAT TIP
You can start operating and accepting donations before your 501(c)(3) approval — but donors cannot deduct their contributions until approval is granted (and it's retroactive to your formation date once approved). Make sure donors understand this if you fundraise before approval.

7. Register for State Tax Exemption

Federal 501(c)(3) status doesn't automatically exempt you from state taxes. Most states require a separate application for state income tax exemption, and many also require registration for state sales tax exemption.

This step varies significantly by state — some states automatically grant exemption when you receive federal 501(c)(3) status, while others require their own application process.

Register for Charitable Solicitation (if fundraising)

If your nonprofit will solicit donations from the public — including online donations — most states require you to register as a charitable organization before you begin fundraising. Currently, 41 states have charitable solicitation registration requirements.

Failure to register before fundraising can result in fines and being required to refund donations. If you plan to fundraise in multiple states, you may need to register in each state where you solicit.

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Start Your Nonprofit With Brendat

Brendat handles Articles of Incorporation, EIN, registered agent, and bylaws — so your nonprofit is properly formed from day one.

See Nonprofit Formation Plans →

All 50 states · Not a law firm · For legal advice, consult a qualified professional

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The cost to start a nonprofit depends on your state and the size of your organization. Here's a realistic breakdown:

• State incorporation fee: $25–$150 depending on your state
• IRS Form 1023-EZ filing fee: $275 (for smaller organizations)
• IRS Form 1023 filing fee: $600 (for larger organizations)
• Registered agent service: typically $100–$200/year
• State charitable solicitation registration: $0–$200 depending on state
• Formation service fee (if using a service like Brendat): varies by plan

Total startup costs typically range from $400–$1,200 depending on your state, organization size, and which IRS form you qualify for. Ongoing annual costs include registered agent fees, annual report filings, and IRS Form 990 preparation (your annual information return).

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State-Specific Requirements

While the federal 501(c)(3) process is the same nationwide, state-level requirements vary significantly. Here are some key states:

Can an LLC Be a Nonprofit?

This is one of the most common questions we receive — and the short answer is: technically yes in some states, but it's almost never the right choice.

A handful of states allow the formation of a nonprofit LLC, but the IRS does not recognize LLCs as eligible for 501(c)(3) status on their own — the LLC must be wholly owned by a 501(c)(3) organization and meet very specific requirements. In practice, nearly all nonprofits seeking tax-exempt status incorporate as nonprofit corporations, not LLCs.

If your goal is to start a charitable organization that can accept tax-deductible donations and apply for grants, form a nonprofit corporation — not an LLC. If your goal is to run a mission-driven business that still generates profit for owners, consider a benefit corporation or B-Corp certification instead.

LLC vs Nonprofit
An LLC is for businesses that generate profit for their owners. A nonprofit corporation is for organizations that reinvest all surplus into their mission. They serve fundamentally different purposes and have different legal and tax structures.

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Frequently Asked Questions

How long does it take to start a nonprofit?

State incorporation typically takes 1–4 weeks. IRS Form 1023-EZ approval takes 2–4 weeks. Full Form 1023 processing currently takes 3–12 months. Total time from start to IRS approval is typically 3–6 months for small organizations using the 1023-EZ, and 6–18 months for larger organizations using the full Form 1023.

Do I need a lawyer to start a nonprofit?

Not necessarily for simple formations. The IRS Form 1023-EZ is designed to be completed without legal assistance for qualifying small organizations. However, for larger organizations, complex program structures, or if you're unsure about your eligibility, consulting a nonprofit attorney or CPA is advisable. Brendat is not a law firm and does not provide legal advice.

What is the difference between a nonprofit and a 501(c)(3)?

"Nonprofit" refers to your state-level legal structure — a corporation formed without profit motive. "501(c)(3)" refers to your federal tax-exempt status granted by the IRS. You can be incorporated as a nonprofit at the state level without having 501(c)(3) status. To receive tax-deductible donations and apply for most grants, you need both: state incorporation AND federal 501(c)(3) recognition.

Can a nonprofit pay its founders or employees?

Yes. Nonprofits can and do pay employees — including founders — reasonable compensation for their work. What nonprofits cannot do is distribute surplus profits to members, directors, or shareholders like a for-profit business would. Compensation must be reasonable and in line with market rates for the role.

How much does it cost to start a nonprofit?

Startup costs typically range from $400–$1,200, including the state incorporation fee ($25–$150), IRS filing fee ($275 for Form 1023-EZ or $600 for Form 1023), and registered agent service. Ongoing annual costs include annual report filings, registered agent renewal, and Form 990 preparation.

Can an LLC be a nonprofit?

In most practical cases, no. The IRS does not recognize standard LLCs as eligible for 501(c)(3) status. Nearly all nonprofits seeking federal tax-exempt status incorporate as nonprofit corporations. If your goal is a charitable organization that can accept tax-deductible donations, form a nonprofit corporation — not an LLC.

What annual requirements does a nonprofit have?

Nonprofits must file an annual information return with the IRS (Form 990, 990-EZ, or 990-N depending on size), file state annual reports to maintain good standing, renew their registered agent, and maintain their charitable solicitation registrations in all states where they fundraise. Failing to file Form 990 for three consecutive years results in automatic loss of tax-exempt status.

Further Reading

• Is an LLC a Sole Proprietorship? Key Differences
• What Legal Documents Does Every LLC Need?
• Form an LLC with Brendat — Starting at $0