Are You Ready to Start a Nonprofit?

National Council of Nonprofits and IRS guidance consistently identify five readiness signals: a specific mission with clear target population (not just a cause area), validated need showing the gap is real and not already filled by other organizations, a committed founding team of 2-3 plus board of 5-9, funding plan covering at least the first 18 months, and willingness to navigate the 501(c)(3) incorporation and IRS application process. Fiscal sponsorship may be a better path for some founders.

IRS Form 1023 application data shows typical 501(c)(3) approval timelines at 4-12 months from initial state incorporation through IRS determination letter, with the IRS application alone commonly taking 3-9 months for review. Faster paths exist (Form 1023-EZ for small nonprofits, fiscal sponsorship to operate immediately under another organization tax-exempt status); the right path depends on organizational size, complexity, and timeline urgency.

Typical out-of-pocket costs include state incorporation fees ($50-300 depending on state), IRS Form 1023 filing fee ($275 for Form 1023-EZ if eligible, $600 for full Form 1023), state tax registration fees (varies), attorney fees ($1,500-5,000 if working with a specialized formation attorney), and initial organizational costs (registered agent, EIN, bylaws, initial board meeting). Total typical formation costs range from a few hundred dollars for self-filed simple cases to several thousand dollars with professional support.

Fiscal sponsorship is an arrangement where an established 501(c)(3) nonprofit (the fiscal sponsor) accepts tax-deductible donations on behalf of a project, group, or aspiring nonprofit that does not have its own 501(c)(3) status. The fiscal sponsor typically charges 5-10% administrative fee and provides legal, financial, and operational infrastructure. For many founders fiscal sponsorship is a better path than independent incorporation, particularly for early-stage projects testing the mission before formal incorporation.

No. The starting a nonprofit result is a structured starting point that surfaces the patterns worth investigating, not a final verdict. People with the same starting a nonprofit result often arrive at different next steps once they factor in context the assessment cannot capture (timing, relationships, personal preferences). Treat it as a useful map, not the territory.

Fundraising Effectiveness Project and AFP industry research consistently identify five foundations for sustained nonprofit fundraising: a documented case for support with measurable outcomes, donor data managed in a CRM rather than scattered spreadsheets, active board involvement including 100% board giving, dedicated fundraising staff capacity, and an existing donor base to steward and grow from.

BoardSource Leading with Intent research consistently identifies five characteristics of healthy nonprofit boards: meaningful diversity across skills, demographics, and lived experience reflecting represented community; 80%+ meeting attendance with engaged between-meeting participation; 100% board giving with active fundraising involvement; documented roles plus effective meetings producing decisions; and structured succession plus board development through orientation, training, and self-evaluation.

For small nonprofits (under $250,000 annual budget) industry consensus consistently recommends a core mix of individual giving (the foundation), monthly giving (predictable revenue plus higher lifetime value), and modest events (community building plus mid-tier donor cultivation).

A capital campaign is a structured fundraising effort to raise substantial funds for a specific transformative project (new facility, endowment, major program expansion, equipment purchase) within a defined timeframe (typically 2-5 years).

Foundation Center and Grant Professional Association research consistently identify five foundations for competitive grant applications: clear mission with aligned programs and documented theory of change, outcome measurement with impact data, audit-ready financials with annual independent audit or review, current 501(c)(3) status with up-to-date IRS Form 990 filings, and grant-writing plus grant-management capacity.