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Starting a Nonprofit

Nonprofits enrich our communities.  If you are considering starting a nonprofit, it's probably because you have seen a need and think that creating a nonprofit is the best way to address that need.  Starting a nonprofit involves a lot more than just starting a program.  You have to be willing to create and sustain an organization, be informed about all the regulations and reporting requirements governing nonprofits and be willing to fundraise.

Take a moment to ask yourself these seven questions

1. Is somebody already doing what you would like to do?  Is somebody already doing something close to what you would like to do?

Have you done some research to confirm?  Check the New Mexico Nonprofit Directory to see if someone else is already doing the work.  If someone is, then connect with them and explore partnering or supporting the existing work in some manner.  collaborating or partnering with an existing agency could save you a lot of time and effort.  You would get to focus on the program; they already have an infrastructure in place.

2. Have you considered collaborating/partnering with an existing organization instead of creating an independent nonprofit to accomplish your mission?

If you are concerned about losing control of the direction of the nonprofit, then you need to remember that nonprofits are public entities, no one person has control.  Creating a nonprofit requires having an independent board of directors.  They oversee, guide and direct the organization.

If you no one is doing the exact work, then try to find an organization that is doing compatible work and review the options.  You may be able to merge the new program idea into the organization.  Or you might be able to have the organization act as a fiscal sponsor for your program (it must fit within the mission of the sponsporing nonprofit and meet other IRS guidelines).  Often, a fiscal sponsor can serve as an incubator for the program allowing it to (i) be piloted, evaluated and improved and (ii) secure a funding base prior to its startup as an independent nonprofit.

Also see 8 Alternatives to Starting a Nonprofit, an article on About.com

3. Have you done the research to ascertain that your idea will address an unmet need in the community?

Doing some research before starting a nonprofit is equivalent to a new business venture doing a feasibility study.  Contact local community organizations: community foundations, united ways, chambers of commerce, local government, police, etc..  Confirm that your proposed organzation will address a need that other readily perceive.

4. Do you want to create a nonprofit because you need a job?

Starting a nonprofit is not an appropriate make-work project.  A nonprofit should be formed to address an unmet need in the broader community.  If the purpose of the nonprofit is personal gain, then you should consider creating a for-profit company.  Starting a nonprofit is a lot of work, but there may not be sufficient funding to pay anyone.

5. How will you fund the mission or finance the organization?  Have you been able to secure funding for at least 6 months?

If you are relying on grant funding, do you have a relationship with a funder and have they stated with some degree of certainty that you will be able to obtain funding?  According to a recent study by the National Center for Charitable Statistics, foundation giving has decreased. Relying solely on grant funding is a precarious thing to do, even for an established nonprofit. 

If you are relying on seek donations, do you have people who are ready to donate when you receive the letter of determination for nonprofit status?  Please note: any "donations" received before you have your IRS letter of determination are not tax-deductible.

Tom Pollack, program director for National Center for Charitable Statistics, said, " I think organizations should look for opportunities to merge and share resources as government budget concerns come to a head.  If you're relying on governmental contract, it's better to start thinking about cooperation." ("Test Your Knowledge Of The Nonprofit World -11/04/2011," The NonProfit Times)

6. Do you have a prospective board of directors?  Are there enough community members that share your vision and are willing to be board members?

Board members should be representative of the community and bring a range of skill sets and expertise to assist the organization in its formative phase.

7. Do you have a strategic plan for the organization?

Create a 3-year business plan to ensure the viability of the new nonprofit.  If the analysis doesn't support a startup, then you probably shouldn't go forward with the intiative unless you develop a viable alternative operating model.

Steps to Forming a Nonprofit

When you have considered the above questions and reviewed all your options, please review the steps to forming a nonprofit.

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