How to Run a Nonprofit Organization

Last Updated: June 10, 2021 Approved

A nonprofit is an organization that does not seek primarily to make a profit to distribute to shareholders of owners, but rather uses any money it takes in to further the non-profit's mission. Like any other business, a nonprofit requires a great deal of time, money, resources, and planning. A vision of what the nonprofit will seek to accomplish is the first step in creating a successful organization. To be operational, the nonprofit will require a great deal more work.

Part 1

Part 1 of 4:

Starting Your Nonprofit

1
Have a well-developed vision. Individuals often come up with a great idea for helping those in need in their community, but have no idea how to achieve those goals. In order to be successful, you must take your vision and develop it into a business. Start by defining the goal you want to achieve in just a few words (try eight or fewer). This will help you focus your goal and start taking steps to make it a reality.^{[1]
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2
Craft a business plan. One of the most comprehensive ways to realize your vision is by making a business plan. A business plan requires you to scrutinize each aspect of your vision and will force you to determine, in detail, how the organization will run. Once you have developed your idea, you must move from an abstract idea into a concrete plan.
- Take it further by brainstorming the resources or help you will need to achieve your vision.
- Make a to-do list of what you have to get done to organize your nonprofit and make it successful.^{[2]
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3
Determine growth goals. Create a timeline for achieving your goals in your business plan. Make clear and measurable goals that you can check off along the way. If you don't know where to start, work backwards from your ultimate goal until you get to where you are now. If you can't get it to work with your current team or funding, reevaluate your business plan and look for an alternative courses of action.^{[3]
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4
Incorporate your nonprofit. While it is not necessary for a nonprofit to become a corporation, many choose to do so in order to Get Non-Profit Status. The other options, charitable trusts and unincorporated organizations, are generally for shorter-term organizational setups that do not require public support. To Incorporate a Business, you will need to file articles of incorporation with your state government. Usually, you file them with the Attorney General or Secretary of State in your state. Check the websites of these offices for the documents you need.
- Fill out the documents with your organization's name, address, and mission statement or purpose. When choosing a purpose, be vague so you can make changes easier. However, do not be so vague that the IRS questions your motives. A more concrete purpose will also allow your donors to understand what you are about. If donors are confident in your purpose, they will be more likely to give you more money.
- Within a few weeks of filing your articles of incorporation, you should receive notice of your successful incorporation.
5
Obtain nonprofit status. Nonprofit organizations generally seek to be tax-exempt under IRS Code 501(c)(3). This will save you from paying taxes on donations and leave you more money to achieve your goals. Earning this status is also a bit of a badge of trust that you can show to donors, as it proves you are a legitimate organization. To file for tax-exempt status, fill out IRS Form 1023. When filling out your form, it's best to retain the services of a tax attorney as the process can be complicated.
- If you cannot afford a tax attorney, try reaching out to organizations that provide free legal services to nonprofits. These organizations are present in many areas around the country.
- Once filled out, your Form 1023 may take up to six months to be processed. After this, you will be notified of your tax-exempt status.
- You may also be required to register separately in each state where you are planning to do fundraising. Check with the state body responsible for charitable organizations where you plan on operating.

Part 2

Part 2 of 4:

Building a Team

1
Ask for help. Often, the individual that comes up with the great idea will enlist the help of others to turn that idea into a tangible plan.
- The process for creating and running a nonprofit organization requires consideration of many different issues ranging from finances, real estate, law, taxes, education, and more. It is rare to find one person who has the experience and expertise to handle all of those issues alone. By reaching out and enlisting the help of experts on each of these issues, the nonprofit will run smoother and be more effective.
- Often, nonprofits struggle to obtain the funding necessary to pay those experts. Seek donations, Apply for a Grant, and use the internet to search for other nonprofit organizers to assist you in finding the funding you need to run a successful non-profit. Nonprofits may even be able to find experts that are willing to work on a volunteer basis or for a reduced fee.
2
Associate with individuals who will help grow your organization. Consider joining a networking group of individuals that works with nonprofits. There, you will being able to share your successes and frustrations with those who understand what you are going through. They can also provide you with insight and advice going forward.
- Hiring the right people will also help your organization flourish. It might be tempting to hire employees and appoint board members based on their enthusiasm for your vision rather than their job skills. Of course, you want to hire those individuals that are passionate about the nonprofit, but you also need to make sure that each person within the organization can do a good job in his or her role.
- Remember, just because an organization is “not for profit” does not mean that it is not a business. Treat hiring employees and appointing members the same way a for-profit corporation would by evaluating each potential candidate and choosing the person you feel will be most effective.
- Hiring employees will require you to have an Employee Identification Number (EIN) with the IRS. File for this number on the IRS's website. There is no filing fee and you should have your EIN within a month of filing.
3
Create an organizational structure. Like a business, a nonprofit should have a board of directors that votes on organizational changes and oversees operations. The board will need officers, like a president, a treasurer, and a secretary, to run the organization and fulfill different roles. Whether or not this board will employ or direct any other employees depends on the size of the nonprofit.
- You can also choose to create a membership structure, where every member in the nonprofit has voting rights. However, the board of directors model is more common.^{[4]
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- Any organization you choose must enact bylaws or a charter to ensure that decision-making runs smoothly. Bylaws will establish a voting policy, a manner in which officers are elected, and conflict-resolution policies. There should also be a defined policy for calling board meetings.
4
Coordinate your volunteers effectively. Put your volunteers to work in ways that can capitalize on their skills and allow them to contribute the most to the organization. Make sure you treat all volunteers with the same respect you would your paid employees. Don't overwork them or treat them poorly or they may just walk out.
5
Delegate your responsibilities. Many nonprofit founders insist upon running every aspect of the organization, even when the size of the organization makes it difficult to do so. This leads to a reduction in efficiency and the frustration of employees. Make sure to avoid this trap by delegating important responsibilities to your board members and others. That way, you (as the president and/or founder) can continue to work on the general direction of your nonprofit.

Part 3

Part 3 of 4:

Managing Your Organization

1
Keep corporate records. Start a corporate records book by compiling your articles of incorporation, charter (or bylaws), evidence of your tax exempt status, and other important organizational documents. Then, keep minutes of board meetings and records of important decisions as written documents in your records. Doing so will both help your organization keep its tax-exempt status and limit the personal liability of directors.^{[5]
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- Have a designated secretary assigned to keeping track of, creating, and updating these records.
2
Manage your finances. Acting as a nonprofit doesn't free you from the responsibilities of financial reporting. In order to adhere to IRS standards, a nonprofit must maintain a double entry bookkeeping system and keep detailed financial records. Therefore, make sure you Understand Debits and Credits. During tax season, you must file a corporate tax return as well.
- Even though your organization is a nonprofit, and is tax-exempt, you are still required to pay income taxes on income earned in "unrelated activities." That is, you may be charged income tax if you have earned income from any activity not directly related to your purpose, even if you use that money to further the purpose.
- Earning too much unrelated income can deprive you of your nonprofit of tax-exempt status. To find the limits on what you can earn, consult with a tax lawyer.^{[6]
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- In order to manage finances, you will need a nonprofit bank account. Your own personal account will not work for these purposes. Open an account at a local bank and select several members of your organization to oversee the account.
3
Adhere to nonprofit regulations. In order to maintain tax-exempt status, nonprofits have to follow several other rules. For example, they can not make donations to political campaigns. They may also not be able to lobby the government in any substantial way. And it goes without saying that there should be no profits distributed to the board or members.
- In addition, if dissolved, the nonprofit must donate its assets to another nonprofit, rather than to board members.^{[7]
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4
Measure and analyze your successes. In order to improve over time, your nonprofit will have to assess what it is doing right and what is being done poorly. Look at your expenditures versus the outcomes those expenditures have achieved. Find a way to quantify these outcomes as a cost per (outcome) measurement. For example, if you had a pet shelter, you could quantify this as "cost per dog saved." Use this metric to assess your expenditures and initiatives. Then, identify activities with the lowest cost per outcome and focus on those activities.

Part 4

Part 4 of 4:

Gaining Donors and Volunteers

1
Create a marketing plan. Remember that your nonprofit needs to market itself. Having a great idea does not mean your organization will be successful. In order to thrive, your organization must attract volunteers, financial supporters, and those in need of the services.
- Have a plan in place regarding how you will attract these people to your organization. Whether it is a traditional advertising approach, or whether you will reach out through other organizations or government groups, it is important to plan for these activities at the beginning because they are often costly (monetarily and in terms of time).
- Plan to attract both individual donors and organizational ones (e.g., foundations, corporations, governments, and religious organizations).
2
Diversify your fundraising strategies. It's best to spread out your methods in case your main source of funds dries up for unexpected reasons. For example, even if you get a major grant, there's no guarantee that you will get the same grant next year. For variety, try:
- Face-to-face fundraising.
- Going door-to-door.
- Phone-a-thons.
- Mailing brochures or postcards.
- Events like dinners or races.
- Product sales.
- Services to the community.
3
Market your nonprofit cheaply. Odds are you won't have much money for advertising in the beginning. There are several ways to market your organization with minimal funding. Find someone to help you make flyers about your nonprofit and hang them around your community. Contact your local government and offer the services of your organization to those individuals that need them.
- You can also issue press releases for free that proclaim your organization's successes.
4
Maintain donor relationships. Once you have earned substantial donations from certain donors, your goal is to keep them coming back. Institute a donor database so that you can track these donors and contact them if you need to. Send them newsletters or thank you notes for donations and remember to show your thanks by inviting them to thank you events or dinners.
- It is best to create a donor plan that lays out planned expenditures on donors, what to do if a donor hasn't donated in a long period of time, and a plan to reach out to new donors.^{[8]
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