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How Much Does It Cost to Start a Nonprofit?: A Definitive Guide

Are you thinking about starting a nonprofit, but are concerned about funding it?

Like any business, it can be tough to put together the funding to keep a nonprofit afloat. In fact, according to the National Center on Charitable Statistics, 30% of nonprofits fail to make it after 10 years.

While there are several different reasons nonprofits fail, a lot of the times, it comes down to a lack of funds.

This is why it’s so important to make sure you have enough funding together before you begin your nonprofit. So, how much does it cost to start a nonprofit?

Keep reading to find out.

 

How Much Does it Cost to Start a Nonprofit?

So, how much money do you need to start a nonprofit? Unfortunately, the answer is complicated.

Generally speaking, you’ll need at least $500 to $1000 to start your nonprofit. But, depending on what your goals are, you could easily end up needing a lot more money. There are four main factors that will affect your startup costs. These are:

  • Filing for tax-exempt status
  • Incorporation fees
  • Charitable solicitation fees
  • Other associated costs

Some of these costs are non-negotiable, while some you can reconsider. Let’s take a look at the details of each one of these.

 

Filing for Tax-Exempt Status

Filing for tax-exempt status is not something that all nonprofits do. If your nonprofit provides a service that’s charitable, education, or is research-related, then you’ll want to file for tax-exempt status, also known as 501c3 status.

To apply for this status, you’ll need to fill out one of two forms- 1023 forms or 1023EZ forms.

The 1023 form requires you to explain several things, including your:

  • Mission statement
  • Spending and projected budget
  • Information about your board of directors
  • A detailed listing of programs
  • Conflict interest policy

The cost to fill out this form is $600.

The 1023 EZ form was created in 2014 as a streamlined way for new and smaller nonprofits to file tax-exempt status with less hassle. If you estimate that your nonprofit won’t have any more than $50,000 in gross receipts each year, then you’re eligible to fill out this form.

To be eligible to fill out the 1023EZ form you also need to be forming your nonprofit in the US and have no more than $200,000 in assets. This form costs $275 to fill out.

In addition to paying for filing fees, you may also want to work with a tax professional or lawyer when filling out these forms to make sure you do everything right. Obviously, this can drive up your total costs.

 

Incorporation Costs

Incorporating you’re nonprofit can cost anywhere from $0 to $250.

Before you incorporate your nonprofit, you’ll first need to put together a board of directors. You’ll also need to develop your mission and vision statements.

To figure out how to incorporate your nonprofit, you’ll need to follow your state’s specific guidelines. You can call your Secretary of State’s office to learn the steps you need to take to incorporate. You can also check with your state’s nonprofit association to learn how to incorporate your nonprofit.

Depending on the activities you plan on doing, you may also need a business license. For example, if you provide hairstyling services to your clients, then you’ll need a license to cut hair. Or, let’s say you want to provide counseling services- you’ll need the right credentials for this as well.

 

Charitable Solicitation Fees

In most states, you need to be approved before you’re allowed to fundraise. This includes fundraising by email, mail, or in-person.

Registering allows your state to protect its citizens from fraudulent fundraisers and scammers. In addition to registering before you solicit your residents, many states also require that you don’t place a “donate” button on your website until you’re 100 percent registered to solicit charitable fees.

Also, keep in mind that you’ll need to register in every state where you plan to solicit funds. If you don’t know how big you plan to expand your nonprofit, in the beginning, you should at least register to solicit in your state and any state where you foresee having multiple donors.

You’ll need to pay charitable solicitation fees each year, and costs vary by state.

 

Other Associated Costs

Here are some other costs that come with starting a nonprofit:

Insurance

You’ll likely either need umbrella insurance or general liability coverage to run your nonprofit. You may also want to consider directors and officers insurance, which covers your board members and the officers of your organization.

Depending on your planned activities, you may also need other types of insurance. Typically, insurance costs about $500 per year.

 

Communications and Marketing

No matter what type of nonprofit you’re starting, you’ll need to engage in some form of marketing so you can get the word out to potential donors and volunteers.

At the very minimum, you’re going to need a website, as this helps make your organization credible in the eyes of the people. If you build your website yourself, you can purchase a domain for as little as $50 for 3 years and pay as little as $10 per month for a website building service.

If you hire a web designer or graphic designer, you’re going to end up paying a lot more money. But, you’ll likely have a lot more professional-looking website.

You’ll also need to figure out whether you want to handle your marketing on your own or hire a marketing team.

 

Are You Ready to Start a Nonprofit?

Now that we’ve answered the question, “How much does it cost to start a nonprofit?”, it’s time to get started. Pretty soon, your nonprofit will be up and running.

For more tips and tricks on keeping your nonprofit afloat, be sure to check back in with our blog.

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