Creating a New Nonprofit

I have two clients right now who are looking to create a new nonprofit, and you know two is my magic number for questions and ideas that generate a blog post. As such, let’s talk about creating a nonprofit, which for our purposes today will mean a 501 (c) 3, as opposed to other nonprofits that are not charitable institutions.

Before we get in too deep, and on behalf of the people I can hear out there yelling at their computer that the world does not need any more nonprofits, if you haven’t already committed to this path, please click over to read Before You Start A New Nonprofit. There may be options that you have not considered.

If you’re still reading, I will assume that you have done your homework and have concluded that creating a new agency is the way to go. Thank you for wanting to impact your corner of the world and the issues about which you are passionate.

The vast majority of time you will spend at the beginning of the launch is on board development.

Strong boards beget strong agencies. You (and your board once it’s built) will have to set the mission and vision for the organization, create a plan, build the profile, the program and lots of other things to introduce your new agency to your community.

The first official step to create a nonprofit is to hire a lawyer and have the proper paperwork filed. You can file it yourself but I wouldn’t. There are lots of things that I’m willing to figure out (and sometimes learn the hard way), but legal and accounting issues are not usually among them. Once you have filed, usually with both your state and the IRS, you may also need to register as a charity, depending on the state and city in which you will operate.

Make sure that your lawyer has expertise in nonprofit law. If they don’t and you still want to use them, find someone who has that expertise. It can be a consultant, an executive director, or someone who has previously started an agency. Sometimes, lawyers, especially those who are not experts in the nonprofit field, create very basic by-laws, and that won’t be enough. I recommend you start with 12-18 members, not the three that usually get listed on initial by-laws. Three people aren’t enough to get where you want to go. If 12 seems daunting, and you really truly only have 3 people initially, write it as 3-18.

I recommend three-year terms for board members. Try to stagger the terms so that everyone doesn’t roll off at once. It is considered a best practice, by many, to have term limits, usually two or three terms for a total of six to nine years. At that point, really dedicated board members may roll off for a year and then be reappointed.  This is not a best practice I usually advocate.  It’s necessary if you have a board that is conflict adverse. If you have a board that’s willing to address issues and thank people when they’re no longer effective or engaged, you won’t need to say goodbye, even for a year, to effective board members.

I recommend one year terms for officers, renewable once. That may not feel like long enough for the founder and if that’s the case, write the by-laws for longer terms with the understanding that in the future you will revise the by-laws and back down the officer terms. It is not good for an agency to have long term officers. New blood and new ideas are needed on the board to continue to move the organization forward.

Finally, I recommend you create at least three committees: a board development committee to create, perpetuate and educate the board; a finance committee to make sure that the organization is spending its resources in accordance with GAAP standards and appropriately protecting the community’s investment; and a resource development committee to encourage the board and the community to invest in your agency’s mission. For more information on committees, please click here. The committees, once appointed, need to set and meet goals including building, training and annually evaluating the board (and the executive if you have one), personally giving, raising money from others and stewarding the money that is raised.

Once the board is built – at least the first time around – you can move on to other things. As you will find out if you haven’t already learned, board development is an on-going process in any nonprofit agency that never quite ends, but for our purposes, let’s say we’re happy with our initial board.

The next step is values, mission, vision and strategic (then tactical) planning. I can hear some of you thinking that we should have planned first, but planning requires the right people at the table so while it may look like a chicken and egg scenario, it’s not. You need the right board to create the right plan.

One of the keys responsibilities of a board is to set the values, mission, vision and strategic direction. The mission answers why the agency exists. The vision answers where the agency aspires to be at a future point in time. The plan lays out the path to get there. The values are the way you’ll conduct yourself on the path. Once you have the strategic plan, you will also need a tactical plan to operationalize the work.

Part of the plan, especially at the beginning, will be the program and its potential to impact the community you aspire to serve. Please include that community in your planning efforts.  Also consider the staffing needed to create, introduce, offer and evaluate whatever services you plan to provide.

Finally, create a plan to introduce your agency and its program to the community, including partner agencies, potential funders and donors. This again may seem like a chicken and egg scenario but you will need to have a program plan before you can talk to people about your aspirations. They can’t buy in, if you can’t paint the picture.

Starting a new nonprofit is exciting, and daunting. Like anything else in the nonprofit world, a good board and a well thought-out plan can get you pretty far.

Have you started a new nonprofit? Can you share your experiences? As always, I welcome your insight, feedback and experience. Please share your ideas or suggestions for blog topics and consider hitting the follow button to enter your email. A rising tide raises all boats.