Last year was rough for a lot of reasons. The pandemic shut down many small businesses. Millions lost their jobs as a result, struggling to pay rent or put food on the table. Social movements and protests added even more uncertainty.
Despite the challenges of 2020, Americans continued to donate. In fact, contributions to charities and nonprofits actually increased. The Blackbaud Institute reported that giving rose 2% compared to 2019. Even more surprising, the Center on Nonprofits and Philanthropy at the Urban Institute recorded a 7.5% growth in donations over the second half of 2020.
Yet, many want to take it a step further and start their own organization. While this process can be challenging, it’s also the most rewarding. Erlloisse Magan knows this first hand. As both a founder and an executive, the CEO has provided scholarships, led disaster relief efforts, and began feeding programs. Using this experience, Erlloisse Magan advises on the four steps others should follow when creating their own nonprofit.
It all begins with research. As simple as it sounds, ask yourself what problem the nonprofit will address within the community. Then, conduct a need analysis to determine if another group is already doing similar work. Demographic and population data are helpful. These can be found through the U.S. Census Bureau. Erlloisse Magan says It will be more difficult to get support if you’ll just be duplicating existing services.
Building your nonprofit is more than just coming up with a clever name. Drafting a mission statement is crucial. This should convey your group’s purpose, who you will serve, and how you intend to reach them. Your mission should drive every decision. A business plan is equally important to demonstrate how you will achieve the stated mission. Erlloisse Magan stresses the importance of developing your governing board. The group will grow with the charity to fulfill different roles and legal responsibilities.
It’s time to make it legal. By incorporating, your nonprofit will have a formal structure that lends credibility. Corporate entities also protect the nonprofit’s officers from liability. Every state has different requirements. Check what is needed in each state. If soliciting donations in multiple states, be mindful that you may need to register in those as well. Apply for tax-exempt status. However, this process may take up to 12 months.
Erlloisse Magan says even after you’ve reached this point, your work is just beginning. Ongoing compliance is mandated by state and federal agencies. Follow the rules to avoid jeopardizing the organization’s status. Annual reporting and renewal are a must.