How to Start a Nonprofit: 501(c)(3) Steps and Fees (2026)

Quick answer: To start a nonprofit, define a charitable mission, incorporate as a nonprofit corporation in your state, appoint a board, adopt bylaws, get an EIN, then apply for federal tax exemption on Form 1023 ($600 user fee) or the streamlined Form 1023-EZ ($275) as of October 2026. Finish with state registrations and annual Form 990 filings.

Starting a nonprofit means creating two things: a legal entity under state law and a tax-exempt status from the IRS. Many founders confuse the two, or skip the governance steps that keep an organization compliant for years. This guide explains how to start a nonprofit in the United States, focused on 501(c)(3) charities, with the forms, fees and a realistic first-year budget. It is general information, not legal or tax advice.

What is a nonprofit (and what is a 501(c)(3))?

A nonprofit is an organization formed for a purpose other than generating profit for owners. It can earn more than it spends, but surplus must go back into the mission rather than to private individuals. Most nonprofits are corporations formed under a state nonprofit corporation act, though some are trusts or unincorporated associations.

A 501(c)(3) organization is a nonprofit the IRS recognizes as exempt from federal income tax because it is organized and operated exclusively for charitable, religious, educational, scientific or certain other purposes. Donations to it are generally tax deductible for donors. Other categories exist, such as 501(c)(4) social welfare organizations and 501(c)(6) trade associations, but they do not offer deductible donations.

How much does it cost to start a nonprofit?

Item	Typical cost	Notes
State articles of incorporation	Varies by state, often under $100 to a few hundred dollars	Check your secretary of state
EIN	Free	Apply on IRS.gov
Form 1023 user fee	$600	Full application, filed and paid on Pay.gov
Form 1023-EZ user fee	$275	Only for eligible small organizations
State charitable solicitation registration	Varies, some states charge no fee	Required before fundraising in many states
Registered agent	Free if you serve yourself, or a commercial service fee	Must have a physical address in the state
Insurance (general liability, D&O)	Varies by activities	Directors and officers coverage protects board members
Professional help	Optional	Attorney or accountant review

The IRS fees above come from the IRS page on Form 1023 and 1023-EZ user fees as of October 2026; the IRS notes they are subject to change.

How to start a nonprofit: 10 steps

1. Define the mission and check for overlap

Write a clear mission statement and describe the programs you will run, who benefits and how. Research existing organizations doing similar work. Sometimes partnering with one, or operating as a fiscally sponsored project under an established charity, is faster than forming your own.

2. Choose a name

Pick a name available in your state's business registry, and check domain names and trademarks. Many states require a word such as "Inc." or "Corporation".

3. Recruit a founding board

States set a minimum number of directors (often one to three), but the IRS and grantmakers look more favorably on a board of at least three unrelated people. Directors owe duties of care, loyalty and obedience to the mission. A board made up of one family raises questions about private benefit and control.

4. File articles of incorporation

File with your secretary of state. For 501(c)(3) purposes, the articles must include a purpose clause limiting the organization to exempt purposes and a dissolution clause dedicating remaining assets to another exempt purpose. The IRS provides sample language in its Publication 557 and Form 1023 instructions.

5. Adopt bylaws and key policies

Bylaws set out how many directors you have, terms, officers, meetings, quorum and voting. Adopt a conflict of interest policy (Form 1023 asks about it), and consider whistleblower, document retention and gift acceptance policies. Hold an organizational board meeting and record minutes.

6. Get an EIN

Once the corporation exists, apply for an EIN online for free.

7. Apply for federal tax exemption

Most organizations file Form 1023 electronically through Pay.gov. Smaller organizations may use Form 1023-EZ (next section). File within 27 months of formation so that, if approved, exemption is retroactive to your incorporation date.

8. Apply for state tax exemptions

Many states require a separate application for state income, franchise, sales or property tax exemption. Some exempt automatically once you have IRS recognition.

9. Register for charitable solicitation

Around 40 states require charities to register before asking residents for donations, with annual renewals. Online fundraising can trigger registration in multiple states.

10. Set up banking, bookkeeping and compliance

Open a bank account in the organization's name, use fund accounting to track restricted grants, and calendar annual filings.

Form 1023 vs Form 1023-EZ: which should you file?

Feature	Form 1023	Form 1023-EZ
User fee (as of October 2026)	$600	$275
Who can use it	Any organization seeking 501(c)(3) status	Only organizations passing the eligibility worksheet
Projected gross receipts	No limit	$50,000 or less in each of the next 3 years (and actual receipts for the past 3 years)
Total assets	No limit	$250,000 or less (fair market value)
Detail required	Narrative of activities, financial data, policies, compensation	Mostly attestations
Filing method	Electronic through Pay.gov	Electronic through Pay.gov
Typical processing	Longer	Usually faster
Excluded groups	None	Churches, schools, hospitals, supporting organizations and others listed in the instructions

The 1023-EZ is cheaper and faster, but grantmakers sometimes view it as less rigorous, and if you outgrow its limits soon you gain little. If your budget will clearly exceed $50,000 within three years, file the full Form 1023. Details are in the IRS Form 1023-EZ instructions.

Worked example: a first-year budget for a small nonprofit

A community literacy nonprofit plans free tutoring for 60 children. Its first-year projected budget, with illustrative figures:

Revenue	Amount
Individual donations	$18,000
Small community foundation grant	$15,000
Fundraising event (net)	$6,000
Program fees (sliding scale)	$3,000
Total revenue	$42,000

Expenses	Amount
Part-time program coordinator	$22,000
Books and materials	$6,500
Space rental	$6,000
Insurance (general liability, D&O)	$2,200
State filings and Form 1023-EZ fee ($275)	$500
Accounting software and bookkeeping	$1,800
Fundraising costs	$2,000
Total expenses	$41,000

With projected receipts under $50,000 for three years and assets well below $250,000, this group may qualify for Form 1023-EZ, saving $325 in user fees plus preparation time. If it lands a $60,000 grant in year two, however, it would exceed the threshold, so it should project carefully before choosing.

What annual filings does a nonprofit have?

• Form 990-N (e-Postcard): for organizations whose gross receipts are normally $50,000 or less.
• Form 990-EZ: for gross receipts under $200,000 and total assets under $500,000.
• Form 990: for larger organizations.
• Form 990-T: if unrelated business income is $1,000 or more.
• Payroll filings: Form 941 quarterly and W-2s if you have employees. 501(c)(3) organizations are exempt from FUTA but may owe state unemployment or reimburse it.
• State annual report and charitable registration renewals.

Annual returns are due on the 15th day of the fifth month after the fiscal year ends (May 15 for calendar-year organizations).

Who should be on a nonprofit board?

The board is legally responsible for the organization, so recruit for skills, not just enthusiasm. A strong founding board of three to seven people often includes:

• Someone with finance or accounting experience to serve as treasurer and review monthly financial reports.
• Someone with legal, HR or governance experience to oversee policies and contracts.
• People connected to the community you serve, so programs reflect real needs.
• Fundraising connectors who can introduce the organization to donors and funders.

Officers (president or chair, secretary and treasurer) are usually elected by the board. Set term limits in the bylaws, meet at least quarterly, keep minutes and review a budget and financial statements at every meeting. Directors who are also paid staff should not vote on their own compensation.

How do new nonprofits raise money in year one?

1. Founders and board giving. Funders often ask whether every board member gives; aim for 100% participation at any level.
2. Individual donors. Friends, family and community supporters, through an online donation page and a simple year-end appeal.
3. Local foundations and community grants. Many require 501(c)(3) status or a fiscal sponsor, plus a budget and board list.
4. Corporate sponsorships. Local businesses may sponsor events in exchange for acknowledgment. Large advertising-style benefits can create taxable income, so keep sponsor recognition simple.
5. Earned income. Mission-related fees for workshops, services or training.

Track restricted and unrestricted money separately from day one, and prepare a monthly cash flow forecast so payroll and rent never depend on a grant that has not arrived yet. Our bookkeeping basics guide covers the record-keeping habits that make Form 990 much easier.

How nonprofits bill and acknowledge money

Nonprofits handle two kinds of incoming money that need different paperwork:

• Donations: donors need a written acknowledgment for any single gift of $250 or more to claim a deduction, stating the amount and whether any goods or services were provided in return. Use a donation receipt template.
• Fees for services and sponsorships: when you charge a school for workshops or bill a partner for program services, send an invoice. Our nonprofit invoice template shows how to show your tax-exempt status, and the free invoice generator can produce the PDF.
• Grants: some funders pay on a reimbursement basis and ask for invoices with receipts attached. If you hire help to win them, see the grant writer invoice template.

Keep copies of your IRS determination letter, articles, bylaws and the three most recent Form 990 filings handy: federal law requires you to make your exemption application and recent annual returns available for public inspection on request, and grantmakers routinely ask for them.

Common mistakes when starting a nonprofit

• Missing the 27-month window. Late applications may only be effective from the filing date, leaving earlier donations non-deductible.
• Weak articles. Missing purpose or dissolution clauses can delay approval.
• A family-only board. This invites private benefit concerns and limits governance.
• Fundraising before registering. Many states penalize unregistered solicitation.
• Mixing restricted and unrestricted funds. Grant money must be spent as the funder requires.
• Political campaign activity. 501(c)(3) organizations are prohibited from supporting or opposing candidates.
• Not filing Form 990-N. Three years of missed filings means automatic revocation.

Alternatives to starting your own nonprofit

If you want to test an idea first, consider fiscal sponsorship, where an existing 501(c)(3) accepts donations for your project and provides oversight for a fee, or starting as a program of an existing charity. Some founders choose a mission-driven business, such as an LLC or benefit corporation, and pursue small business grants instead.

Next steps

Learning how to start a nonprofit comes down to sound governance and timely filings: incorporate with the right clauses, build a real board, file Form 1023 or 1023-EZ within 27 months, register with your state and never miss an annual return. When your organization needs to bill sponsors, schools or partners, use our free invoice generator: no sign-up, and the PDF is built in your browser for immediate download.