Starting a Nonprofit Checklist: From Bylaws to 501(c)(3)

A starting a nonprofit checklist runs from picking a name and forming a corporation in your state, through applying to the IRS for 501(c)(3) recognition, to registering with your state for tax exemption and charitable solicitation. Plan on $875 to $1,000 or more in government fees and three to nine months from incorporation to receiving your IRS determination letter. The steps below are sequential: skipping one, or doing them out of order, is how founders end up with delayed applications or denied exemptions.

Step 1: Choose a Name and Lock In Your Mission

Search your Secretary of State’s business entity database to confirm the name you want is available. Most states require nonprofit names to include a corporate designator such as “Incorporated,” “Corporation,” “Inc.,” or “Corp.”

Then write a mission statement, because it has to line up with one of the exempt purposes recognized under Section 501(c)(3): charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.¹ The IRS reads “charitable” broadly enough to cover poverty relief, reducing discrimination, defending civil rights, and lessening the burdens of government. If your planned activities don’t fit one of these categories, the IRS will deny the application no matter how clean the rest of your paperwork looks.

Step 2: Recruit a Board and Hold an Organizational Meeting

State laws vary, but most nonprofits start with at least three directors filling distinct roles, typically president, secretary, and treasurer. A few states allow a single-director board, but three or more people give you the checks and balances the IRS expects to see in the governance section of your exemption application.

Before anything else, the initial board should hold a formal organizational meeting and keep written minutes. Those minutes should show that the board:

Adopted the bylaws.
Appointed the officers named in the bylaws.
Chose a fiscal year, whether calendar or otherwise.
Authorized a bank account and designated who has signing authority.

These minutes are part of the organization’s permanent records and may be requested during the IRS review. Skipping the meeting is a common early mistake that becomes a real problem later, when you need to prove the board actually authorized a decision.

Step 3: File Articles of Incorporation With Your State

The articles of incorporation legally create your nonprofit corporation. You file them with the Secretary of State. Each state has its own form, but the IRS requires three specific pieces of language before it will grant 501(c)(3) status:

A purpose clause limiting the organization’s activities to purposes recognized under Section 501(c)(3). The IRS offers sample language: “Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code.”²
A dissolution clause directing that remaining assets go to another 501(c)(3) or to a government entity for a public purpose if the organization shuts down. Without this clause, the IRS will reject the application outright.²
A statement that the organization will not participate in political campaigns or devote a substantial part of its activities to lobbying.³

The articles also have to name a registered agent authorized to receive legal documents on the organization’s behalf and provide a principal office address. Filing fees generally run $25 to $100 depending on the state. Most Secretary of State offices offer online filing, and processing takes anywhere from a few business days to a few weeks unless you pay for expedited handling.

Step 4: Adopt Bylaws and Basic Governance Policies

Bylaws are the internal operating manual the board adopts at its first meeting. They don’t get filed with the state, but the IRS will ask whether you have them. Cover the number of directors, how they’re elected or appointed, meeting frequency, how vacancies are filled, what constitutes a quorum, the duties of each officer, and how the bylaws themselves can be amended.

Adopt a conflict of interest policy before you file the exemption application. It isn’t technically required for 501(c)(3) status, but Form 1023 asks whether you have one, and the IRS instructions strongly recommend adopting one to reduce the risk that insiders receive inappropriate benefits.⁴ Showing up without one signals to the reviewer that the organization hasn’t thought seriously about self-dealing.

Two other policies belong in place from day one: a whistleblower policy protecting employees who report accounting fraud, and a document retention policy that prohibits destroying evidence related to investigations. Both obligations apply to nonprofits under federal law, and having formal policies demonstrates that the board understands them.

Step 5: Get an Employer Identification Number

The Employer Identification Number is the nine-digit tax ID that works like a Social Security number for the organization. You need one before you can open a bank account, file tax returns, or hire employees. Apply using IRS Form SS-4. It asks for basic information about the organization and requires naming a “responsible party,” typically an officer, along with that person’s Social Security number or individual taxpayer identification number.⁵

The fastest route is the IRS online application at IRS.gov/EIN, which issues the number immediately.⁵ Fax and mail work but take days or weeks. Get the EIN early. You’ll need it on the 501(c)(3) application and on state registration forms.

Step 6: Apply for 501(c)(3) Recognition With the IRS

This is what turns a state nonprofit corporation into a federally recognized tax-exempt organization. File Form 1023 electronically through Pay.gov.⁶ Smaller organizations may qualify for the streamlined Form 1023-EZ, but only if gross receipts have not exceeded $50,000 in any of the past three years, are not projected to exceed $50,000 in any of the next three years, and total assets are $250,000 or less.⁷

The user fee is $600 for the full Form 1023 and $275 for Form 1023-EZ.⁸ The full application asks for:

Financial projections covering three upcoming fiscal years, broken down by revenue source and expense category.
A narrative description of activities explaining what the organization actually does, how each activity advances its exempt purpose, and who benefits.
Planned or actual compensation for officers, directors, and key employees.
Governance disclosures, including whether a conflict of interest policy has been adopted.

Every activity you describe has to connect back to the purpose clause in your articles. The IRS uses the application to verify that the organization is both organized and operated for exempt purposes and that none of its earnings benefit private individuals.³

Ask for Public Charity Status

The IRS presumes every new 501(c)(3) is a private foundation unless you affirmatively request and qualify for public charity status.⁹ Private foundations face stricter rules on self-dealing, mandatory annual payouts, and excise taxes on investment income. Most new nonprofits want public charity classification, which generally requires receiving at least one-third of support from the general public, government grants, or a combination of donations and program revenue.¹⁰ Form 1023 asks you to identify which public charity classification you’re seeking.

Expect a Wait, Then Guard the Determination Letter

Form 1023-EZ applications typically take two to three months. The full Form 1023 averages around six months, and nine months or more is not unusual. When approved, the IRS issues a determination letter confirming your tax-exempt status. Keep it somewhere safe. Donors need it to verify their contributions are deductible, and grant-making foundations require it before funding you.

Step 7: Register With Your State

Federal 501(c)(3) status does not automatically exempt you from state taxes. Most states require a separate application for state income or franchise tax exemption, and many require a further filing for sales tax exemption on purchases related to your exempt purpose. Forms differ significantly by state, but you’ll generally submit a copy of your IRS determination letter along with a state-specific application.

Charitable solicitation registration is the other state requirement that blindsides new nonprofits. Roughly 40 states require any nonprofit soliciting donations from their residents to register before asking for money. If you accept online donations through a website, you’re likely soliciting in every state where a donor lives, which can mean registering in dozens of states before your first fundraising campaign. Penalties for soliciting without registration range from fines to cease-and-desist orders, and some states will not let you register retroactively.

Budget for both the initial filings and the annual or biennial renewals most states require. Third-party compliance services can manage multi-state registrations, which is often worth the cost if you’re fundraising nationally.

What You Have to Do Every Year After Launch

Getting the determination letter isn’t the finish line. The IRS requires virtually all tax-exempt organizations to file an annual information return.¹¹ Which form you file depends on size:

Form 990-N (the e-Postcard), for organizations with gross receipts normally under $50,000.¹²
Form 990-EZ, for organizations with gross receipts under $200,000 and total assets under $500,000.
Form 990, when gross receipts reach $200,000 or total assets hit $500,000.

The return is due by the 15th day of the fifth month after your fiscal year ends, so May 15 for calendar-year filers. Late filing triggers daily penalties. The base statutory penalty is $20 per day for smaller organizations, capped at the lesser of $10,000 or 5 percent of gross receipts. Organizations with gross receipts over $1 million pay $100 per day up to a $50,000 cap.¹³ Those figures are adjusted annually for inflation.

The real nightmare is forgetting to file at all. If your organization fails to file its required annual return for three consecutive years, the IRS automatically revokes tax-exempt status.¹⁴ Automatic means automatic. No warning letter, no grace period. Once revoked, the organization owes income tax on revenue, donors can no longer deduct contributions, and you have to reapply and pay the user fee again to get status back. This happens to thousands of small nonprofits every year, usually because a volunteer treasurer didn’t know the e-Postcard existed or assumed no filing was needed because the organization had no income.

If your organization earns $1,000 or more in gross income from activities unrelated to its exempt purpose, such as renting out office space or selling advertising, you’ll also file Form 990-T and pay unrelated business income tax on those earnings. The $1,000 threshold is gross, not net, so you can’t offset it with expenses before deciding whether to file.

Most states also require their own annual reports or renewals for corporate registration, tax exemptions, and charitable solicitation licenses. Put every deadline on the calendar the moment a registration is confirmed. Missing a state renewal can lead to administrative dissolution of the corporation, which compounds any federal compliance problem you already have.

1
Internal Revenue Service. Exempt Purposes – Internal Revenue Code Section 501(c)(3)
2
Internal Revenue Service. Suggested Language for Corporations and Associations (Per Publication 557)
3
Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations
4
Internal Revenue Service. Instructions for Form 1023 (12/2024)
5
Internal Revenue Service. Instructions for Form SS-4 – Application for Employer Identification Number
6
Internal Revenue Service. About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
7
Internal Revenue Service. Instructions for Form 1023-EZ (Rev. January 2025)
8
Internal Revenue Service. Form 1023 and 1023-EZ: Amount of User Fee
9
Internal Revenue Service. EO Operational Requirements: Private Foundations and Public Charities
10
Office of the Law Revision Counsel. 26 USC 509 – Private Foundation Defined
11
Office of the Law Revision Counsel. 26 USC 6033 – Returns by Exempt Organizations
12
Internal Revenue Service. Exempt Organization Annual Filing Requirements Overview
13
Office of the Law Revision Counsel. 26 USC 6652 – Failure to File Certain Information Returns, Registration Statements, Etc.
14
Internal Revenue Service. Automatic Revocation of Exemption