So you want to change the world. You’re not alone.
However, starting a charity is not for the faint of heart—there’s a lot of work on the backend, what with filing for tax-exempt status, honing your mission, recruiting a board, and more preparation work. The good news is we’ve broken down how to start a charity into nine steps below. You should be able to follow these steps for success so that you can start making an impact.
Let’s take a look.
What Exactly Is a Charity?
The Internal Revenue Services defines charities as “organizations that are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational or other specified purposes.”
What does that mean? In plain English, a charity is an organization that’s established for the public good.
Take for example Food for the Hungry, which provides food, water, medical assistance and more to children around the world living in extreme poverty.
The term “charity” comes originally from the Latin word caritas, meaning “dear” or “expensive”. The term evolved into becoming a recognized theological value in early Christianity and eventually took on the meaning that we understand today.
What Is the Difference Between a Charity and a Nonprofit?
Charities are a type of tax-exempt nonprofit organization, defined by the IRS as a 501(c)(3) organization. As noted above, charities operate exclusively for charitable purposes, utilizing any earned revenue to provide services, programming, or products to people or communities in need.
Nonprofits, however, refer to disparate types of organizations that offer a wide range of services for the benefit of the public or the organization’s members, and they can engage in activities that are not strictly “charitable”.
Not all not-for-profit organizations are truly charities:
Take, for instance, a homeowner’s association which is considered a “mutual benefit organization.”
While technically a not-for-profit entity, a homeowner’s association only benefits a small group of people—homeowners—not the entire community. So while the IRS grants such a group a tax exemption, it is by no means a charity.
Private foundations are another example of a tax-exempt organization that are classified differently than charities.
Rather than raising funds to help the needy, private foundations distribute funds (usually from a single wealthy donor or a corporation) to charities actually doing the work. Other tax-exempt organizations can include:
houses of worship and religious organizations,
social welfare organizations,
social clubs, and
As you can see, not all of these meet the definition of “charity.”
In general, nonprofits refer broadly to organizations that utilize earned revenue to provide programs and services without any income distributed to their board, directors, or officers. Depending on how their primary operating activities are defined, nonprofits will receive a specific 501(c) designation that aligns with those activities.
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Now that you have a strong grasp of what the key defining features of a charity are, it is time to unpack pivotal steps for starting a charity.
1. Decide on the Type of Charity You Would Like to Start
Charities should not be created without a strong purpose behind them. If you cannot define a clear and imperative need within your community that requires the services of a new charitable entity, then you should not start one.
What’s a cause that’s near and dear to my heart?
What’s an unmet need in my community that I’m passionate about meeting?
The decision on what type of charity you are starting should come organically once you have identified that unmet community need.
For example, perhaps you learn that many children in lower-income neighborhoods depend on their school lunch to provide their primary nutrition. What happens to these kids during the summer or on long breaks? How can you respond to this critical need in your community? Perhaps establishing a charitable organization is the answer!
Remember that creating a charity should be first and foremost about the service you provide to the public.
You should also rely on expert knowledge and direct community feedback to decide what type of charity you should start and whether or not those services are needed.
2. Develop Your Charity Name, Mission, Vision, and Values
Once you’ve determined the type of charity you want to start, it’s time to define your charity’s mission, vision, and values.
In other words, you need to carefully define your organization’s reason for being.
Mission Statement: Writing a compelling mission statement takes some work—so don’t rush through it. Your mission statement is there to guide your daily work and should outline your organization’s objectives. Vagueness is not your friend.
Core Values: Defining your mission will also guide you in establishing your charity’s core values, or the fundamental beliefs of your organization. Core values are the deeply ingrained principles that guide your charity. For instance, the charity PETA (People for the Ethical Treatment of Animals) believes strongly that animals are not ours to eat, to wear, to experiment on, or otherwise harm or abuse. Because of these values, all of PETA’s staff members are practicing vegans.
Vision Statement: A vision statement is more aspirational than your mission statement. Do you want to stop the deforestation of the Amazon rainforest? Are you passionate about eliminating plastic waste in oceans? Do you dream of a future without human trafficking? Think bold and broad when creating your vision statement. It may not be as achievable as your mission statement but it should be the moonshot goal or ultimate societal achievement that your organization could contribute to.
Charity Name: Finally, you will need to choose a name for your charity. Think of something that’s clear and descriptive and also not too long. You don’t want to have to rebrand in a few years. Search your state’s business registration records to make sure your new charity’s name isn’t already taken.
3. Prepare Your Organizing Documents
Now that you have created your charity’s mission statement, vision statement, and name, it is time to prepare your charity’s organizing documents.
This step can be surprisingly complex and lengthy. You want to ensure that you are in compliance with your local, state, and federal governments in all your entity’s operations and your organizing documents should reflect that.
You may also need to create program-specific documentation, depending on the specific work your charity plans to engage in. You will also need documents like contractor agreements, volunteer agreements, liability waivers, and a licensing contract for your logo, trademark, and website.
All this work may require the services of an attorney, but you can also find sample documents online.
One of the best resources we have identified is Stanford University’s law school’s catalog for forms and sample documents. We encourage you to review these resources and reach out to an attorney with nonprofit-sector expertise to guide you through the development of these policies and key organizational documents.
4. Register Your Charity as a 501(c)(3)
The next major step is to apply for your 501(c)(3) tax-exempt status with the Internal Revenue Service. If your charity is a small organization, you can probably use the Form 1023-EZ which has a much faster turnaround time.
You will also need to register with your state’s Secretary of State. The state registration process is generally much faster than dealing with the IRS, so it is a good idea to get the state registration done while you’re waiting for the federal government. The IRS claims it gets close to 100,000 requests for tax exempt status every year.
Wait, what? Why would a tax-exempt charity need an EIN?
Despite your tax-exempt status, the IRS does require charities to file their tax return each year, called an IRS Form 990. The EIN helps the IRS to identify your charitable organization, and once you’ve hired staff, it will identify your charity as their employer.
As you wait for your tax-exempt status to be granted, it’s time to start thoughtfully recruiting your board of directors.
You probably already have a few ideas about who some of them might be. In general, you need a combination of people with specialized skills (law, financial management, graphic design, marketing, fundraising), community leaders, and others who have access to wealth to help fund your cause. Above all, any board candidate should have an interest in and passion for your cause.
To kick off the board recruitment process, you will need to develop a board job description that each candidate should sign and return. Making sure your board members’ roles and responsibilities are explicitly understood is vital.
Here are some other board recruitment tips:
DO establish term limits: Two to three years is pretty standard for board term limits, with a maximum of two full terms on and one off before returning to board service.
DO keep your eye on your board pipeline: Who are new, promising potential board members? You should develop a strategy to engage them.
DO NOT recruit your family or close friends, including spouses: Remember, your charity’s board of directors are the governing body for your organization. They are the final say in key strategic and financial decisions including overseeing the organization’s Executive Director. As such, you will want to ensure that these individuals are chosen through an ethical process and that they will make all decisions through an unbiased lens.
6. Create a Brand Identity for Your Charity
You want your charity to stand out from the crowd, right? That’s why developing your brand identity is essential.
Think about examples of immediately recognizable logos from well established companies such as Nike’s swoosh, Starbucks’ mermaid, or Apple’s apple. These logos are a huge part of their brand identity.
Any logo your charity creates should be dynamic and clearly associated with your work, helping to establish your identity within the community.
You will also want to choose a color palette to use on all media and collateral your charity produces, which includes everything from your website to your letterhead to your marketing materials.
Other important factors to consider when creating a brand identity include:
All of these components should be visually linked with cohesive elements that tie in seamlessly with your established brand identity.
An example of great branding for a nonprofit organization is the United Way.
They are one of the most prominent charitable organizations in the United States and throughout the globe. Visit their website to see how they incorporate their logo, color scheme, typeface and other recognizable design elements throughout their digital media.
Having a strong, recognizable brand identity doesn’t just identify your charity—it helps you rise above the “noise” and defines you to your supporters as a charitable entity that they can trust. Believe it or not, it will even help you raise more money for your charity.
For a complete guide on nonprofit branding, you can check out this post from Instrumentl’s blog.
7. Create a Website for Your Charity
Closely associated with your brand identity is your charity’s online presence.
In today’s digital world, every charity needs a website. Whether you hire a professional web designer or choose to use one of the do-it-yourself web page templates depends on your budget and teams’ ability.
When designing a website, don’t stint with pictures. People resonate more with pictures than they do with words, so it is important your website is not too copy-heavy.
Canva and Piktochart are two go-to free infographic generators. You’ll be surprised how easy it is to create dramatic visuals with these tools.
You will also need to ensure that your website is easy for your supporters to navigate.
Make sure to include a “donate” button in your homepage’s menu. Potential donors don’t want to have to search for how to make a gift. Many nonprofit websites will incorporate a large donate button in the upper corner of their website’s banner to make it easy to find no matter where a person navigates on the website (see the above ASPCA website for an example of this).
Here are some more website tips:
Make sure you have the best possible CRM to keep track of your donors and their gifts
Be sure your payment processor is PCI compliant to maintain security and privacy
Make sure your website is optimized for mobile
Finally, keep your website up-to-date
Take a look again at the ASPCA’s website—it’s really effective. The picture of an older dog tugs at your heartstrings if you love animals. The big orange “DONATE” button is like the flashing beacon of a lighthouse.
And their donation page is really effective as well, with suggested gift amounts and the option to make a monthly contribution. There’s also an “Other Ways to Give” page which gives potential donors a variety of ways to give back to help animals.
8. Define a Development Plan for Your Charity
To earn revenue and bring in donations, you will need to create a development plan and fundraising calendar for the year.
Cultivating relationships with donors requires intention and strategy. Be sure that you have a plan in place for individual donors, major donors, and grantseeking from private and public sources.
Before you build your plan, you’ll need to have a solid organizational budget in place so you understand your fundraising goals. Take into consideration your fiscal year and use that to create your plan and your activities.
Make sure to set SMART goals while building your plan. Goal should not be vague or general, but follow the SMART acronym:
A good example of a SMART goal for a development plan would be “In 2023, we will engage 100 new potential donors.”
Once your plan is complete, build out a fundraising calendar for the year. Build in any special campaigns you’ll run, whether direct mail or email.
When will mailings go out? When will you do email solicitations? Will you participate in Giving Tuesday or your local philanthropy day? What holidays do you want to highlight? Make sure to build in time for effective fundraising campaigns.
9. Launch Your Fundraising Activities
Now that the fundraising plan has been developed it is time to implement it.
Every plan is connected to specific activities that will help you accomplish your fundraising objectives. To put that plan into action you will need to officially launch those key elements of the plan.
Some of the most common forms of charitable fundraising are:
Begin by soliciting your board for donations if they haven’t yet given. As the founder of a charity, you should expect to be giving, too. You and your board are important to get your fundraising jump-started.
Next, look at other interested individuals as potential givers. It can be scary to ask people for money the first few times, but if you’re passionate about your cause, you’ll get used to it.
Another option for introducing your organization to potential funders and your community is to host an open house at the facility where you provide your services. Just be sure to share your website’s URL with that brightly colored “Donate” button.
And don’t forget you can raise money the old-fashioned way with direct mail. And you can also run email campaigns to encourage giving.
By the way: don’t fret if you’ve yet to receive your tax-exemption from the IRS. You can still raise money with the help of a fiscal sponsor.
Finally, tap into the expertise of a grant writing professional, either full-time in-house or a contractor or consultant. Foundation and corporate grants can help your young nonprofit begin to grow and gain financial momentum.
Instrumentl can help you and your grant writer find new potential funders who fit well with your newly-launched charity and your cause. If you don’t believe us, sign up for a two-week free trial and see for yourself.
Pros and Cons of Starting a Charity
Operating a charity can be incredibly fulfilling but it is not without its challenges.
As mentioned previously, the choice to start a charity should not be taken lightly. Before you take on this work, consider the pros and cons below.
Owning a charity is fulfilling: Giving back to the community can give you a strong sense of purpose. It feels good to help others and do something good for the public!
Contributing to a better world: When you start a charity, the work you do through the charity’s operations contributes to a better world. Whatever it is your charity does, it is likely that that work will improve society and help people who need it most.
Creating strong relationships within your community: By running a charity you will become an active participant in your community. As a result, you’ll make connections with other community leaders and individuals. You might even make some life changing friendships and cultivate important partnerships that will be both personally fulfilling and contribute to a healthy community.
Owning a charity is hard work: Just like running a business, running a charity requires you to be constantly on the clock. You will need to be constantly aware of the status of your operations, navigating relationships with funders and other potential supporters, and fostering relationships with the community and partners in your work.
The burden of constant fundraising: Most nonprofits never get to a place where they do not have to concern themselves with fundraising. There is always a new urgent issue or budget gap that needs to be covered. Fundraising can be an exhausting and difficult process and sometimes the results of your fundraising efforts are out of your control—driven by the budgets of grantmaking organizations or politics.
Running a charity can lead to burnout: While charity work can be extremely fulfilling it is also very emotionally challenging. This can potentially lead to burnout for your staff and for yourself as well.
How Much Does It Cost to Register a Charity?
Starting a charity not only requires a significant emotional and mental investment, it can require an immense financial investment as well.
Depending on how sophisticated your organization is and the type of work you hope to carry, registering to become a nonprofit charity can cost several hundred dollars. While states can have filing fees that range from $15 to a little bit more, every nonprofit is required to file Form 1023 (application for tax exempt status) which can cost between $275 and $600.
Depending on the size and scope of your organization, you can also anticipate budgeting for costs such as:
Office supplies and equipment
Registration and forms (e.g., Form 1023 to register for 501(c)(3) status)
Can I Run a Charity on My Own?
Running a charity is something you certainly cannot do on your own.
Between administrative tasks, programming, and fundraising, you will at the very least need a small team to support your efforts and ensure all the work your nonprofit engages in and produces is the highest quality possible.
Even if you do not have the capacity to hire a large staff for your organization, you will still need to rely on the support and service of volunteers to generously donate their time and energy to your charity’s mission.
You will also need to rely on experts and community members to bolster your organization’s work. Building a network of partners who engage in the work of your charity alongside you will make the work easier to accomplish and overall better for the individuals you intend to serve.
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Wrapping Up: How to Start a Charity in 9 Simple Steps
To wrap up, we’ve discussed nine steps you can take to start your own charitable organization.
Begin by identifying your passion and the need. Next, you’ll have to do the heavy lifting of determining your new charity’s name, as well as its mission, vision, and values. You’ll need to get your organizing documents in order, file for your tax-exempt status with the IRS, and follow that up with recruiting a solid board of directors.
You’ll then need to create a stellar brand identity for your new charity to help it stand out from the crowd, as well as a donor-friendly website. Then, understanding how much money you need to raise, you’ll have to create a development plan of activities, and finally, launch your fundraising activities ranging from individual donors to grants and direct mail.
All of this won’t happen overnight, but step by step, you’ll build a great charitable organization. Good luck!