How To Start a Charity in 5 Simple Steps

Seeking more ways to fundraise for an important cause? Look no further, with this breakdown of how to start a charity in a few simple steps!

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December 19, 2022
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If helping people help people is what drives you, set up an intelligent giving organization and let the good vibes begin. Great intentions are one thing, but it can be daunting knowing how to translate your charitable idea into utilitarian practice. If you want to start a charity but don’t know where to start, this article is for you.

 

What Is the Difference Between a Nonprofit and a Charity?

You might be thinking, wait, is there a difference? Sort of. While closely related, these philanthropic organizations differ mainly in details like tax classifications. Legally, charity status is conferred by federal tax law, while nonprofit status is conferred by state corporate law.

Wading through the nuances can feel tedious. You might get lost in sentences like Nonprofit organizations are recognized as charities under IRS Code section 501(c)(3), and organizations recognized under this classification do not need to pay federal income tax and are allowed to be given tax-deductible donations.

The IRS details what charitable purposes include. And if you can’t get enough tax talk (we kid, it’s crucial info), we’ve outlined some more details like “What is a 501c?” and “What is a 501c3 Organization?” Remember what the IRS says constitutes “charitable purposes” to ensure that your organization meets the minimum qualifications to achieve charity status.

Why Should You Start a Charity?

People are drawn to charity work for many personal reasons. You may want to shed light on a cause that has affected you or a loved one, or you have a heart for giving. It’s a bonus that there are also more practical perks. Starting a charity offers the following to its founders:

  • It helps you organize giving. If you know how to give back, but lack focus or direction, starting a charity can help you make structured, meaningful change. Think about the scope of charitable work the Humane Society does for animals each year compared to your neighborhood animal-lover who feeds stray cats. While both act for animal altruism, the charity organization has much further reach.
  • It offers tax benefits. One of the top reasons to start a charity is more practical than ideological. Legally recognized charities do not need to pay federal income tax, meaning you get more benevolence bang for your buck.
  • It allows you to leave a legacy. We’re only on this planet for a brief time, so you might as well make yours mean something. Starting a charity can leave a lasting mark on the world around you.

What Do You Need To Start a Charity?

To start a charity, you need a clearly defined mission and vision, a detailed business plan, and registration with the IRS.

Mission and vision: What do you hope to accomplish with your charity? Who do you want to help? Considering these questions, write a concise but comprehensive description of what you want your charity organization to do and accomplish. Your mission and vision statement will also be great for asking for charitable donations.

Detailed business plan: In many ways, a charity organization is just another type of business. This means that to get your charity up and running, you need to write a detailed business plan that explains how you’ll make money; where and how that money will be spent; operational and organizational details; and a defined strategy for at least the first five years of operation. Key tip: the more detailed you can be here, the better. It shows others that you’re serious about starting your organization and helps you create a clear plan of action for your work.

Registration with the IRS: You can have the most charitable organization, but without the IRS's recognition (and that shiny tax-exempt status), you won’t be an actual charity. Look through the requirements and documentation for registration here to get an idea of what is needed. You should also incorporate your organization in your state. This usually entails registering your nonprofit’s name and filing the articles of incorporation. Additional steps may be needed depending on the state — more on that later.

How To Start a Charity

#1

Pick a name.

Look for a name that isn’t already taken by checking with your state’s existing nonprofit organizations. Choose a name that represents your cause and is easy to remember.

#2

Demonstrate your originality.

You’re starting a charity to advocate for your specific cause, so you want to make sure you can make a difference, even in a crowded space. The National Center for Charitable Statistics at the Urban Institute lists the types of charities currently active in the United States. Look through the list, identify charities like yours, and make sure to differentiate.

#3

Register your organization.

You should hire a lawyer specializing in nonprofit organizations, as it can include much red tape. Also, be sure your charity is registered with the IRS and your state's Secretary of State.

#4

Get your name out there.

Make a website and build cross-platform social media pages that explain your charity’s values and goals — you can usually take directly from your mission and vision statement for this. Be sure to include links so visitors can donate to the cause and find information about volunteerism or other ways to get involved. You can also explore tried-and-true ways to get your name out, such as text message marketing for nonprofits.

#5

Make meaningful connections.

Only a small portion of donors will come through organic traffic to your site, so it’s imperative that you campaign, do fundraisers, and engage the community in grassroots initiatives.

How To Start a Nonprofit Organization vs. Charity

While starting a charity is the same throughout the country, how to start a nonprofit varies from state to state. The main factors that change depending on your state of incorporation are:

  • Director number, qualifications, quorum, term, and committee
  • Officer amount, type, term, and office holding

The Foundation Group provides detailed information about how to form and maintain a nonprofit across the 50 states. You can find information on each state’s regulations and requirements here. Now get out there, start building, and happy giving!

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