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Thinking of starting a nonprofit in California?
Don’t get swindled or worse- scared away!
An online search of “How to start a Nonprofit in California” will yield several ads and top ranked websites that sell legal services, including the preparation of documents and legal consultation, geared towards helping individuals and organizations start 501(c)3 nonprofit organizations. There are even organizations that offer 'fiscal sponsorship', so that startups can be embedded in larger, already-established nonprofit organizations in exchange for a fee. Each of these sites has a combination of sound advice, outdated or incorrect information, and fear-mongering. All of them are trying to convince potential nonprofit founders that starting a nonprofit is far more difficult, complicated, or expensive than it actually is. Whether it is that the paperwork will take 100+ hours to complete, the reporting requirements are too cumbersome to manage, or that obtaining tax exempt status is difficult, the aim of these organizations is to mislead you into paying for help with something that you don't actually need help with.
To be clear, this applies only to potential founders starting out with a budget/assets of $50,000 or less. If you have $50,000 dollars to help start a Nonprofit, then you can probably afford to pay for the aforementioned services. This guide is for everyone else who may not have a lump of seed money to begin their charitable or cause-oriented endeavor.
If you do have two people that you trust who want to be involved (Minimum number for board of directors is 3, including you) and less than $50,000 to start your organization, the paperwork takes less than 15 minutes per application (and there are 8 applications you need to complete- including the applications for federal and state tax-exempt status, so 2 hours max of paperwork total for a fully-functional, tax-exempt Nonprofit organization) for anyone familiar with filling out forms, the IRS reporting requirement is so minimal they call it a Tax Postcard*, and the total cost of filing all of the essential forms and applications is $473.00.
*Literally just identifying info and checking a box to indicate that yes, your organization is still under $50,000 in budget and assets. Filed annually by halfway through the 4th month after the month that you choose as the end of your fiscal year in your paperwork.
Here's the breakdown of those absolutely necessary forms and applications, in the order that they should be completed, and where to find them:
Registered agent, online- ~$109
(Found by online search, this price from www.californiaregisteredagents.net)
Incorporate with CA Secretary of State, online- FREE
Statement of information with CA Secretary of State, online- FREE
Do immediately after incorporating, no new information required. Found in the same place.
Request for Federal Employer Identification Number (EIN) from IRS, online- FREE
1023EZ Tax exempt status application form with IRS, online- $275
www.irs.gov/charities-non-profits/applying-for-tax-exempt-status
FTB3500 CA state tax exempt status application form with Franchise Tax Board, mail- FREE
www.ftb.ca.gov/forms/misc/3500A-instructions.html
CT-1 charitable registration application form with Office of Attorney General, mail- $74
oag.ca.gov/charities/initial-reg
Request for a Certified Copy of Articles of Incorporation for completion of CT-1 form from Secretary of State upon receipt of assets (first donation), online- $5
Once this is completed, you can begin building your organization, programs/activities, and website.
Also, there are organizations who provide discounted products and services for Nonprofits, which is nice, but also you can get many of these products and services for FREE. However they aren't all easy to find. Here's some of what's available for registered Nonprofits and where to find it:
Donation and Donor Management Software
Corporate/Business Bank Account
Web Design Services
Website Builder
Web Hosting
Google Workspace with branded email
… which will help you get an account with…
Techsoup
…Which will give you access to…
-Year-long subscriptions to Adobe Cloud Express
-A Canva Pro Account - both of these come with logo/brand and social media design features
-A Fiverr pro account
-Microsoft 365 including all Office programs [preferred to Google Products for Nonprofits on all levels]
-Grant search support
…and more (some more free, but mainly otherwise discounted stuff like software, support, and even computers and furniture)
Annotated Nonprofit Bylaws Template
publiccounsel.org/wp-content/uploads/2021/12/Annotated_Bylaws.pdf
Nonprofit Accounting Templates and Support
www.nonprofitaccountingbasics.org/
Microsoft Ads for Social Impact
$3,000+ monthly in free, high quality advertising on Microsoft platforms, including Yahoo and Bing. Lots of support for set up and success.
**Update - As of 12/29/2022, the pilot program has ended and is accepting no new participants. Check the website below for up to date information.
nonprofits.tsi.microsoft.com/en-US/ads-for-social-impact/
Amazon Web Services Activate Founders Credits
$1,000 in credits for eligible Amazon Web Services as well as $250 in AWS Developer Support. Lots of support for set up and success.
aws.amazon.com/activate/founders/
Google Ad Grants
Google claims to give $10,000/month in the same style as Microsoft, but their rules are cumbersome, the real value is actually less than $150/month in some cases (paid ads will always outbid/win ad slots over 'free' ads), and there is almost no support from Google for success (Google says there is ample support, and then they refer you to a user forum or to apply to have a team of students help so that they can learn by doing so), so many organizations that use it don't benefit from it at all.
There is likely more out there. At first it seems that there couldn't be this many free offerings for such vital services, but each time, with a bit more digging online, you'll find that this hypothesis is wrong. It is likely there is a way to find almost anything you might need for your Nonprofit for free in some form.
Tips-
When choosing a Specific Purpose Statement for your Articles of Incorporation (first step), take a moment to map out what you can of what you plan to actually do with your organization. Be as detailed as possible. This will help in more ways than one. Your Specific Purpose Statement will determine the nature of the tax-exempt activities you can engage in as an organization. If you need to change it, there is no fee, you just have to create a Certificate of Amendment to Bylaws and have it declare the change with signatures of at least two board members, including yourself. This does not need to be filed anywhere, just kept with your organization's bylaws.
Essential Website features- Make sure the website has several 'call to action' links/buttons (donate now!) and all of your identifying information, including your EIN, Entity Registration # from the CA Secretary of State, and that you're registered in CA as a 501(c)3 Nonprofit organization.
To obtain tax exempt status, use IRS guides (found on www.irs.gov) to confirm your organization qualifies, and then use your Specific Purpose Statement to guide a consistent thread through the descriptions of your programs and activities. You do not need to submit any financial plans or budgets in this or any other form or application until your organization has a budget/assets over $50,000.
This whole process, depending on the nature of your organization- including grant awards and accessing free products and services- can take as little as 8 weeks (taking into account varying wait times for application processing by different agencies).
There is, of course, a lot to be done in addition to the steps listed above that costs time and mental effort that can't be accounted for here, but don't let anyone tell you that it is expensive, difficult, or complicated.
-San Ramon, CA
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