How Much Does It Really Cost To Start a Nonprofit in 2023?
[et_pb_section admin_label=”section”] [et_pb_row admin_label=”row”] [et_pb_column type=”4_4″][et_pb_text admin_label=”Text”] How much does it really cost to start a nonprofit in 2023? Sure, you could fairly easily incorporate a nonprofit for the absolute bare bones. $250 will get you a registered agent and filed with your state in most states, plus $600 for federal filing and you’ll have an “official” nonprofit in the eyes of the law. But that says nothing about the reason you’re creating a nonprofit – to make an impact. If you want to create a nonprofit that makes a significant impact, you need to start up with more than just your filing fees – but a workable budget to get you going. And, of course, inflation. Most other pricing lists on the internet haven’t accounted for inflation and are at least 25% lower than your real costs. So how much will it cost to start your nonprofit? These are all averages, but on average starting a nonprofit will cost between $2,875 and $17,740, plus rent and utilities (if needed) and whatever it will cost to actually deliver your services. Here’s how each of these costs breaks down. Nonprofit Filing Costs in 2023 – $1,350-$5,350 First up is filing costs. These are what it will cost to get your nonprofit properly incorporated and get your 501(c)3 status. Registered Agent – $50-250 A registered agent is the person who will receive your paperwork and legal filings against you in a state. Some states will allow you to be your own registered agent, but if you want to keep your home address private, you’ll likely need a registered agent. Registered agents charge $50 per year on the very low end and up to $250 if you want services like ongoing compliance, mail delivery, or a phone number. Articles Of Incorporation and Bylaws Creation – $0-$1,500 In order to incorporate your nonprofit, you’ll need your articles of incorporation and a set of bylaws for governing your nonprofit. The first, and cheapest, option is to go with a template. There are some good sources for general IRS-approved articles of incorporation, here and here, and bylaws, here and here, online. If you’re going to go with a template however, I recommend finding one designed for your state, since the nonprofit laws of each state vary. The best templates are put out by nonprofit associations in that state, like Minnesota’s here. If you’re concerned about ownership of the organization, such as preventing your board from taking your organization from you at some point, how your nonprofit might work with other business entities, or want to create a special type of nonprofit, it may be better to ask a nonprofit attorney to draft your bylaws. This can cost up to $1500, depending on how complicated the provisions you seek are, but could be worth it for some nonprofits. NOTE: If you decide to use a template for your articles of incorporation, make sure that your template has the two required provisions for nonprofits. There are numerous “nonprofit” articles of incorporation templates that do not have the two required provisions for tax-exempt, 501c3 status with the IRS. If you file with those, you’ll have to amend your articles before getting 501c3 status. State Filing Fees – $25-$250 After you’ve had your articles and bylaws drafted, you’ll need to incorporate your nonprofit with your state. Each state charges a fee for filing your nonprofit. These fees range from $25 in Texas to up to $200 in Alabama. You might also get charged a fee for a certified copy, which you’ll want in order to send to the IRS. That fee ranges from $25-50. There is a list of filing fees by state here. Federal Filing Fees – $275-600 In order to get tax-exempt status, including 501(c)3 status, you’ll also need to file your nonprofit with the IRS. This article will focus on 501(c)3 status, since it is the most common. To get your 501c3 status, the IRS has two forms you can choose from, Form 1023 EZ and Form 1023. Form 1023 EZ – $275 Form 1023 EZ is, as it claims, the “easy” version of Form 1023. It is a two-page form that asks several questions about your intentions for your nonprofit, and asks you to sign a declaration that you will follow existing law. The problem with this form is that, since it was rushed into production to eliminate an IRS backlog in nonprofit applications, it has numerous limitations and traps for unsuspecting nonprofits. The most significant of which is that in order to qualify you have to project an income of less than $50,000, which most serious nonprofits will not stay under. Oh, and 10% of new applications are automatically audited because the form contains no proof you actually did anything you said you did. If you still decide to go with Form 1023 EZ, I highly recommend getting a professional to help you out. There are numerous declarations you make under penalty of perjury on the form that have a very specific meaning and if the IRS audits you and you don’t have them in place, you could lose your nonprofit status. Form 1023 – $600 Form 1023 is the primary application for nonprofit status. It is a much longer form that asks many specific questions about your nonprofit, and requires you to submit a narrative of activities, budget, and copies of your articles of incorporation, bylaws, and conflict of interest policy. Total filing cost for this form is $600. It is definitely doable by an individual, but I recommend getting a professional for this one as well. The sheer size of the form can be intimidating for many. Professional Help – $1000-$2750 Any government form you fill out is worth doing right, particularly the one your nonprofit will rely on for 501(c)3 status. While there are numerous nonprofit outfits who will help you file, proper filing for your state and federal paperwork will run you around $1000 and depending on what extra services