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 you want.
Some firms offer several years of compliance, strategic planning assistance, etc., could run you into a couple of grand. (Or, for the same price, you could get an entire nonprofit launch package.)
Nonprofit Startup Marketing Costs in 2023 – $750-$20,000+
Once you’ve got your nonprofit filed, next up is your marketing and outreach. Here’s what you should expect to spend on marketing for your new nonprofit.
Brand Design – $65-$20,000+
If you want to have more than a black and white name on a business card, you’ll also need an identity for your nonprofit. This includes a logo, your brand colors, and appropriate fonts that help people understand what your organization does and what it stands for.
On the low end, you can get AI help to create a logo and select colors, and fonts for your nonprofit for between $65-300. One tool that can help with that is Brandmark, and another is Logomaster, which I used to create the logo for this site.
If you want to spend a bit more and create a brand that will really stand out, consider investing in a great startup designer (I’ve used Kelsey Lyon before and have been very impressed) or go the whole way and invest in an enterprise brand agency like DarkSquare Design.
A midrange startup designer will likely run you $1000-2000 for a brand design, and an enterprise agency could run you up to $20,000 and beyond. This is the logo, name, colors, and text that will be on everything though, so it may be worth investing more in this at the beginning than just about anything else.
Domains for Your Website – $21-$60/yr
The next most important marketing investment after your brand is your website. Your website will bring new donors, supporters, volunteers, and clients to your nonprofit, and it will be the number one way people who are interested in you learn more about you. How professional or unprofessional it is will affect how likely they are to trust your nonprofit. Website costs also vary widely, and with different kinds of payment approaches.
The first thing you’ll need for this website is to purchase the domains for it. On average, you’ll purchase a 3 pack of domains (you’ll want to own .com, .org, and .net for your organization name at the very least), which will run you about $30. If you end up getting domain privacy for the domains, it’ll run about $60. Google Domains includes domain privacy though, and has some of the cheapest domains on the market, so it will cost you $21 for all three, plus domain privacy.
Website Hosting – $0-580/yr
Website hosting also varies widely depending on the speed and features you need. A general rule is faster loading for your website = more expensive hosting. For a single website, expect to pay about $50/month for website hosting. However, DreamHost offers free hosting for nonprofits for a lifetime.
Website Design – $350-$5,000
Website design is the most expensive part of creating your website, and also varies widely depending on the type of website you want and the type of service and payment approach you’re looking for.
Web services range from the donated website, like the Geekpack Match Grant, to the self-hosted website with a website builder, like Wix, Squarespace or WordPress, to the standard website design. Each approach has its tradeoffs, which we’ll cover in a future article. Free websites will be well, free, self-hosted builders will run you about $350-800/year, and for professional design for a new nonprofit you should budget somewhere between $3,000-5,000 for a basic website design.
Business Cards $50-400
While much of the awareness for new nonprofits will come online, you’ll want to have some printed materials as well for donors, local events, and conferences. The most basic are business cards, which you’ll want for you and for your team. My personal favorite is MooCards, because these business cards are thick, colorful, and stand out when you hand someone your card (the whole point of a business card is the first impression, right?). However, they are on the pricier end, and will run you around $400 for 1000 cards. Vistaprint offers 1000 cards for $50.
Flyers and Brochures – $250-500
When you’re promoting your nonprofit at events, you’re going to want some basic flyers and brochures promoting your program and encouraging people to donate. Prices again vary widely, but in most cases you can get all of the basic printed materials you need for your nonprofit for around $250-500.
NOTE: You might be surprised at why I haven’t mentioned paying for a graphic designer on an ongoing basis with your marketing costs. While you certainly can, once you have your logo, fonts, and colors, you can pretty easily use a tool like Canva to create most of the rest of your graphics. As a plus, Canva’s tool is free for nonprofits, forever, as a part of how the company gives back.
Nonprofit Startup Fundraising Costs in 2023 – $50-$1,500
Alright, we’ve made it through the most expensive part of starting an effective nonprofit – which is marketing so your community takes you seriously. However, there are a few more costs we’ll need to cover, first of which is fundraising costs.
Fundraising Software – $0-$1000/yr
The most important fundraising investment for your nonprofit will be your donation software. This is critical for a few reasons.
First, the vast majority of giving is done online. Second, most donation software allows you to track and make notes on donors, tag them, and in some cases research their giving capacity. Having an easy way to track donor engagement will make your fundraising significantly easier. Finally, donation software will allow you to set up recurring donations, which will likely be the lifeblood of your nonprofit, especially if you’ll be relying on small, individual gifts at first.
Fundraising software runs the gamut on price, and these are nearly hundreds of options available. However, from a price standpoint, they all fall into roughly three categories.
Donors Pay Fees – Often called zero fee or free donation software, this is software that relies on processing fees from each transaction, but adds those to the donor’s gift instead of taking them from the nonprofit. So, for example, if the donor were planning to give a monthly gift of $20, and the average processing fee is 3%, then the donor would actually give your nonprofit $20.60 per month to cover the fees.
This kind of software usually has low functionality on the backend, and simply processes donations and gets them into your bank account. The cost is $0 to your nonprofit, and the top two software options in this category are GiveButter and Zeffy.
Processing Fees – Another category of fundraising software is free to operate monthly, but charges processing fees to your nonprofit to cover transaction costs. These fees range from 3-5% per transaction.
This software can often be much more robust than the donors pay fees model, and offer donor tracking, tagging, contact tracking, etc. However, it will take a cut of every donation that comes into your nonprofit. If you have a lot of small gifts coming in, this could add up pretty quickly. Donorbox is the top software in this category, though it has also recently started to offer donors the option to cover fees.
Monthly Costs – The final category of fundraising software is the monthly fee model. The more high-end and useful fundraising tools often fall into this category. For these, you’ll pay a monthly fee based on the number of contacts (potential donors and existing donors) in your database. These tools often offer a donor management system, contact tracking, direct communication features, and even fundraising pages or landing page creators.
The top software options in this category are Bloomerang, Funraise, and Virtuous. The average annual cost for software like this for a new nonprofit is around $1000-$2000.
NOTE: One hidden trick in the fundraising software industry is that, if you have recurring donors, it can be incredibly difficult to change donation software if you’re unhappy with the one you have. To ensure that you’re picking a software you actually can leave if you have issues, ask that question upfront – what’s their donor migration process if you need to choose another software? If they have a payment processor like Stripe, you can likely just change over, but some of them will charge you a fee for taking your own data back. Ask first!
Annual Report – $0-500/yr
The most important fundraising tool for any new nonprofit is its annual report. This is the report you’ll issue at the end of the year talking about what you’ve done, your impact, and thanking your top donors.
There are a couple of ways to go about this. If you have some graphic design experience, you can get it done yourself via Canva or a tool designed specifically for annual reports, yearly.report, for free. If not, you can go on Fiverr and hire someone for around $150. You could also hire a graphic designer, which will probably run you about $500 but will give your annual report the best look for presenting to donors.
Thank You Cards – $50
Of course, you cannot forget the personal touch. Emails and software will only get you so far. A handwritten note will do wonders to make a huge, and cost-effective, impression on your donors. Spend $50 on some nice thank you cards and a gel pen to write handwritten notes to your donors. It will be worth every penny.
Nonprofit Startup Operations Costs in 2023 – $725-$2,300
You’ll also want to plan for some general operations costs for your new nonprofit.
Office Space and Utilities – $6,000-$30,000/yr (optional)
This one is definitely optional for nonprofit work today, but if your organization is going to have a presence in the community, it might be valuable to have an office space for people to access you and to bring your team together to work.
You can sometimes get some office space donated by a local company that isn’t using it, but if not, plan for office space, utilities, and insurance based on the rental rates in your area. In large cities, a coworking office will run you about $500-700/month depending on the city, and a full office might cost upwards of $2500/month. The most popular options here are WeWork and Regus for coworking, and LoopNet to find larger office space in your area.
Operations Software – $250-$750/yr
In today’s high-tech environment, you’ll likely also need some office software to run your organization.
At a minimum, you’ll want to have some video conferencing software such as Zoom or Google Meet, project management software such as Monday or Asana, a work email platform such as Google Workspace, a mass email tool to reach supporters like Mailchimp or Mailchimp’s little brother Tinyletter (which I recommend for small nonprofits since it’s $0 and fulfills most mass email functions), and office software such as Microsoft 365.
Cost varies widely, but you should plan to spend about $250-750/year on office software.
NOTE: For all software purchases, make sure you get a Techsoup account once you’ve had your nonprofit approved. They offer amazing deals on nonprofit software and it is completely free to join. Also, the most cost-conscious option for a software bundle would be Google for Nonprofits. It’s completely free once you’ve been approved, and contains your email, file storage, videoconferencing, and office software all in one.
Mailbox – $75-150/yr
If no one has anywhere to mail you a check, bill, or letter, you won’t get them (or you’ll have to send them to your home address and put that on the internet.) You’ll need a mailbox to serve as your mailing address for everything from government documents to shipping packages.
The easiest option is to get a virtual mailbox, such as through a provider like iPostal1, which will allow you to review and check your mail remotely. You can also get a mailbox at a private provider like FedEx or UPS, which comes with a real address.
The one thing I’d advise against is getting a P.O. Box, unless there are no better options, because a significant number of places (including the IRS) reject PO boxes as your organizational address. Both virtual and in-person mailboxes run about $75-150 per year, depending on the size of the box you want. A P.O. Box will run you $60-$250 per year, depending on size.
Insurance – $400-1400/yr
Last but not least is insurance to cover your nonprofit’s leadership and operations.
The essential insurance for your nonprofit is directors and officers insurance. As fiscal officers of your organization, you and your board are liable for any harm your nonprofit creates. Many board members will not join unless the organization promises to protect them, and that is where D&O insurance comes in. D&O insurance provides a financial cushion if you or your board members are sued for actions resulting from your management of the organization, and is essential to protecting you and your board’s personal assets. Directors and officers insurance costs vary by state and provider, but you’re looking at an average of $400-$700 per year.
Second, you should also consider liability insurance. While this is only a must if your nonprofit operates physically in the community, it is strongly recommended if you’ll have volunteers doing even moderately dangerous physical activities, such as driving, lifting heavy objects, digging, putting things together, cooking, or the like. Liability insurance varies widely based on how risky your operations are, but you’re looking at an average of $500-700 per year for that insurance as well. The Nonprofit Insurance Alliance provides numerous options for those seeking liability insurance.
Nonprofit Startup Program Costs in 2023 – Variable
Finally, you’ll want to consider the costs of your actual program – nonprofit speak for the specific things you’ll do to help people. For example, food drives, classes, medical care, etc., depending on the type of nonprofit you’re starting. Your program costs are the cost of the space you need to run your program, the services you deliver, and the materials required.
Workspace – Varies
First, you’ll want to consider the cost of any space you need for your program. While some programs can be carried out digitally, it’s difficult to do so for many impactful programs. Will you get space donated? Will you rent space at a reduced cost, such as from a local business, government, or library? Will you need special considerations for your space, such as industrial-grade wiring, security cameras, or door and ceiling sizes? Think through each of these costs when determining what to set for your workspace budget.
Services – Varies
Second, consider what services you’ll need to pay for in order to carry out your programs. In general, while many people will likely be happy to volunteer for your nonprofit, you should consider paid services when you
a) Need highly specialized services (especially anything that could carry high liability, such as medical procedures, construction, mental health, etc.)
b) Need consistent services. Volunteers are incredible but often unreliable, so if you have a position in your program that must be done every day or at a specific time all of the time you should consider hiring for services.
c) Need services from a specific company.
If you already have a company in mind who will serve your program, you should work that cost into your program costs.
Materials – Varies
Finally, you should consider what materials you’ll need for your programs. These will be the most obvious costs, school backpacks for a back to school program, refrigerators for a food rescue nonprofit, etc. However, you should think through each aspect of your program from start to finish to make sure you have all your materials accounted for.
A great way to ensure you have accounted for all your material costs is to look at what other programs are doing. Google the name or type of program you want to create online and look at their annual reports to see how they make their impact, or better yet, volunteer for one and experience the process yourself. You might even figure out what you want to improve with yours!
That’s it! While no list can be perfectly comprehensive, this should give you a pretty good idea of what it costs to start a nonprofit that makes an impact on your community in 2023, as well as dozens of resources to help you find and purchase the right services for your organization.
Feel free to share this list with others, and if you want specific advice on what to budget for your nonprofit, let’s chat.
Photo by Karolina Grabowska at Pexels.
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