My intent here is not to offend. My intent is to preserve. But be forewarned (and please forgive me), I'm going to be plain-spoken and forthright. If you want coddling, you'll have to find it someplace else.

Since I've become somewhat entrenched in the nonprofit sector, it seems I am frequently asked for advice on starting a nonprofit. Ninety-nine times out of a hundred, my first response is: "Don't."

I do not mean to sound flippant. It takes remarkable people with truly noble hearts to make the world a better place. I want to honor that. Believe me when I tell you I want you to find fulfillment. I hope to help you find real traction for your passions. In fact, my own company would benefit from having more nonprofits with whom to work. So in addition to possibly raining on your parade, I am potentially hurting my own business when I say "don't." But make no mistake, I do mean to say: Do not start a nonprofit.

Very rarely does an individual have a solid understanding of what it means to start and run a nonprofit. I've met people who think nonprofit boards get paid. (They don't.) I've met people who don't know that board members can get personally sued for the actions of their organization. (They can.) I've met people who wanted to start a nonprofit that would ensure their own family members had jobs. (What?) I've met people who were nicely grounded in their knowledge and research. (Hooray!)

That was true in 2010. It is more true now. The sector is more crowded, the money is tighter, and the federal funding floor that a lot of organizations assumed would always be there has, in the last year and a half, proven that it can simply vanish. Starting a nonprofit in 2026 is a harder, riskier proposition than it was when I first wrote this. So before you do it, do the work. Here's what that work actually looks like now.

Forget The Name And The Logo

Before you even go there, articulate your business plan to the nth degree. In addition to all the usual stuff in a business plan, yours needs a real competitor analysis. Who does something similar to what you want to do? How are they different? How much do they spend every year, and where does that money come from? Be sure your target population isn't already being served, even in some small way. 

You should be able to verifiably show that your niche or your methodology is genuinely unique. If someone is doing something even vaguely similar, consider joining them as a collaborator instead of trying to outcompete them for the same shrinking pool of donors. If you want to serve disadvantaged teen moms with art therapy and someone else in town is already serving that population by helping them get their GEDs, that's not a coincidence to ignore. That's a door someone's already holding open.

This part of the original advice hasn't changed. What's changed is how unforgiving the landscape is if you skip it.

Run The Fundraising Feasibility Study Like You Mean It

It doesn't need to be a massive formal study, but you need real data on how the world will respond to your idea. Will people give you a smile, or will they give you a check? Here's what that question looks like in 2026, and it's blunter than it used to be.

The federal grant environment that many nonprofits leaned on for decades is no longer something you can treat as stable background infrastructure. Since early 2025, around 30% of nonprofits that receive federal grant funds, plus many more who receive it indirectly, have faced a wide array of disruptions from grant freezes, terminations, and policy shifts. A nationally representative survey found that a third of nonprofits reported government funding disruptions in just the first four to six months of 2025, and specifically, 21% reported losing some government funding outright, 27% experienced a delay, pause, or freeze, and 6% received a stop-work order. This wasn't a slow squeeze. The National Endowment for the Arts sent termination notices to over 377 organizations in a single night in May 2025, with funding pulled after it had already been budgeted and spent on staff and programs.

If you're planning to build a funding model around federal grants, you need to know that the number of open federal grant opportunities dropped roughly a third between early 2025 and February 2026, and the ones that remain often close in weeks instead of the months-long windows organizations used to count on.

None of this means government funding is off the table forever. It means you cannot build a one-legged stool and expect it to hold weight. Financial advisors in the sector now generally recommend that no single funder, government or otherwise, make up more than 15 to 20% of your budget, and most nonprofits already fail to hit that target. Know your number before you start, not after a grant disappears.

The question the IRS will ask, and the question you should ask yourself first, is the same one it's always been: can you diversify your funding stream enough to survive a single funder walking away? In 2026, "a single funder" increasingly includes the federal government itself.

Here's My Most Important Suggestion, And It Hasn't Changed

While you're documenting this business plan, serve at least two years, or a full term, on an established nonprofit board of directors, ideally one doing something similar to your idea. Solid research for your business plan takes time. Being part of a board gives you that time and a front-row seat. Take the first year to learn the culture: the financials, reporting requirements, current strategies, relationships between board and staff, relationships between the organization and its stakeholders. In your second year, ramp up. Become an officer. Be a stellar one.

What you learn about yourself during this time matters more than what you learn about the org. What makes for good leadership? Were others receptive to your ideas? Did you discover you're a good fundraiser, a networker, an organizer? Do you actually understand what a board member does versus what an executive director does? Maybe you had fun planning a silent auction but don't actually want to run an entire organization. There's nothing wrong with that. It just helps to know it before you've incorporated.

But Before Any Of That, Ask Whether You Need To Incorporate At All

This is the piece the original post didn't have, because the option barely existed in its current form back in 2010: fiscal sponsorship.

A fiscal sponsor is an existing 501(c)(3) that takes your project under its legal and financial umbrella. You get to raise tax-deductible donations and apply for grants that require 501(c)(3) status, without forming your own corporation, building your own board, filing your own IRS application, or taking on your own audit and compliance burden. The sponsor takes a cut, usually somewhere in the 5 to 15% range of funds raised, in exchange for carrying the legal and administrative weight.

This is now the default first move that most nonprofit consultants recommend to someone with an idea and no track record. It lets you test whether your idea actually attracts donors and volunteers before you commit years of your life and someone else's legal liability to it. If the idea doesn't work, you walk away. Nobody has to dissolve a corporation, file final tax returns, or explain to a state attorney general's office why an organization with assets is shutting down.

If, after a year or two under fiscal sponsorship, you have real revenue, real programmatic traction, and a board ready to take on fiduciary responsibility, then incorporate. You'll do it with data instead of hope.

On The Actual Mechanics Of Forming One, If You Still Want To

The IRS has a streamlined exemption application, Form 1023-EZ, that didn't exist when I first wrote this post. It's faster and cheaper than the full Form 1023, but it comes with a catch worth knowing: it's only available to organizations expecting gross annual receipts under $50,000 and total assets under $250,000, and the IRS's own data has found that a meaningful share of organizations using it didn't actually meet the legal requirements for 501(c)(3) status. The EZ form asks the IRS to take your word for it. The long form makes you actually demonstrate you understand what you're forming. If filling out the long form makes you reconsider whether you want to do this at all, that's not a failure of the form. That's the form working as intended.

On Your Startup Board, This Also Hasn't Changed, And It Still Matters

As your business plan comes together, figure out who will be your startup board. Board members accept fiduciary responsibility for the organization. They can be personally sued for its conduct. Your startup board is critical to your organization's survival. How much money will they contribute? What else do they bring? Are they your friends, or are they people genuinely positioned to help? Are they on the board because they understand the cause, or because you asked and they were too polite to say no? Are you on the board, or are you the executive director? Those are different jobs with different legal exposure, and conflating them is one of the most common mistakes new nonprofits make.

There remains a real shortage of funding across the sector. There also remains a real shortage of board members who actually understand governance, finance, and fiduciary duty. Stacking your board with well-meaning friends instead of people who understand what they're signing up for is how nonprofits end up in trouble that has nothing to do with their mission and everything to do with paperwork nobody filed correctly.

If You Don't Need 501(C)(3) Status At All

Not every form of organized generosity requires incorporation. Mutual aid networks, informal giving circles, and unincorporated community response groups have grown substantially since 2020, and they remain a legitimate path for people who want direct impact without the structure, the board, the filings, or the compliance overhead. If what you actually want is to get help to people quickly, ask yourself honestly whether you need a 501(c)(3) to do that, or whether you need a group chat, a shared spreadsheet, and people willing to show up. Plenty of real good gets done without a determination letter.

On Starting A Nonprofit

Unless you have a genuinely unique idea with real power and real planning behind it, please consider collaborating with an established entity. As a board member. As a program volunteer. As a fiscally sponsored project testing the idea for a year before you commit to anything permanent. You might find a way to bring your idea to life with their infrastructure instead of building your own from scratch. What board wouldn't welcome you with open arms if you walked in and said, "Here's why I'm passionate about this. What can I do to help? And by the way, have you thought about doing this new thing?"

That sentence was the right closing line in 2010. It's the right closing line now. The landscape around it has gotten harder. The advice hasn't.

(originally published Aug 12, 2010; revised 2026)