How to Start a Nonprofit: Grants and Funding for New Organizations

Starting a nonprofit is exciting but requires careful planning — especially around funding. This guide covers everything from formation to landing your first grants.

Phase 1: Forming Your Nonprofit

Step 1: Define Your Mission

Before anything else, clearly articulate:

• What problem you're solving
• Who you're serving
• How you'll create impact
• Why you (vs. existing organizations)

Pro tip: Research existing nonprofits. Funders prefer supporting established orgs or truly unique approaches — not duplicates.

Step 2: Incorporate as a Nonprofit

File articles of incorporation with your state:

State	Filing Fee	Processing Time
Delaware	$89	1-2 weeks
California	$30	2-4 weeks
Texas	$25	1-2 weeks
New York	$75	2-4 weeks

Required elements:

• Organization name
• Purpose (must be charitable, educational, religious, or scientific)
• Registered agent
• Board of directors (minimum 3 recommended)
• Dissolution clause (assets go to another 501(c)(3))

Step 3: Get Your EIN

Apply for an Employer Identification Number from IRS:

• Online: Immediate (irs.gov)
• Required even without employees
• Free — never pay for this

Step 4: Apply for 501(c)(3) Status

Form 1023 vs 1023-EZ:

Form	Eligibility	Fee	Processing
1023-EZ	Gross receipts ≤$50K, assets ≤$250K	$275	2-4 weeks
1023 (full)	All others	$600	3-6 months

What IRS reviews:

• Organizational documents
• Conflict of interest policy
• Detailed description of activities
• Financial projections (3 years)
• Compensation reasonableness

Step 5: State Registrations

After federal approval:

• State tax exemption — separate application in most states
• Charitable solicitation registration — required in ~40 states before fundraising
• Sales tax exemption — if applicable

Phase 2: Pre-Grant Foundations

Build Credibility First

Most foundations won't fund brand-new nonprofits. Build credibility through:

Year 1 Funding Sources:

1. Founders and board — personal contributions
2. Friends and family — early believers
3. Crowdfunding — GoFundMe Charity, Classy
4. Corporate sponsorships — local businesses
5. Fee-for-service — if your model allows

Why this matters: Foundations want to see:

• Proof of concept
• Community support
• Financial management capability
• Track record (even small)

Establish Financial Systems

Before applying for grants, you need:

• Bank account — nonprofit business account
• Accounting software — QuickBooks Nonprofit, Aplos
• Budget — detailed annual budget
• Financial policies — internal controls, approval processes
• Board oversight — finance committee, regular reviews

Create Required Documents

Funders will request:

• 501(c)(3) determination letter
• Current year budget
• Most recent 990 (after first filing)
• Board list with affiliations
• Strategic plan
• Audited financials (for larger grants)

Phase 3: Finding Startup-Friendly Funders

Government Grants for New Nonprofits

Challenging but possible:

Most federal grants require "demonstrated capacity" — but some exceptions:

Agency	Program	New Org Friendly?
CNCS	AmeriCorps VISTA	Yes (with sponsor)
HHS	Community-based programs	Varies
DOJ	Community grants	Some set-asides
USDA	Rural development	Yes

State and local governments often more accessible:

• Community development block grants (through cities)
• State arts councils (for arts nonprofits)
• State health departments (health focus)

Foundation Grants for Startups

Foundations that fund new organizations:

Foundation	Focus	New Org Policy
Surdna Foundation	Various	Will consider new orgs
Skoll Foundation	Social entrepreneurs	Funds early stage
Draper Richards Kaplan	High-impact nonprofits	Specifically targets early
Echoing Green	Social entrepreneurs	Fellowship for new leaders
Ashoka	Social entrepreneurs	Funds individuals, not orgs

Community foundations in your area often:

• Have lower barriers
• Know local needs
• Provide capacity building support
• Offer smaller "seed" grants

Fiscal Sponsorship Alternative

Can't wait for 501(c)(3)? Consider fiscal sponsorship:

• Established nonprofit "sponsors" your project
• Donations to sponsor are tax-deductible
• Sponsor handles compliance
• You operate your program
• Fees: typically 5-10% of funds

Good fiscal sponsors:

• Community foundations
• United Way affiliates
• Specialized sponsors (arts, health, etc.)

Phase 4: Your First Grant Application

Start Small

Recommended first grants:

• $1,000 - $10,000 range
• Local foundations
• Less competitive
• Simpler applications
• Builds track record

The Application Process

Before applying:

1. Read guidelines completely
2. Confirm eligibility
3. Contact program officer (if encouraged)
4. Gather all required documents
5. Note deadline and submission format

Standard components:

Section	What to Include
Executive Summary	Mission, request, impact (1 paragraph)
Statement of Need	Data-backed problem description
Project Description	Activities, timeline, staffing
Goals & Objectives	Measurable outcomes
Evaluation Plan	How you'll measure success
Budget	Line-item with narrative
Organizational Info	History, capacity, leadership

Common New Nonprofit Mistakes

❌ Applying too early — Wait until you have basic infrastructure

❌ Asking for too much — Start with smaller asks

❌ Generic applications — Customize for each funder

❌ No relationship building — Connect before applying

❌ Unclear outcomes — Be specific about impact

Funding Timeline

Realistic expectations:

Timeframe	Milestone
Months 1-3	Incorporation, EIN, 501(c)(3) application
Months 3-6	IRS approval, state registrations
Months 6-12	Build programs, raise seed funding
Year 2	Apply for first foundation grants
Year 3+	Government grants become realistic

Resources

GrantNavigation Tools

• Search grants for nonprofits
• Foundation database
• Eligibility checker

External Resources

• IRS Charities & Nonprofits
• Foundation Center
• National Council of Nonprofits

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Ready to find funding for your nonprofit? Start your search or check eligibility.