Start a Nonprofit
The process for transforming an idea into an operating organization can be complicated. It takes time, planning and knowledge of Minnesota and federal regulations, as well as nonprofit best practices. Note that this information was prepared in an attempt to provide accurate information on how to start a nonprofit organization in Minnesota. The steps, regulations, and laws referred to in this website apply in the state of Minnesota. Other states may use different guidelines. Legal requirements and non-legal administrative practices discussed in this website are subject to change due to new legislation, regulatory and judicial pronouncements, and evolving guidelines. This information does not constitute an engagement to provide legal, tax, or other professional services on the part of the MCN or its authors and reviewers.
It is common for organizations to go through four distinct stages during development. While it may seem easy and efficient to complete the entire process at the onset of the new organization, many new nonprofits find it more manageable to grow slowly into their nonprofit status. Following these stages can allow your new organization to grow and succeed at its own pace.
Four Stages of Development
As an organization goes through these stages of development, it may choose to stop at any point and not proceed further.
- Many nonprofits begin as an unincorporated association. Organizations can continue with programs and activities informally with financial activity being conducted by one or more individuals within the group.
- As donations and activities grow, the organization may find a fiscal sponsor to aid with reporting requirements, administrative tasks, and to lend their tax-exempt status. This allows the organization to continue to focus its attention on programs.
- An organization may incorporate at the state level and maintain fiscal agency, or begin to establish itself on its own.
- Finally, the organization may apply for tax-exempt status from the Internal Revenue Service. If accepted, the organization is now able to accept tax-deductible donations and is responsible for following regulations set by the IRS and the state, and for reporting annually to the IRS, Minnesota’s Secretary of State’s Office, and Minnesota’s Attorney General.