How to start a nonprofit in 2026

Two layers: the state corporation, then the federal exemption. In the US a nonprofit corporation is a creature of state law — Texas: "A 'nonprofit corporation' is a corporation no part of the income of which is distributable to members, directors, or officers. A nonprofit corporation is created by filing a certificate of formation with the secretary of state." — and "is not automatically exempt from federal or state taxes"; "the designation '501(c)(3)' refers to a specific federal tax provision only" (Texas Secretary of State, nonprofit FAQ). The federal layer is the IRS's: an organization "must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual", may not make lobbying "a substantial part of its activities" and may not campaign for candidates (IRS, exemption requirements, June 2026); it "must not be organized or operated for the benefit of private interests, such as the creator or the creator's family" (IRS, inurement, October 2026).

The board — and the AI answer's "three directors", by state. The IRS sets no minimum; the states do. Texas: "a corporation may not have fewer than three directors" (Tex. Bus. Orgs. Code §22.204), plus "one president, and one secretary. The same person cannot be both the president and secretary" (Texas Secretary of State). Florida: "A board of directors must consist of three or more individuals" (Fla. Stat. §617.0803). New York: "The number of directors constituting the entire board shall be not less than three" (N.Y. N-PCL §702). California: "The number or minimum number of directors may be one or more" (Cal. Corp. Code §5151) — but "not more than 49 percent of the persons serving on the board of any corporation may be interested persons", meaning anyone paid by the corporation in the previous twelve months and their relatives (Cal. Corp. Code §5227), so a paid founder-director needs at least two unpaid, unrelated colleagues. Delaware: "1 or more members" (8 Del. C. §141). Recruit three unrelated people anywhere; in three of the four big states you must.

Incorporating. Texas: "for filing a certificate of formation, $25" (Tex. Bus. Orgs. Code §4.153). California: "Filing articles of incorporation not providing for shares: Thirty dollars ($30)" plus a $20 statement of information (Cal. Gov. Code §12186), due within 90 days of incorporating (CalNonprofits). Florida: "Articles of incorporation: $35", "Designation of and acceptance by registered agent: $35", an annual report of $61.25 (Fla. Stat. §617.0122) — $70 to form, our arithmetic. New York: "seventy-five dollars" for the certificate of incorporation (N.Y. N-PCL §104-A). The articles need the purpose and dissolution clauses the IRS reads; adopt bylaws and a conflict-of-interest policy at the first meeting — the IRS's sample policy is in its instructions, and adopting one "isn't required to obtain tax-exempt status" but puts the procedures in place (IRS, Form 1023 instructions). Then the EIN: "Use this tool to get an EIN directly from the IRS in minutes for free." (IRS).

Form 1023-EZ or Form 1023 — the real eligibility test. The user fee is "$275" for "Form 1023-EZ" and "$600" for "all other applications for recognition of exemption under § 501", paid on Pay.gov (Revenue Procedure 2026-5, Appendix A). The short form's test has three parts, not one: "projected annual gross receipts of $50,000 or less in the current taxable year and the next two years", "annual gross receipts of $50,000 or less in each of the past three years", and "total assets the fair market value of which does not exceed $250,000" (Rev. Proc. 2026-5, §6.05); and "if you are seeking recognition as a church, school, or hospital, you are not eligible to use Form 1023-EZ", nor is an LLC (IRS, Form 1023-EZ instructions). File within 27 months of formation and "the effective date of your exempt status will be your legal date of formation" (IRS, Form 1023 instructions). Processing, by the IRS's own page: "We issue 80% of Form 1023-EZ application determinations within 22 days", "80% of Form 1023 application determinations within 191 days", cases needing further review "within 120 days", "Form 1023-EZ can't be expedited", and "you must file your annual return (for example, Form 990) even if you haven't received a determination letter" (IRS, Where's my application, June 2026). The tail is real: one Missouri charity's short form was approved in a week; another's full form took "about 15 months" (Springfield Business Journal, December 26, 2018).

Permission to fundraise, state by state. About 40 states and the District of Columbia require registration before you solicit, by a compliance vendor's 2017 count (Harbor Compliance, revised November 2017 — a vendor). New York: "each charitable organization shall pay to the attorney general a fee of twenty-five dollars" (N.Y. Exec. Law §172), and most organizations that solicit or hold charitable assets there must register (New York Attorney General, Charities Bureau). California: "Registration must occur within 30 days of first receiving charitable assets" with a $50 initial fee and an annual renewal (California Attorney General, Registry of Charities). Florida: "anyone who solicits donations in or from Florida" registers with FDACS and renews annually; the fee runs from $10 under $5,000 of contributions to $400 at $10 million or more, and "small organizations are not required to pay a registration fee" below $50,000 with unpaid staff; every solicitation must carry the state's registration disclosure in capitals, and the late fee is "$25 for each month or part of a month" (FDACS, Solicitation of Contributions; Fla. Stat. §496.405). Texas has no general charitable-solicitation registration. State tax exemptions are separate applications: Texas AP-204 (Texas Comptroller), California Form 3500A with no fee (CalNonprofits), New York ST-119.2 for sales tax (New York Tax Department), and in Florida "exemption from one tax does not necessarily exempt the organization from all taxes" (Florida Department of Revenue).

Keeping it: the 990, every year. Form 990-N when gross receipts are "normally ≤ $50,000", 990-EZ under $200,000 of receipts and $500,000 of assets, the full 990 above either (IRS, Form 990 series thresholds, June 2026); three missed years and the exemption is revoked automatically, with no appeal (IRS). A public charity must also stay publicly supported — "at least one-third of its total support from governmental units, from contributions made directly or indirectly by the general public, or from a combination" over five years (IRS Publication 557).

Paying yourself. Allowed, as an employee doing the work, at "reasonable compensation" — "the amount that would ordinarily be paid for like services by like organizations under like circumstance" (IRS, Form 1023 instructions); Candid: "nonprofits should make money and employees can be paid a salary. This includes the founder if the founder is performing mission-related work as an employee of the organization." (Candid). Overpay and "an excise tax equal to 25% of the excess benefit is imposed", 200 percent if uncorrected, with managers who approved it liable for 10 percent; the safe harbor is approval in advance by conflict-free directors using comparables — for organizations under $1 million, "data on compensation paid by three comparable organizations" (IRS Publication 557). Texas puts it plainly: "Any corporation may pay reasonable compensation for services rendered to the corporation." (Texas Secretary of State). The benchmark for the job is the $80,390 median above.

Insurance, and taking the money. Insureon's nonprofit customers pay a median $42 a month for general liability, $82 for a business owner's policy, $67 for directors-and-officers cover, $62 for workers' compensation and $56 for professional liability — "69% pay less than $60 per month" for general liability, and 93 percent choose a $1 million per-occurrence limit (Insureon, nonprofits, updated May 8, 2025); general liability plus D&O is $1,308 a year, our arithmetic — the biggest sourced first-year cost after the program itself. Donations: PayPal's charity rate is "1.99% + fixed fee" of $0.49, "subject to eligibility, application, and pre-approval by PayPal" (PayPal, merchant fees, October 1, 2026); Givebutter charges "0% platform fees across all campaign types when tips are enabled", a flat 3 percent if you disable them, with standard processor rates of "2.9% + 30¢" (Givebutter, pricing); Donorbox's free plan runs "fees between 2.95% and 3.95%" and its Pro plan is $150 a month (Donorbox, pricing); Zeffy "covers all transaction & credit card fees" and asks donors for an optional contribution instead (Zeffy, pricing). Federal grants, when they come, allow "a de minimis rate of up to 15 percent of modified total direct costs" for indirect costs without a negotiated rate (2 CFR 200.414).

The money to start. Our free nonprofit business plan itemizes formation and the first program at $4,900–$35,683: the state incorporation, the IRS user fee, the charitable registration where your state requires it, legal help if you want it, insurance at Insureon's medians, the first program's materials and space, the website, software, branding and three months of reserve for the months before the grants arrive. The program and the reserve are most of it; the government fees are $300 to $725 across the four states and the two forms, our arithmetic. Confirm the details with your accountant.

In the UK: "Find trustees for your charity - you usually need at least 3" and "Register as a charity if your annual income is over £5,000" or if you set up a charitable incorporated organization (GOV.UK, set up a charity); below £5,000 you "don't have to apply to register", but can still ask HMRC for recognition for tax breaks and Gift Aid (Charity Commission, CC21b), which pays "25p every time an individual donates £1" (GOV.UK, Gift Aid); choose the structure first — if it "is a corporate body, generally its trustees aren't personally liable for what it does" (Charity Commission, CC22a). In Australia: register with the ACNC, which can send your application for tax concessions on to the ATO (ACNC, why register); you need an ABN with the right entity type and must be not-for-profit (ACNC, who can apply); deductible-gift-recipient status is a separate endorsement by the ATO, and some of its categories are open only to registered charities (ACNC, DGRs and the ACNC); a New South Wales incorporated association needs at least five members and a committee of three or more adults, with registration at $171 to $220 (NSW Government, starting an incorporated association; NSW, forms and fees). Check your own regulator's rules.