Below are answers to some of the most frequently asked questions that we hear about nonprofits. Click on the question to reveal the answer and more resources on each topic.
Q: How do you start a nonprofit corporation?
A: The National Council of Nonprofits does not offer technical assistance in starting up nonprofit organizations. It’s important to understand the legal requirements in the state where the nonprofit will operate before you begin. Please read our guidance on starting a nonprofit organization. Before you begin the process, research your cause to see if there are nonprofits already established in your area with the same or a similar mission. If so, you might consider collaborating through a fiscal sponsorship arrangement instead of establishing a new organization. It’s also a good idea to contact the state association of nonprofits in your state for state-specific guidance. We also encourage you to subscribe to the Council of Nonprofits’ free newsletters.
Q: How do I decide what nonprofit to donate to?
A: What causes interest you? Do you want to support an organization that is seeking the cure to a specific disease? Are you passionate about ensuring there is arts education in schools? Do you want to protect the environment for future generations? Are you hoping to focus your generous gift locally, or nationally, or internationally? Try to identify a few nonprofits with missions that best correspond with your priorities.
Visit its website and read whatever you can on the nonprofit. Better yet, go see the organization in action. A review of financial information alone will not tell you the impact that the organization is having in the community. Volunteering for the organization is a wonderful way to determine if the nonprofit is one you want to support.
Q: How do I ensure my donation is spent on the nonprofit’s mission, not overhead?
A: Understandably donors want to support a nonprofit’s mission, but many don’t understand that incurring administrative costs is not bad – instead, those costs are essential for mission advancement. Nonetheless, when you make a donation to a nonprofit, you can signal intent for that donation to be spent in a particular way. However, the most useful donation is often an unrestricted donation. This will allow the nonprofit to allocate your donation to the area of greatest need. Sometimes applying that donation to an overhead expense (such as a new roof or new computers) can make program delivery more efficient. Don’t hesitate to reach out to a nonprofit before making a donation to ask how you can direct your donation to make the most impact.
Q: How do I ensure my donation isn’t being used for ads for or against political candidates?
A: Be sure that you are donating to a charitable nonprofit organization. Charitable nonprofits may not engage in partisan election activities. When you read an article about “political nonprofits,” they are generally referring to something other than a charitable nonprofit.
Q: How much should a nonprofit spend on overhead?
A: Whatever is necessary to advance the organization’s mission. There is no set percentage that would indicate that one nonprofit is run any more effective than another. Overhead costs are investments in necessary infrastructure, including rent, paying staff, replacing old computers etc. A better gauge of an efficient nonprofit is its impact in the community.
Q: What is an acceptable amount for a nonprofit to pay its CEO/Executive Director?
A: There is no set amount that is right, or wrong. A nonprofit is like any other employer and needs to pay competitive wages to attract and retain quality employees. As nonprofits work to improve communities, they require leaders and staff with the right skills and expertise to accomplish the nonprofit’s mission. It is the responsibility of the Board of Directors to evaluate and set appropriate compensation for the CEO/Executive Director of the organization.
Q: Does our nonprofit have to file anything annually?
A: Yes, we have to audit our annual income and outcome with the departments that certified us.
For more questions feel free to contact us