A key consideration you need to make when thinking of setting up a charity is how much it will cost. Financial planning is essential as it will help you to have more time to find funding if needed or to recruit more donors.
Here, we’ll look at how much it typically costs to start a nonprofit. By planning ahead, the charity will have an increased chance of success.
One of the initial costs of starting a nonprofit is incorporation fees. If you only plan to be a really small charity or a temporary nonprofit, you won’t necessarily need to incorporate. However, if you do plan on running the nonprofit permanently, incorporating it makes sense.
The fee for filing for incorporation will differ between states. It tends to work out between $30 and $125. Other potential start-up costs you may face depending on your state include a charitable solicitation fee and a fee for a business license.
Fees for Achieving 501(c)(3) Status
If you want to benefit from a nonprofit tax exemption, you’re going to need to achieve 501(c)(3) status. This involves filling out the IRS Form 1023. The fee for filing this form is around $600.
If you expect your nonprofit to earn no more than $50,000 each year, you could file the Form 1023-EZ. The fee for filing this form is much lower at just $275.
Other Costs You Need to Consider
As well as the initial set-up fees, there are other costs to consider too. For example, are you planning on hiring employees or relying solely upon volunteers? If you will be hiring employees, you’ll need to figure out salaries and factor that into your ongoing costs.
If you are going to need a space to operate from, you’ll also need to pay for this. The fees for office space would include rent or a mortgage, electricity, signage, and broadband payments. You might also need to invest in computers and equipment.
Remember, you can typically take advantage of tax exemptions when purchasing the things you need for the charity.
Insurance costs are something else to think about. You’ll need to cover the premises you operate from. There may also be other insurance requirements depending upon the type of nonprofit you are running. If you are hiring employees, think about how much health insurance is going to cost.
These are some of the main costs that come with setting up a charity. There is a lot to factor in and it is vital you account for all of the expenses you’ll need to pay. Once you do know how much you’ll need to get started, you can work on finding the funding you need. Always take time to fully figure out the costs before deciding whether starting a nonprofit is right for you.