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Starting a nonprofit organization means considering the financial aspects of implementing your vision. So, how much does it cost to start a nonprofit?
While the costs can vary, you don't necessarily need a massive investment to get started. Understanding the basic expenses and managing them efficiently can help you hit the ground running.
Below, we’ll explain the essential costs of starting a nonprofit, provide a state-by-state cost analysis, and offer savings strategies.
State fees include the costs involved with registering an organization.
Incorporation costs
Filing articles of incorporation is a mandatory step of strategic planning to establish your nonprofit legally. Costs vary widely by state, ranging from about $50 to $500, with additional fees for expedited processing if needed.
In most states, nonprofits must register before fundraising for all forms of donation solicitation, including online, in-person, and by mail. Some states even consider a "Donate" button on your website as an active solicitation, requiring registration where potential donors reside.
Charitable registration fees can range between $10 and $100. Before fundraising, research state-specific solicitation laws to ensure compliance.
Business license and permit fees
Some states require a nonprofit organization to obtain a business license or permit. While many states waive this requirement for tax-exempt organizations, it is essential to check with your state office for any necessary filings.
Depending on the permit type, business license fees typically range from $50 to hundreds of dollars.
These are state-dependent fees your nonprofit organization will have to pay in some situations. These include sales tax permits, annual registration, tax exemption, a gambling license, and name registration. Each of these charges depends on your state and nonprofit type.
2. Costs for filing for tax-exempt status
Filing for tax-exempt status with the Internal Revenue Service and establishing your nonprofit legally are two separate steps. The filing process with federal tax exemptions varies depending on the type of 501(c) organization you want to form. Federal filing fees are also different.
Depending on your eligibility, you must typically fill out Form 1023, Form 1023-EZ, or Form 1024 and pay filing fees with the federal government.
Form
Filing Fees
Processing Time
Key Eligibility Requirements
Details
Form 1023
$600
3–6 months
No specific income/asset limits
Standard application for 501(c)(3) tax-exempt status, filed online.
Legal assistance costs vary, with some attorneys charging hourly rates and others offering flat fees for nonprofit setups. The complexity of your organization affects the price of paying fees along the way.
You can look for pro-bono services (some law firms offer free or reduced-cost help to nonprofits). If you want to feel assured you’re cutting legal costs, you can always partner with Zeffy. All you have to cover are incorporation fees, and we’ll help you with the rest.
These additional costs help you support your organization's operations and keep it running. Administrative and operational costs comprise of:
Office space
Remote work means office space isn’t always essential. Overhead costs can be reduced with this shift as you consider your team's needs and ideal budget. Some nonprofits thrive with a hybrid model—using co-working office spaces for occasional meetings while primarily working remotely.
A hybrid model can reduce operational costs overall, and enable you to recruit volunteers when more in person work and collaboration is needed.
Staffing and recruitment
Typically, staffing costs comprise 60% to 90% of the annual budget. The Better Business Bureau recommends that at least 65% of your budget go toward program expenses, including salaries.
Running a nonprofit comes with risks, like claims made during activities such as fundraising. To protect your organization, consider investing in nonprofit insurance.
Many nonprofits start with a Business Owner’s Policy (BOP) covering general liability, business income, and property. The average cost is $57/month or $684/year, according to Insureon. Finding the minimum cost for general liability insurance will support you to cut down on the expense of obtaining your nonprofit status and other financial protections in the event of an emergency.
Nonprofits often also get Directors and Officers (D&O) insurance to cover board members. D&O insurance typically costs $70/month, though it varies based on risks.
Communications and marketing
A strong marketing strategy is key to spreading the word about your cause and attracting donors, volunteers, and more.
A few tips:
Create a plan balancing impact and cost.
Use both online (social media, email, website) and offline methods (events, partnerships).
Budget for tools like email marketing, social media management, and design resources.
A website adds to the credibility of your organization. With an online presence, you can make it easy for your potential supporters to find you and confirm the legitimacy of your organization.
To create a website, you have a few choices.
DIY: Use online website builders with no coding required.
Freelance web designer: Hire a freelancer or someone with web design experience.
Web design agency: Full-service design with an average cost of $100-$149/hour.
Planning for these expenses upfront is essential. Your exact costs will depend on your nonprofit’s size and strategy.
While many software options charge monthly or yearly fees (often with nonprofit discounts), Zeffy is a standout option. It’s 100% free and offers all-in-one tools to maximize your impact.
Traditional nonprofit filing services often charge upwards of $2,000, in addition to mandatory government filing fees. With Zeffy, nonprofits can avoid these hefty costs. From organizing documents to guiding you through the application process, Zeffy simplifies the path to official nonprofit status so you can focus on making an impact.
With a proven track record of working with over 50,000 nonprofits across North America, Zeffy provides expert guidance every step of the way. Their team helps you craft and review your paperwork, ensuring everything aligns with your organization’s goals before submission. Zeffy even handles communications with the state, streamlining the process so most organizations achieve nonprofit status within four weeks.
Effective fundraising is crucial for your nonprofit, but most platforms charge transaction fees (credit card fees) on top of platform fees.
Zeffy offers a 100% free solution that covers all your fundraising needs:
Incorporate your nonprofit
Online donation processing with zero transaction fees
Event management and ticketing
Peer-to-peer fundraising campaigns
Robust donor management system
Email marketing tools
Customizable donation forms and pages
3. Leverage free resources for nonprofits
Many online platforms provide discounted or free tools for nonprofit organizations. For example, TechSoup connects organizations with discounted software and services from Microsoft, Intuit, and Adobe to avoid costly outsourcing for tech and operational needs.
Cut costs by sourcing office supplies and furniture from businesses donating surplus items or shopping second-hand. You can also seek in-kind donations from corporate partners.
Retaining a new donor can be more costly than retaining your existing supporters. Build relationships by sharing updates, impact stories, and branded merchandise. These efforts foster loyalty and make your supporters feel valued beyond their financial contributions.
Virtual fundraisers or events with a hybrid component are a cost-effective way to eliminate expenses like venue rentals, catering, and on-site logistics. Digital platforms often include built-in tools for marketing and engagement, reducing the need for additional resources. Plus, virtual events break down geographic barriers, allowing you to reach a global audience without significant cost increases.
While hiring a lawyer to start a nonprofit is not mandatory, legal assistance can help meet all legal requirements. Legal fees can range from $500 to $5000, depending on the complexity of your organization and other costs associated with paying IRS fees. State fees typically vary. Zeffy helps you skip those additional fees as a free legal partner.
A nonprofit founder can receive a fair salary for their work to run the organization. They must be careful while compensating because IRS fees exist if the organization overpays. The basic guidelines for compensating both executives and employees are:
Meet all federal, local, and state guidelines for the minimum wage.
Be fair, reasonable, and not excessive.
Remain compliant with payroll taxes.
Include all benefits as part of the total compensation package.
Contrary to popular belief, nonprofits are allowed to make a profit. The only difference is that unlike for-profit businesses, nonprofits cannot distribute their earnings to private individuals. This prohibition is because tax-exempt charitable organizations are formed to benefit the public and not private interests.
How to Start a Nonprofit Organization with No Money in 6 Steps
Is it possible to start a nonprofit organization for free? Explore our complete 2024 guide to discover our best tips to launch your charity on a budget.
