Running a U.S. Nonprofit: A Practical, No-Fluff Guide for Founders and Board Members

Launching or improving a U.S. nonprofit is equal parts mission, management, and meticulous compliance. This article distills what actually matters—from formation through fundraising, governance, finance, people, tech, and a month-by-month operating cadence—so you can focus on impact without stepping on avoidable landmines.

1) Form the Entity the Right Way (So Everything Else Works)

Choose your structure. Most charities start as a nonprofit corporation formed under state law (articles of incorporation filed with your Secretary of State). A 501(c)(3) public charity typically offers best fundraising flexibility and donor deductibility; a private foundation is viable for family philanthropy but has tighter rules.

Lock in core documents early:

• Articles of Incorporation with a 501(c)(3)-compliant purpose and dissolution clause.

• Bylaws covering board size, terms, meetings, officers, and committees.

• Policies you will be asked about on your IRS application and Form 990:

  • Conflict of Interest (with annual disclosure)

  • Whistleblower

  • Document Retention & Destruction

  • Gift Acceptance (especially if you’ll receive non-cash gifts)

Get your EIN (IRS Form SS-4; can be done online). You’ll need it to open a bank account and apply for tax exemption.

2) Tax-Exempt Status: Fast, Clean, and Supported by Documentation

Pick the path:

• Form 1023-EZ: Streamlined, for smaller orgs that qualify per IRS criteria.

• Form 1023: Full application; expect to provide narratives, budgets, and policies.

Public charity vs. private foundation. If you want public charity status, your revenue mix must meet a public support test over time (broad support from the public/government, not just one or two big funders). Keep an eye on Schedule A of your future Form 990—it’s where this gets tested annually.

Know the boundaries:

• No partisan politics. 501(c)(3)s cannot support or oppose candidates. Limited lobbying is allowed; consider making a 501(h) election for clearer limits and tracking.

• UBIT (Unrelated Business Income Tax). Revenue from regularly carried-on activities not substantially related to your exempt purpose may be taxable (Form 990-T). Build simple decision trees for program vs. non-program revenue before you launch earned income streams.

3) Governance That Works (Without Bureaucracy)

Board composition. Aim for a small but active board with relevant skills (program, finance, legal/compliance, fundraising, and lived experience). Independence matters—at least a majority of independent directors is best practice.

Meeting discipline.

• Annual board calendar: 4–6 meetings, plus a short consent agenda for routine matters.

• Maintain minutes that record decisions and conflicts handled—not a transcript.

• Use a decision register to track approvals, delegated authorities, and follow-ups.

Standing committees (when appropriate):

• Finance & Audit (oversees budgets, audits/reviews, and internal controls)

• Governance/Nominating (board recruiting, onboarding, evaluations)

• Development (fundraising strategy, major gifts pipeline)

Tools that help: Board portals can centralize agendas, “board packs,” minutes, approvals, and conflict registers; they also reduce version sprawl and improve accountability.

4) Money In: Fundraising Compliance & Donor Stewardship

State charitable solicitation registrations. If you’re asking the public for donations (including online), many states require registration with the Attorney General/charities bureau before or shortly after soliciting. Map where you’ll fundraise and register accordingly.

Receipting & acknowledgments:

• $250+: Donors need a contemporaneous written acknowledgment.

• Quid pro quo: If the donor receives something of value (e.g., gala dinner), disclose the fair market value; only the excess is deductible.

• Non-cash gifts: For property >$500 donors file Form 8283; for >$5,000 a qualified appraisal is required (with your signature).

Grants & restricted funds. If a grant is restricted, treat it as such in your ledger and in spending decisions. Document donor intent clearly and report back on deliverables. For federal grants, know the Single Audit threshold (currently $750,000 in federal expenditures within a fiscal year).

Stewardship system:

• Thank fast (48–72 hours), report transparently, and connect outcomes to gifts.

• Track relationships, not just transactions—notes, interests, and next steps.

5) Money Out: Internal Controls That Prevent Headaches

Good controls are culture and process—not paperwork. Keep it simple and consistent.

Core controls:

• Segregation of duties: Separate who requests, approves, pays, and reconciles. If you’re tiny, use workflow tools and a board treasurer to compensate.

• Dual authorization for payments above a threshold.

• Bank reconciliations monthly; reviewed by someone other than the preparer.

• Purchasing policy (spend thresholds, bids, conflict screening).

• Grant & program tracking (timekeeping and cost allocation if you have multiple funding sources).

Year-end readiness:

• Clean vendor files (W-9s on hand), issue 1099-NEC where required.

• Inventory restrictions and commitments.

• If your state or funders require an audit/review/compilation, schedule your CPA early.

6) People: Hiring, Volunteers, and Insurance

Employees vs. contractors vs. volunteers.

• Pay employees at least minimum wage and overtime per the Fair Labor Standards Act (FLSA) and state law.

• Contractors must meet independent contractor tests; don’t “schedule” or “supervise” them like staff.

• Volunteers can’t be used to replace paid roles; reimburse actual expenses rather than paying stipends that could look like wages.

Policies to adopt:

• Anti-harassment and EEO

• Background checks where appropriate (especially with vulnerable populations)

• Clear Code of Conduct, including social media and data handling

Insurance basics:

• General Liability and Directors & Officers (D&O)

• Workers’ Comp (as required by state law)

• Cyber (data, email, donations) and Volunteer Accident where applicable

7) Reporting & Compliance Calendar (Save This)

Federal filings:

• Form 990/990-EZ/990-N due the 15th day of the 5th month after your fiscal year end (e.g., May 15 for December 31 year-end). File Form 8868 to extend.

• Form 990-T if you owe UBIT.

• Form W-2/W-3, Form 941 (payroll), 1099-NEC for eligible contractors.

State filings:

• Annual report with your state corporation division.

• Charitable registration renewals in each soliciting state.

• Sales/use tax exemptions (apply separately; tax-exempt ≠ sales-tax-exempt).

Other permits:

• Raffles/gaming often require permits and specialized reporting.

• Local business licenses and solicitation permits in some jurisdictions.

Put all of this on a 12-month compliance calendar with owners and due dates. Review it at every Finance & Audit Committee meeting.

8) Tech Stack: Low-Lift Tools That Punch Above Their Weight

Finance: QuickBooks Online (class/projects for grants), bill-pay with dual approval, expense management with receipt capture.

Donors & comms: A lightweight CRM that can:

• track relationships and restrictions,

• send segmented, CAN-SPAM compliant email campaigns,

• capture online gifts securely with automatic receipting.

Board & governance: A board portal to handle agendas, “board packs,” minutes, tasking, conflict disclosures, and e-votes—reducing email chaos and improving transparency.

Data privacy & security: Least-privilege access, MFA everywhere, standard retention schedules, and a breach-response checklist.

9) Your First 90 Days: A Simple Roadmap

Days 1–30: Foundations

• Incorporate, obtain EIN, open bank, adopt bylaws and core policies.

• Draft a one-page theory of change and 12-month outcomes.

• Build your chart of accounts to support program vs. admin vs. fundraising.

• Choose your finance, CRM, and board tools; implement basic controls and approvals.

Days 31–60: Governance & Money

• File 1023/1023-EZ; initiate state charitable registrations.

• Approve a 12-month budget and cash forecast; draft an internal grants & restrictions memo.

• Build a donor journey map (first-time, monthly, major gifts).

• Launch a board cadence (quarterly meetings; committee charters; decision register).

Days 61–90: Programs & Pipeline

• Finalize year-one program plan with clear KPIs.

• Stand up monthly financials for board review (P&L by class, cash flow, budget vs. actual).

• Establish stewardship rhythms (thank-you SLAs, quarterly impact updates).

• Book your first audit/review inquiry if required by state or funders.

10) Common Pitfalls (and How to Avoid Them)

1. Skipping state registrations while fundraising online → Map your footprint; file before you solicit.

2. Loose cash controls (single-person money handling) → Dual controls and monthly reconciliations.

3. Confusing restricted and unrestricted revenue → Tag gifts on receipt; report use back to donors.

4. Over-reliance on one funder → Track public support test; diversify early.

5. No written policies → Adopt lightweight, plain-English policies you’ll actually use.

6. Political activity missteps → Train staff/board on 501(c)(3) boundaries and lobbying limits.

7. Documentation gaps (minutes, conflicts, receipts) → Use a portal + checklists to standardize.

11) Board Dashboard: What to Review Every Meeting

• Mission KPIs: outputs → outcomes → impact (keep it simple and consistent)

• Finance: cash runway, revenue mix, restricted balances, budget vs. actual, forecast

• Fundraising: pipeline, conversion rates, retention, average gift, stewardship SLAs

• Risk & compliance: calendar status (990, state filings), policy attestations, incident log

• People: hiring/volunteer needs, culture signals, leadership development

• Decisions & actions: what requires approval, who owns what by when

12) Quick Glossary for Busy Leaders

• Public Support Test: IRS test for 501(c)(3) public charities to ensure broad support.

• Quid Pro Quo Gift: Donation with benefits received; only the excess is deductible.

• Restricted Funds: Gifts earmarked for a specific purpose; must be tracked and honored.

• UBIT: Tax on unrelated business income; reported on Form 990-T.

• Single Audit: Audit required if you expend $750k+ in federal funds in a fiscal year.

Final Thought

High-performing nonprofits pair a relentless focus on outcomes with a few durable management habits: informed governance, clear policies, lean controls, consistent stewardship, and tools that make compliance automatic. Start small, write it down, review it rhythmically—and let your systems free your team to do the work only you can do.