Should you start a charity?

You saw a need and you care enough to do something about it. That matters, and it is where every good charity starts. Before you file any paperwork, though, it is worth asking one honest question: is a new charity the best way to help?

A charity is an organization. It has a board, bank accounts, annual filings with the IRS and often with your state, and legal duties that last as long as it exists. Some people find that the paperwork takes the time they wanted to spend helping people. This stage helps you decide with clear eyes. There is no wrong answer, only a better fit.

What to do

Look for who is already doing this

Spend a few evenings finding out who already serves the people you want to help, in your town and nearby. Search the IRS Tax Exempt Organization Search (opens another site) by city or keyword. Call 211, the free local help line, and ask what services exist. Ask at your place of worship, the library and the school district.

If you find a group already doing the work, that is good news. You may be able to do more good, sooner, by joining them, lending your skills or starting a new program inside their organization.

Know the other ways to help

You have more choices than "start a charity" or "do nothing":

• Volunteer or join a board. Existing charities often need people with energy and local knowledge.
• Start a program inside an existing charity. A food pantry might welcome your weekend meals project as one of its programs. They handle the legal and tax side; you run the work.
• Use a fiscal sponsor. A fiscal sponsor is an established charity that agrees to take your project under its wing. Donations go to the sponsor, so donors can usually deduct them, and the sponsor holds the money for your project. The sponsor usually charges a share of what you raise to cover its costs, and it keeps legal control of the funds. It is a common way to test an idea for a year or two before forming your own charity.
• Stay informal. A small neighborhood effort, like a coat drive, may not need to be a legal organization at all. Gifts to an informal group are not tax-deductible, though.

For some people, the best answer is to join or partner with a charity that already exists. That is not giving up. It is putting your energy where it helps fastest.

Count the time

Starting a charity takes real hours: writing the founding documents, recruiting a board, applying to the IRS, setting up books, and then running programs and raising money. After that, there are ongoing duties every year. Every charity must file an annual return or notice with the IRS, and a charity that does not file for three years in a row automatically loses its tax-exempt status. Many states also require yearly reports and registration before you ask the public for donations, and the rules vary by state.

Ask yourself: can I give this steady time for at least the next two to three years, alongside my job and family?

Count your people

No one should run a charity alone. You will need a board of directors, the group that is legally responsible for the charity. The number varies by state, and many states, New York among them, require at least three. Think about who you could ask today. Do you know people who would show up to meetings, help raise money and tell you the truth?

Count your money

You do not need a lot of money to start, but you do need some. There are state filing fees, an IRS application fee, insurance, and the cost of running your first programs. Ask: where will the first year's money come from? Do you know at least a handful of people who would give? Is there a local funder who supports this kind of work?

Your checklist

• Write down, in one sentence, the problem you want to solve and who it affects.
• Search the IRS Tax Exempt Organization Search for groups doing similar work near you.
• Call 211 and ask what services already exist for the people you want to help.
• Talk to at least two leaders of existing charities in your area.
• Ask one charity whether you could run your idea as a program or under fiscal sponsorship.
• Estimate the hours a week you can give for the next two to three years.
• List three people you could ask to serve on a board.
• List where your first year's money could come from.
• Take the Golden Hint starter quiz to see which path fits.
• Use the structure chooser to compare forming a charity, fiscal sponsorship and other options.