When starting a new nonprofit organization, you and your co-founders will be passionate about your cause and eager to make a difference in your community. During this exciting time, you and your co-founders will have to make an effort to not overlook the mundane, but important, administrative details that, if avoided, could end up hurting your organization as it starts to grow or has financial problems.

The best practices listed below will help you get your new nonprofit organization off to a good start.

Operations Best Practices

Get an EIN. Even if your organization does not have any employees, you need to get a federal employer identification number (EIN) to apply for tax-exempt status from the IRS. You will also need it to open a bank account in your organization's name. Applying for an EIN (PDF, 100 KB) online is free. When you apply, you'll also need to submit your articles of incorporation and your bylaws.

Open a bank account and establish check writing procedures. Even if your nonprofit is 100 percent volunteer, you will still need a checking account. The way you set up your account and money-handling procedures in the beginning will help you establish best practices in the future.

Generally, one person should never have sole control over the checking account and finances. For instance, if you hold a fundraising event, the person receiving the money should be different from the person who tallies the funds. This person should be different from the person who deposits the money in the checking account. Bank statements should be sent to the head of your organization, either the executive director or board chair.

Following these best practices will be especially valuable when you must undergo an audit or when your organization is reviewed by a potential large donor.

Be wary of investing your own money. Within the first couple of years, the leaders of your organization need to figure out how to make the organization sustainable through its programs and fundraising. It is acceptable to provide initial seed money to your organization, but bailing out your nonprofit organization with your own money is not a viable fundraising plan. Don't make personal sacrifices to keep your dream afloat. This approach will have long-term consequences that may turn your dream into a nightmare.

Early in your organization's formation, you should create a fundraising strategy and business plan. If your group is having financial problems, focus on the cause of the issue: structure, leadership, or programs.

Regularly consult outside experts and a knowledgeable attorney. As your group is getting started, you will be operating without proof that your structure and operations work. Soliciting the advice and criticism of professionals could save a lot of trouble later on. You and your co-founders may want to develop an advisory board — a group of experts and prominent individuals in the community who can't commit to being on the board but would agree to meet on a less-frequent basis. You can display the advisory board member names on your organization's letterhead to demonstrate that your group has some substance and the support of key community members.

Secure organizational and Directors and Officers (D&O) insurance. While you are tending to all of the needs of your new nonprofit organization, don't overlook the need for insurance. Insurance is essential and not very expensive or difficult to get.

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