How to start a nonprofit — a basic overview

November 16, 2025

By Nadia Cabrera-Mazzeo, Esq.

Step 1: Form a Nonprofit Corporation
Step 2: Adopt Bylaws
Step 3: Get an EIN
Step 4: Apply for Tax-Exempt Status

Step 1:  Form a Nonprofit Corporation with the State

To start a nonprofit in New Mexico, you must first create a nonprofit corporation through the NM Secretary of State’s online business portal. This is a similar process to forming any other type of business, but a “nonprofit corporation” is a specific type of business form under state law. LLCs are generally not eligible to be nonprofits. As part of the process of creating a nonprofit corporation, you will need at least 3 board members ready to go for your board of directors. Their names and roles will be included in the state filing when you’re creating the corporation (AKA filing the Articles of Incorporation). For this step, you will also need a registered agent — someone who has a physical address that can receive mail and who agrees to receive important legal mail related to your nonprofit.

Step 2:  Adopt Bylaws

Corporations, including nonprofit corporations, are legally required to adopt bylaws which set out the internal rules for how the organization should operate. When you’re just getting started, it’s okay to use a template for your bylaws. However, as your organization develops and starts doing the work it set out to do, you must update your bylaws and customize them to fit your organization’s actual operations and needs. I served as Executive Director of an established nonprofit for a time and while our bylaws were legally compliant, they provided zero guidance about how the board and the organization should operate, making them effectively useless. For example, our bylaws said that the directors’ term of office would be one, two, or three years as determined by the board. Extremely general bylaws that are not tailored to the organization may result in inefficient governance with unclear expectations despite everyone’s good intentions.

Step 3:  Get an EIN through the IRS

An Employer Identification Number (EIN) is a federal ID number for entities that serves a similar purpose as social security numbers for individuals. You will need the EIN to apply for tax-exempt status.

Step 4:  Apply for Tax-Exempt Status through the IRS

Once you have your nonprofit corporation set up, you can apply for tax-exempt status from the IRS. This will allow you to accept tax-deductible donations and will exempt you from certain taxes. (Note: nonprofits still have to pay the NM gross receipts tax unless they qualify for an industry exemption).

The way that you apply for tax-exempt status is by filing IRS Form 1023. There are two versions of Form 1023, the long version is about 40 pages and the short version (called Form 1023-EZ) is 3 pages. Most applicants have to file the long form. There are strict eligibility requirements for the short form and if you don’t meet them, you have to do the long form. You can file the short form if:

     1.   Your nonprofit is a completely new project with no history of being a for-profit venture (including past iterations of your venture that were organized as an LLC or corporation);
     2.   You expect to have less than $50,000 in yearly revenue (including grants) for the next 3 years; and
     3.   You currently have assets worth less than $250,000.

There are more eligibility requirements but these are the most common.

At the time of this writing, the filing fee for the long form is $600. For the short form, the filing fee is $275. These filing fees are nonrefundable. If you make a mistake or your application gets denied for whatever reason, you will have to file a new application with a new filing fee.

How long does it take for the IRS to process applications for tax-exemption?

It can take the IRS anywhere from a few weeks to a few months to process the short form and anywhere from 3-12 months to process the long form.

What if I can’t wait months to start getting grants and fundraising?

If you’re on a tight timeline and want to start fundraising before your tax-exempt status goes through, you can ask an established tax-exempt nonprofit to be your fiscal sponsor. A fiscal sponsor can receive tax-exempt donations on your behalf.

What does 501(c)(3) mean?

The main laws that govern the IRS and taxes is called the Internal Revenue Code (IRC). 501(c)(3) refers to the section of the IRC that deals with most nonprofits. There are other parts of section 501(c) that deal with other tax-exempt organizations, but 501(c)(3) is the relevant section for most nonprofits.

Can I file the short IRS form if I had a for-profit LLC that made no money and then I created a nonprofit corporation to do the same work?

No. If the project/ work that your nonprofit is created to do has any history as a for-profit entity, regardless of whether it made any actual profit, you are not eligible to file the short form. The IRS pays close attention to whether your nonprofit is the successor organization of a for-profit entity even if the entities are not legally related.

Do I need a lawyer to apply for tax-exempt status?

Not necessarily. If you can follow directions really well, ensure you file the correct form, and can eloquently describe your organization’s activities, you can submit an application yourself without a lawyer. Just be aware that any mistake will cost you the filing fee and all the time it takes to fill out the form.

Law office of Nadia Cabrera-Mazzeo, Esq.

Small business and contracts lawyer

Based in Taos, serving clients throughout New Mexico

505 427 2025

nadia@honestcontracts.com

The information on this website is not legal advice and does not create an attorney-client relationship. The rates and fees listed on this website may not be the most up to date.