Fundraising     |     17 April 2025

How to Start a Fundraising Business in 9 Simple Steps

9 steps to starting a fundraising organization made simple

15 minute read

You’ve got the passion, the cause, and the drive to make a difference, but now you're faced with the big question: how do you start a fundraising business? Whether you’re looking to support a local charity, fund community projects, or build a full-fledged organization, the process can feel overwhelming. The paperwork, the planning, the financial details: it’s a lot to figure out, especially if this isn’t your full-time job.

One of the biggest points of confusion is understanding the difference between a fundraising business and a nonprofit. Many people assume all fundraising businesses are nonprofits, but that’s not always the case. Some operate as for-profit companies, while others take the nonprofit route, each with its own benefits and challenges.

No matter which path you choose, setting up a solid foundation is the key to long-term success. A clear plan will help you stay organized, attract donors, and grow your impact. Before we jump into the step-by-step guide, one important note: every state has its own fundraising and business formation regulations. Be sure to research local laws and requirements before you get started.

Understanding fundraising businesses and choosing your model

What is a fundraising business

A fundraising business is any organization designed to generate money for a cause, charity, or specific initiative. That might mean planning fundraising events, selling products with proceeds benefiting a nonprofit, or helping other organizations raise funds.

Not all fundraising businesses are charities. Some operate as for-profit companies providing fundraising services, such as event planning businesses specializing in charity galas or companies selling fundraising products like custom T-shirts or cookie dough. Others function as traditional nonprofits, relying on grants, donations, and community support.

Understanding which type of fundraising business makes sense for your goals is one of the first decisions you’ll need to make.

For-profit vs. nonprofit business models

Choosing between a for-profit and a nonprofit structure affects everything from taxes to funding sources. Here’s a breakdown of the key differences:

• Nonprofit organizations exist to serve a mission. They qualify for tax-exempt status (like 501(c)(3) designation) and rely on donations, grants, and fundraising events. All money raised goes back into the organization rather than paying out profits to owners or shareholders.
• For-profit fundraising businesses operate like traditional companies. They may sell fundraising services, products, or event management tools and generate revenue. Unlike nonprofits, they pay taxes on profits and don’t necessarily rely on donations or grants to operate.

When a for-profit fundraising business makes sense

A for-profit model can be a good choice if you want to provide fundraising-related services, such as event planning, consulting, or online auction software. You may also want to consider this option if you plan to sell products where some proceeds go toward charitable causes or if you want flexibility in operating and don’t want to rely on grants or donations.

When a nonprofit is the better fit

A nonprofit structure is best if your primary goal is to raise funds for a cause rather than generate personal income. If you want to qualify for tax-exempt status and attract donors who can make tax-deductible contributions or plan to apply for grants or corporate sponsorships to fund your work, a nonprofit is the way to go. 

How to start a nonprofit and decide if it’s the right choice

If you’re leaning toward a nonprofit, there are specific legal steps you’ll need to take to make it official. While requirements vary by state, the general process looks like this:

1. Choose a name and mission statement. Your nonprofit’s name should reflect its purpose. A clear mission statement helps attract donors and keep your efforts focused.
2. Form a board of directors. Nonprofits must have a governing board responsible for decision-making and oversight.
3. File articles of incorporation. This legal document officially registers your nonprofit with the state.
4. Apply for tax-exempt status. To avoid paying federal income taxes and allow donors to make tax-deductible contributions, you must apply for 501(c)(3) status with the IRS.
5. Create bylaws. These outline how your nonprofit will operate, including leadership structure and decision-making processes.
6. Register for state and local licenses. Some states require additional registrations to solicit donations legally.

Starting a nonprofit requires more paperwork and oversight than a for-profit business, but it also comes with significant benefits, including tax exemptions and grant eligibility. If your goal is to build a long-term fundraising organization that reinvests all funds into its mission, this structure may be the right choice.

Starting a for-profit fundraising business and when to consider a nonprofit

Not every fundraising business needs to be a nonprofit. Some operate as for-profit companies, offering services or products that help raise money for good causes while still generating revenue. If you’re planning to run a business that organizes fundraising events, sells merchandise to support charities, or provides nonprofit consulting services, a for-profit model might be the right fit.

Starting a for-profit business is generally more straightforward than setting up a nonprofit. You’ll need to:

• Choose a business name and structure (sole proprietorship, LLC, or corporation).
• Register with your state and apply for any required business licenses.
• Set up a financial system to track revenue, expenses, and taxes.
• Develop a fundraising strategy to generate sustainable income.

While a for-profit model offers flexibility, it doesn’t provide the same tax benefits or access to grants that nonprofits receive. If you aim to raise money for a cause without personal financial gain, transitioning to a nonprofit structure may be the better option.

Now, let’s look at what it takes to start a fundraising business.

How to start a fundraising business in 9 simple steps

1. Define your mission and goals

Starting any business without a clear purpose is like taking a road trip without a GPS. The first step is defining exactly what your fundraising business is trying to achieve and how it will operate.

Fundraising is about building trust. Whether you’re supporting a nonprofit cause or launching a for-profit fundraising service, people need to know what they’re supporting and why it matters. A well-defined mission gives your business credibility and helps attract donors, customers, and partners.

Who you will serve and how you will raise money

Consider these key questions when shaping your fundraising business.

• Who benefits from your fundraising efforts? (A specific charity? Community projects? A cause you create yourself?)
• How will you generate revenue? (Ticket sales, donations, sponsorships, silent auctions, product sales?)
• Will you operate seasonally or year-round?
• Do you want to focus on local efforts or expand nationally?

Clearly defining these elements will help you create a strong foundation for growth.

2. Choose the proper business structure

The type of business structure you choose impacts taxes, liability, and overall operations. If you’re unsure what fits best, consulting with an accountant or legal expert can help.

Here are the most common business structures for fundraising organizations.

• Sole proprietorship: A simple structure where one person runs the business. It's easy to set up, but you’re personally responsible for any financial liabilities.
• Limited Liability Company (LLC): Offers protection by keeping your assets separate from business finances. Works well for fundraising event planning companies or product-based fundraising businesses.
• Corporation: A more formal structure suited for larger fundraising operations. It can be for-profit or nonprofit, but it requires more paperwork and regulations.
• Nonprofit organization: Structured to reinvest all profits into the mission. It requires tax-exempt approval and legal compliance but allows you to apply for grants and tax-deductible donations.

Legal and tax considerations

For-profits pay taxes on earnings, while nonprofits can apply for tax-exempt status. A nonprofit may be the better fit if you plan to raise money for charitable causes. But a for-profit structure could provide more flexibility if you’re offering a fundraising service (like event planning or donation management).

3. Register your business and get legal paperwork in order

Once you’ve chosen your business structure, it’s time to make it official. Each state has different rules, so check with your local business bureau or attorney.

To legally operate, you may need:

• A business license from your state or city.
• A federal EIN (Employer Identification Number) for tax purposes.
• A bank account separate from personal funds for financial transparency.
• Specific fundraising permits (some states require a charitable solicitation license).

Essential considerations for nonprofits vs. for-profits

If you’re running a nonprofit, you’ll also need to:

• File for 501(c)(3) status with the IRS for tax-exempt benefits
• Register with your state’s charitable organization division if required
• Set up bylaws and governance policies to maintain compliance

On the other hand, for-profits should focus on setting up the correct tax structure and securing liability protection if needed.

4. Create a fundraising strategy that works

With your legal and business structure in place, it’s time to develop a fundraising strategy. A good strategy combines different methods to maximize revenue and engage supporters.

Fundraising businesses use a variety of approaches, including:

• Crowdfunding: Platforms help individuals and organizations raise money online in a different way than traditional fundraising. 
• Events: Galas, silent auctions, and community fundraisers generate donations while engaging supporters.
• Product sales: Selling items (T-shirts, food, merchandise) with proceeds for your cause.
• Grant writing: Nonprofits can apply for grants from foundations or government programs.

Silent auctions as a fundraising tool

Silent auctions are a powerful way to engage donors while raising money. They work well for in-person, hybrid, and fully online events. With the right auction software, you can streamline the entire process, from bidding to checkout.

Successful fundraising businesses don’t rely on just one method. A mix of online and in-person strategies, like combining a silent auction with a crowdfunding campaign or adding a sponsorship package to an event, can help maximize funds and reach a wider audience.

5. Set up your financial system

Money moves fast in fundraising, and keeping track of everything is critical. Whether collecting donations, processing ticket sales, or managing sponsorships, setting up a proper financial system will help you stay organized and compliant.

Bank accounts, accounting software, and tax compliance

The first step is opening a dedicated bank account for your fundraising business. Keeping business finances separate from personal accounts makes bookkeeping easier and ensures transparency, especially if you're a nonprofit.

Here’s what else you’ll need:

• Accounting software: Tools like QuickBooks or Wave help track income, expenses, and donor contributions.
• Payment processing systems: Platforms like PayPal, Stripe, or specialized fundraising software like Silent Auction Pro (that partners with payment processing systems) can handle ticket sales and online donations.
• Bookkeeping process: Even if you start small, having a transparent system for tracking every dollar will prevent financial headaches later.

Nonprofit reporting requirements vs for-profit tax obligations

If you're running a nonprofit, you must keep meticulous financial records and file an annual IRS Form 990 to maintain tax-exempt status. Many states also require financial disclosures for charities.

For for-profit fundraising businesses, standard tax rules apply. You’ll report income, deduct expenses, and file business taxes like any other company. It’s always a good idea to consult an accountant to ensure compliance.

6. Build a strong brand and online presence

Fundraising success depends on visibility. People won’t donate, attend events, or support your cause if they don’t know you exist. That’s why branding and an online presence are non-negotiable.

Your website is the hub for your fundraising business. At a minimum, it should include:

• A clear mission statement that tells visitors why your fundraising business exists.
• A way to donate or participate (ticket sales, sponsorships, auction pages).
• Success stories or impact updates to show progress.
• Contact information so supporters can reach out.

For social media, focus on platforms where your audience spends time. Facebook and Instagram work well for community-based fundraising, while LinkedIn is great for corporate sponsorships. Creating a fundraising calendar and consistently posting updates, success stories, and upcoming events will keep people engaged.

7. Secure funding and initial donors

Starting a fundraising business requires some initial capital, whether it’s for software, marketing, or event costs. Luckily, there are multiple ways to fundraise before your first event.

Finding startup capital (grants, sponsors, crowdfunding)

• Grants: If you’re a nonprofit, research foundation, and corporate grants. Many large organizations offer funding for charitable projects.
• Sponsorships: Businesses often support fundraising efforts in exchange for visibility. Offer sponsor perks like logo placements or event mentions.
• Crowdfunding: A great campaign on the right platform can generate early support. A well-crafted plan with a compelling story increases your chances of success.

8. Plan and execute your first fundraising event

Events are among the best ways to engage donors, create excitement, and raise money. Whether planning a formal gala, an online auction, or a casual fundraiser, the right approach will set you up for success.

Different events attract different audiences. Some popular options include:

• Silent auctions: Guests bid on donated items, and proceeds support your cause.
• Live galas: A combination of dinner, entertainment, and fundraising activities.
• Virtual fundraisers: Online campaigns like live-streamed donation drives.
• Community events: Fun runs, golf tournaments, or charity concerts.

Using Silent Auction Pro for seamless event management

Running a successful fundraising event requires organization, and Silent Auction Pro makes the process easier. This platform offers powerful tools that help manage online and in-person auctions, event registration and ticket sales, text-to-give campaigns, and real-time donation tracking. By using fundraising software, you eliminate much of the stress and ensure a smooth experience for attendees.

9. Maintain relationships and grow your impact

A successful fundraising business isn’t just about one great event: it’s about building long-term relationships with donors, sponsors, and community members.

People are more likely to give again if they feel connected to your cause. Keep them engaged with personalized thank-you messages after donations and event participation, impact updates showcasing how their contributions made a difference, and loyalty programs for repeat donors or supporters.

Scaling your fundraising business over time

Once you have a strong foundation, look for ways to expand. That could mean hosting larger events, launching new fundraising campaigns, or partnering with other organizations.

Building a Fundraising Business That Lasts

Starting a fundraising business might seem like a huge undertaking, but it becomes much more doable when you break it down into clear, manageable steps. Whether launching a nonprofit to support a cause or creating a for-profit business that helps others raise money, success comes from having a solid plan and the tools to stay organized.

The best fundraising businesses don’t focus on one big event; they build a system that makes fundraising easier, year after year. That means keeping donors engaged, finding new ways to bring in revenue, and using technology to streamline operations. Platforms like Silent Auction Pro exist to take the stress out of event planning, auctions, and donor management so you can focus on making a bigger impact.

If you’ve been thinking about starting a fundraising business, now is the time to take the first step. Get clear on your mission, explore your options, and begin laying the groundwork. As you move forward, check state and local laws to ensure compliance with fundraising regulations.

The world needs more people willing to act for good causes. With the right strategy and persistence, your fundraising business can grow into something that makes a real difference. Silent Auction Pro is here to help every step of the way. Request a free demo to see how we can turn your fundraising business dreams into an impact-driven reality.