How to Start a Nonprofit in Tennessee

Important: The Secretary of State provides a standardized nonprofit charter form that meets Tennessee requirements for incorporation, but it doesn’t necessarily meet IRS requirements for 501(c)(3) status. LegalZoom can help you file your nonprofit charter in a way that meets both state and federal requirements. 

Step 4: Hold your organizational meeting and adopt bylaws

The organizational meeting is where your board of directors formally adopts bylaws, which are your organization’s internal rules, and elects any additional officers or members. Your board of directors must adopt bylaws under Tennessee nonprofit corporation law.

Tennessee nonprofit bylaws can include any provisions that relate to how you regulate and manage your organization, but it's wise to at least address the following:

• The nonprofit’s name and principal office address.
• A statement of purpose: This must be consistent with the charter’s business purpose.
• Board of directors composition: Include a minimum size (no less than three), term lengths, election procedures, and removal process.
• Director roles: Include their responsibilities and any other pertinent information.
• Officer roles: There must be a president, secretary, and one other officer responsible for taking meeting minutes. Include how each is elected and what their duties are.
• Meeting requirements: They should note the frequency or meetings, quorum requirements (minimum number of directors who must be present for a meeting to take place or for its actions to be binding), and advance notice requirements.
• Voting procedures: Include what percentage of votes are required in what situations.
• Conflict of interest policy: The IRS requires a policy to ensure directors, officers, and key persons address any conflicts of interest, including procedures for how to navigate the conflict.
• Amendment procedures: These are methods for adding to or adjusting bylaws.
• Dissolution procedures: These must align with the charter's dissolution clause.

You can also work with a business attorney or use an online legal service to help ensure your bylaws cover all the important points. Your bylaws will often act as a supporting document when registering with state and federal agencies, so it's important to create a comprehensive document that adds credibility to your mission. 

Step 5: Get an employer identification number (EIN) for your Tennessee nonprofit

A federal EIN is a nine-digit ID that the IRS assigns businesses to identify them for tax purposes. You’ll need an EIN to file for tax-exempt status, hire employees, and apply for grants. Some banks may also require an EIN to open a bank account. It’s completely free to obtain an EIN through the IRS website. 

But, you can also use LegalZoom’s EIN filing service if you want guidance. Keep in mind, an EIN doesn’t make your organization tax-exempt. It's an identification number that the IRS, banks, and other agencies use to identify your organization. 

Step 6: Apply for federal 501(c)(3) tax-exempt status

This is the next major step in setting up your nonprofit. 501(c)(3) status can make donations tax-deductible and exempt your organization from federal income tax. The IRS grants 501(c)(3) status through one of two main forms.

Form 1023 is the more complex application. 

• Who qualifies: Larger exempt organizations that don’t qualify for the simpler form 
• Filling fee: $600
• How to file: Submit the completed form online through www.pay.gov
• How long it will take: Generally, around six months
• Required supporting documents: Nonprofit corporation charter and bylaws 

Form 1023-EZ is a simplified version of the 1023 for smaller organizations. 

• Who qualifies: U.S.-exempt organizations whose current or projected gross receipts don’t exceed $50,000/year and total assets value at $250,000 or less
• Filling fee: $275
• How to file: Submit the completed form online through www.pay.gov
• How long it will take: Generally, about a month
• Required supporting documents: Nonprofit corporation charter

After the IRS reviews your application, you’ll receive a determination letter approving your status, a request for additional information, or a rejection letter. If you’d like help filing the application, LegalZoom’s 501(c)(3) application service can guide you through the process. 

Step 7: Apply for Tennessee state tax exemption

501(c)(3) status doesn’t automatically exempt your organization from Tennessee state taxes. You’ll have to apply separately with the Tennessee Department of Revenue. Luckily, they make the process relatively simple. Just go to the TNTAP homepage and click “View exemption links.” Then, apply for the exemptions that apply to your organization. 

Tennessee has a variety of exemptions for nonprofit organizations that will depend on the nature of your charitable activities. These are a few common tax exemptions and obligations for Tennessee nonprofits:

• Sales and use tax exemption. Apply for a certificate of exemption from the Tennessee Department of Revenue. Show this certificate to vendors when purchasing products or services for your organization. 
• Business tax exemption. Charitable, religious, and educational/research organizations aren’t subject to Tennessee business tax. 
• Franchise and excise tax exemption. Most 501(c)(3) organizations can apply for exemption from Tennessee's franchise and excise tax, except for any profits made from business unrelated to the organization’s charitable purpose. 
• Employer taxes. Register with the Tennessee Department of Labor and Workforce Development if your organization employs four or more paid employees for at least 20 weeks in the current or previous calendar year. 

It’s wise to consult with a business attorney or tax professional for an in-depth understanding of the tax obligations and/or exemptions that apply to your specific organization. 

Step 8: Register for charitable solicitation in Tennessee

Tennessee charitable organizations will need to register with the Charitable Solicitations and Gaming Division. You can register online through TNCaB for a $50 registration fee. This fee is waived for nonprofits that receive less than $50,000 in public donations in a fiscal year.

Here’s what you’ll need to include:

• A copy of your IRS 990 form (unless your nonprofit is new and hasn’t completed a fiscal year)
• An audited financial statement prepared by an independent certified accountant (if your nonprofit’s annual income is $1,000,000 or more)
• A copy of your charter and bylaws
• A copy of the determination letter from the IRS
• Signatures from two authorized officers (one must be the Chief Fiscal Officer)

These organizations are exempt from registration:

• Religious institutions
• Educational institutions and supporting organizations
• Volunteer fire departments, rescue squads, and local civil defense organizations
• Political parties, candidates, and Political Action Committees
• Hospitals
• Nursing homes
• Corporations established through the U.S. congress that submit annual reports to congress and are fully audited by the department of defense

Note. You’ll need to renew this registration yearly. 

How much does it cost to start a nonprofit in Tennessee?

While the full cost of starting a nonprofit in Tennessee varies based on the needs, location, and size of your organization, these are some of the basic costs that you should be aware of.

• Nonprofit corporation charter: $100
• Name reservation (optional): $20 
• EIN: Free or for a fee using a service like LegalZoom
• Form 1023: $600
• Form 1023-EZ: $275
• Charitable Solicitations and Gaming Division registration: $50

Therefore, the total basic initial cost to start a nonprofit in Tennessee ranges from around $375 to $770. Professional assistance would increase these numbers, but is often worth it for the peace of mind and accuracy. 

Ongoing compliance for Tennessee nonprofits

Once your nonprofit is off the ground, it's important to stay compliant with federal and state laws so that you can keep making a difference.

Federal Form 990

Most Section 501(c)(3) public charities need to file annual reports with the IRS. Which form you file depends on your organization's size.

• Form 990-N (e-Postcard): Public charities with gross receipts normally under $50,000.
• Form 990-EZ: Public charities with gross receipts under $200,000 and total assets under $500,000.
• Form 990 (full): Public charities with gross receipts of $200,000 or more, or total assets of $500,000 or more.