How To Start a Nonprofit
Starting a nonprofit requires filing forms and other paperwork with government agencies at both the federal and state level. If you're seeking tax-exempt status, there may be more paperwork required.
Obtain Forms and Instructions
The first thing to do to form a nonprofit corporation is obtain the forms and instructions that are available from your state's corporate registration office (usually the secretary of state). Some states provide a lot of information, others only the basics. Most forms are available online.
If you plan to do charitable solicitation, in most states you will need to obtain information on any registration requirements from the state attorney general's office.
Some of the IRS forms you may need include:
- Publication 557-Tax-exempt Status for Your Organization
- Form 1023-Application for Recognition of Exemption under Section 501 (c)(3 )
- Form 1024-Application for Recognition of Exemption under sections other than Section 501( c)(3)
- Publication 526-Charitable Contributions
- Publication 56 1-Determining the Value of Donated Property
- Publication 598-Tax on Unrelated Business Income
Get an Emplyer Identification Number (EIN)
Prior to opening a bank account, the corporation must obtain a taxpayer identification number (also known as an employer identification number or EIN). This is the corporate equivalent of a Social Security number. You need this number even if you do not expect to hire employees.
File Your Articles of Incorporation
To create a nonprofit corporation, a document must be filed with the state agency that keeps corporate records-usually the secretary of state. In most states, this document is called the articles of incorporation; however, in some states, it may be called the certificate of incorporation, articles of association, or charter. For simplicity, this document is referred to as the articles of incorporation.
Note: Some organizations have special requirements (for example, social clubs must be nondiscriminatory). For more information, see IRS Publication 557.
In most states, the articles of incorporation is a form you can get from the Secretary of State, or similar office. It must usually be signed and dated by the incorporator. In some states the registered agent must sign a statement accepting his or her duties as such. This can be done either as a separate form or on the same form as the articles of incorporation.
The articles of incorporation form must be filed, along with the filing fee, with the secretary of state. If you wish to receive a certified copy of the articles, which you may need to obtain nonprofit mailing permit, there is an additional cost.
Every corporation must have bylaws. This is the document that spells out in detail the corporation's purpose, operating rules, and operational structure. For a nonprofit corporation, they are especially important and must be submitted to the IRS when applying for the tax exemption.
Many smaller nonprofits do not have formal members. If you decide to, you need to include membership provisions in your bylaws.
The real birth of the corporation takes place at the first meeting of the incorporators and the initial board of directors. The officers and board of directors are elected at this meeting. Other business may also take place, such as adopting bylaws.
A sample agenda for the initial meeting is usually as follows:
- Sign the waiver of notice of organizational meeting
- Note persons present
- Present and accept the articles of incorporation (the copy returned by the secretary of state)
- Elect the directors
- Adopt the bylaws
- Elect the officers
- Present and accept the corporate seal
- Adopt the banking resolution
- Adopt the resolution to reimburse expenses
- Adopt any tax resolutions
Keep a Minute Book
After the organizational meeting, set up your minute book. The minute book often contains the following:
- Copy of the articles of incorporation
- Copy of any fictitious name registration.
- Copy of any trademark registration.
- Waiver of notice of organizational meeting
- Minutes of organizational meeting
- Tax forms:
- IRS Form SS-4 and taxpayer identification number
- IRS Forms 1023 or 1024
- Any state forms
Open a Business Bank Account
A corporation needs a bank account. Checks payable to a corporation cannot be cashed by an individual; they must be deposited into a corporate account. All you should need to open a corporate bank account is a copy of your articles of incorporation, your taxpayer identification number, and perhaps a business license.
Get Local Permits and Licenses
In some states, counties and municipalities are authorized to levy a license fee or tax on the privilege of doing business. Nonprofit corporations do not always come under these laws, but some areas have registration provisions to keep track of nonprofits. Check with your town, city, or county clerk to see if registration is required.
County occupational licenses can be obtained from the tax collector in the county courthouse. City licenses are usually available at city hall. Be sure to find out if zoning allows your type of business before buying or leasing property. The licensing departments check the zoning before issuing your license.
If you will be preparing or serving food, you need to check with the local health department to be sure that the premises comply with their regulations. In some areas, if food has been served on the premises in the past, there is no problem getting a license. If food has never been served on the premises, then the property must comply with all the newest regulations. This can be very costly.
Register for Charitable Solicitations
If you will be doing charitable solicitations, many states require you to register.