While it may be very similar in practice to forming a for-profit business, there are a number of special processes required to establish a nonprofit organization. Read ahead for help navigating the nonprofit filing process.
The formation process
The first step in establishing a nonprofit corporation is the same as forming any other type of corporation: filing the articles of incorporation. While this process varies slightly from state to state, you can expect to submit roughly the same information during the filing process.
Determining your name
Due to the eventual tax-exempt status and the philanthropic nature of most non-profits, you must use an identifying word in your new organization’s name to signify that you are incorporated. The most common of these identifiers are “Corporation”, “Inc.”, “Limited”, or “Company”.
You will also need to make sure that your preferred company name is already not in use in your state. Be sure to search trademark listings, both state and federal, to make sure your company is unique. Most nonprofits also elect to ensure that their name accurately reflects their social purpose or cause, in order to help the general public identify their organization’s reason for existence.
Outlining your nonprofit’s purpose
Once you have settled on your organization’s name, you’ll be required to explain the goal and purpose of your organization—the more detailed the better. This explanation will be what the IRS uses to classify the type of nonprofit status most appropriate for your organization. This is absolutely necessary if you plan to apply for tax-exempt status.
The most common form of nonprofit is the 501(c)(3). This classification is used for any type of public charity or private foundation that is established to promote or assist religious, educational, or charitable causes. This type of organization is typically what the average person thinks of when they envision a nonprofit organization. There are also classifications ranging from 501(c)(4) all the way up to 501(c)(27), each with their own specific purposes.
Electing a registered agent
Just like with any other corporation, nonprofits must elect a registered agent who will be in charge of communications between the organization and any governmental agency. This must be an individual, not another business or organization. The registered agent is required to have a physical address that isn’t a P.O. box or other form of rented mailbox. Your registered agent must be available at all times during regular business hours (9:00am to 5:00pm, Monday through Friday). In many states, the registered agent’s address will be the only address required to be on file with your state.
Organizing your leadership structure
In order to be granted nonprofit status, you will need to formally define and disclose your new organization’s leadership structure.
Besides your registered agent, there are three more positions to fill:
- Incorporator — The incorporator is the individual responsible for putting together your articles of incorporation. They will need to sign and date all relevant paperwork during this process, and often list their address as well.
- Directors — The directors of your nonprofit are the individuals in charge of making any and all of the major operating decisions for the organization. Due to the fact that nonprofits often operate with a certain level of implied trust from the public, many states require them to disclose their address and names during the filing process.
- Officers — The officers of your organization are hands on individuals that are responsible for day-to-day operations. Very few states require much information to be submitted regarding these individuals. Usually only names and positions are required.
Other notable information
Admittedly, there are many contextual issues that may affect your nonprofit’s incorporation that would not fit in the scope of an introductory article. With that in mind, it is always best to contact a professional business filing service before starting your new venture.
Also, be sure to keep in mind that there are additional steps you must take with the IRS before your nonprofit can be considered tax-exempt (Form 1023). A dedicated filing service can assist you as you seek tax-exempt status.
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