Forming a nonprofit corporation is similar to creating a regular corporation. However, nonprofits must apply for tax-exempt status with the IRS and their state tax division. To do this, follow these steps:
1. Contact your state’s corporations division: Reach out to your state’s corporate filing division, usually part of the Secretary or Department of State’s office. They will provide a packet of nonprofit materials to aid you in forming your nonprofit. This packet includes sample articles of incorporation and your state’s nonprofit corporation laws.
2. Choose a business name: Before forming your nonprofit corporation, select a name that complies with your state’s rules. Your state’s corporate filing office will have guidelines, but generally, your name cannot be the same as another corporation’s, must end with a corporate designator, and cannot include prohibited words.
3. Prepare and file your articles of incorporation: Once you have a legal and available name, prepare and file your articles of incorporation with the corporate filing office. This document may go by a different name in some states. It’s important to include specific language to ensure tax-exempt status. Consult a legal guide to ensure compliance with your state’s nonprofit law.
4. Apply for your federal 501(c)(3) tax exemption: Once your articles of incorporation are approved, submit your federal 501(c)(3) tax exemption application to the IRS. Complete IRS Form 8718 and IRS Package 1023. Familiarize yourself with the tax exemption requirements before filing your articles to avoid potential issues.
5. Apply for a state tax exemption (if necessary): In some states, a separate application is required to obtain a state tax exemption. In others, it is automatically granted upon obtaining federal tax-exempt status. Contact your state tax agency for specific steps.
6. Draft corporate bylaws: Create bylaws that outline the internal rules of your nonprofit corporation, including meeting procedures, voting processes, and the election of directors and officers. Seek a self-help resource or hire a lawyer to assist with drafting the bylaws.
7. Appoint directors: Choose directors who collectively make decisions and manage the nonprofit corporation. States may require at least three directors.
8. Hold a directors’ meeting: Conduct the first board of directors meeting to handle initial business and record the receipt of tax exemptions. Adopt the bylaws, elect officers, and authorize actions necessary to start the nonprofit’s operations.
9. Obtain licenses and permits: Check with your state department of consumer affairs for any necessary licenses or permits required for your nonprofit’s activities. This may include a local business license and a sales tax permit if you sell goods or services.
By following these steps, you can successfully form a nonprofit corporation.
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