Starting a Nonprofit Organization Checklist
You've traveled the world from Africa to Indonesia. You've lived overseas, fed the homeless, and put in countless hours at the Red Cross. Now, you want to start your own nonprofit organization.
Whether you are hoping to cure cancer, help raise awareness for HIV/AIDS, or simply make sure low-income families are provided with food and shelter, forming a nonprofit organization may be right for you.
Why Create a Nonprofit?
Why do people create nonprofits? Typically it is because they have the drive to make a difference for a cause that is close to their hearts or has affected them personally in some way. Simply put, nonprofits handle the hard issues and make the world a better place.
Many nonprofits organize as corporations. By incorporating, you can ensure that your personal assets and those of other members are protected from the debts and liabilities of the organization.
Tax Benefits of a Nonprofit
Because the mission of a nonprofit is to work toward the public good, the organization is usually eligible for federal and state tax benefits not available to for-profit organizations. Additionally, some nonprofits can offer tax deductions to individuals and organizations that donate money, goods, or services to the organization.
Applying for 501 (c) (3) Status
One of the basic steps to forming a nonprofit corporation is filing for the correct tax status. The application process to claim 501(c)(3) tax-exempt status begins with determining if the Internal Revenue Service (IRS) deems your organization eligible for this tax exemption.
The application process is not finished until the IRS Form 1023 application for recognition of exemption is completed and submitted to the IRS.
The following is a step-by-step guide to forming your nonprofit. Keep in mind that your nonprofit's startup requirements might vary from the list below, depending on the specific type of business you are in and where your business is located.
- Decide on a business name for your nonprofit corporation. Keep in mind that your state may require that your nonprofit corporation's name include an identifying word such as "incorporated," "limited," "corporation," or an abbreviation of such a term.
- Search availability of your nonprofit's chosen business name and for similarity to existing names.
- Register your nonprofit's name.
- Decide where to incorporate your nonprofit.
- Choose the board of directors (or nonprofit board).
- Create and sign your nonprofit corporation's articles of incorporation.
- File your nonprofit corporation's articles of incorporation with your state's secretary of state, and pay any related fees.
- Write your nonprofit corporation's bylaws.
- Apply for 501(c)(3) tax-exempt status. You may be able to receive a tax exemption from the local, state, and federal governments.
- Obtain business licenses and permits for your corporation from:
- Open a separate bank account for your nonprofit corporation.
Starting a Nonprofit? Get a Leg-up From a Legal Professional
Incorporating can be a benefit to your new nonprofit organization in the long run and help protect your personal assets, but the incorporation process can be complicated.
To ensure that your new nonprofit complies with your state's rules for incorporation, you may wish to consult an experienced local small business attorney before becoming a part of the nonprofit community.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.