How to Start a Nonprofit in Arizona
You have a great idea for an Arizona nonprofit organization. You have a Board of Directors, statements of purpose, and a way to change the world for the better. And now you want to formalize the process and create a living, breathing nonprofit corporation in Arizona.
First off: there are only a few specific sets of rules, regulations, or laws for nonprofits located in Arizona that are separate or different from the laws of the State of Arizona. For the most part, an Arizona nonprofit is organized under state law.
The Arizona state statutes and rules governing nonprofits are very complex and require patience and great attention to detail, as well as professional advice and guidance.
This overview of how to create an Arizona nonprofit organization will guide you through the various steps necessary for the formation of a nonprofit. This page is not a substitute for professional legal advice in this highly technical and complicated area of law.
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Types of Arizona Nonprofit Corporations
There are no specific limitations to the types of nonprofit corporations that can be opened in Arizona. If the nonprofit will seek tax-exempt status, it has to be eligible for Internal Revenue Service nonprofit taxation status. That status is generally limited to charitable organizations, churches and religious organizations, private foundations, certain political organizations, educational organizations, social welfare organizations, some social clubs, civic leagues, labor organizations, and business leagues.
An Arizona nonprofit corporation may either be a tax-paying or a tax-exempt organization. If your nonprofit is going to apply to be tax-exempt, follow the directions below.
Arizona nonprofits may or may not have members. If there are no members, the organization is governed by the Board. If there are members, the Board is elected by the members.
Arizona nonprofits may or may not be charitable organizations. If they are charitable, their incorporation papers may be different from a non-charitable organization, as discussed below.
Costs to Start a Nonprofit Corporation
It will cost a few dollars to start a nonprofit. There are various state filing fees, which will be noted in the appropriate sections below. In addition, unless you have a volunteer lawyer, you will have legal fees to pay. If you are opening a storefront of some kind, you may be dealing with business licenses.
Step I: Create and Name Your Nonprofit Business
Creating a legally proper business name and then protecting it is one of the first actions that the nonprofit needs to undertake. This is a process that can be complex and time-consuming, but the nonprofit must operate legally in Arizona.
The first thing you have to do is create a great name (that's up to you). Arizona law requires that the nonprofit's name be unique and different from any other company's name, whether the other company is a nonprofit or not.
So your first task will be to search the Arizona Corporation Commission (ACC) business entity database to make sure that the name that you have chosen is not in use by any other Arizona company.
Understand that just having your new name not be in that database does not mean that you will eventually be able to use that name. You will still have to go through the nonprofit incorporation process to have the state determine that the name you have chosen is acceptable and that you can use it.
Step II: Legally Protect Your Name
Next, make sure that no one else can use it in business or on the internet. This means that you have to make sure that no one else is using that name. You do this by making sure that the Internet Domain Name is available. If it is available, grab it immediately (that will only cost a few dollars).
If you want to do business nationally, or you want to operate in several other states, you should trademark the nonprofit's name with the United States Patent and Trademark Office (USPTO). This process takes some time and money. The nonprofit's name is still protected as a common law trademark while that application is pending.
Once you receive your federal trademark, register it with the Arizona Secretary of State as a Trade Name. You may also trademark the name with just the state, without a federal trademark.
Now that name is yours, you can keep anyone else from using it, and it conforms to Arizona law.
Step III: Establish a Board of Directors
Every Arizona nonprofit must have a Board of Directors. However, there are no particular legal qualifications for serving on the Board, and the Board only legally has to have one board member.
The Board should be chosen for skills that they can bring to the organization, including fundraising, expertise in the nonprofit's field of endeavor, and organizational skills.
Step IV: Create the Bylaws
Arizona requires the creation of bylaws for any corporation. Bylaws are the internal rules of the corporation and must be adopted by the Board before the corporation can legally function.
Step V: Appoint a Corporate Statutory Agent for Service of Process
Incorporation papers must include a statutory agent for service of process. An Arizona agent for service of process must be one of the following:
- An individual who resides in Arizona
- A domestic business, nonprofit corporation, or limited liability corporation formed under Arizona law
- A foreign business, nonprofit corporation, or limited liability corporation authorized to transact business under Arizona law.
The Statutory Agent Acceptance Form must accompany the Articles of Incorporation.
Appoint Corporate Officers
The corporation can have any type of organizational structure. The procedures for appointing corporate officers must be in the bylaws.
An incorporator signs the Articles of Incorporation. Arizona law only requires one incorporator.
Step VI: Hold the First Board Meeting
Once the Board is created, it should conduct its first meeting as soon as possible. That meeting should discuss the role of the Board, adopt bylaws, appoint a registered agent for service of process, appoint corporate officers, begin the process of incorporation, and create statements of organizational purpose, at the very least. If an incorporator has not been appointed yet, that needs to be done.
Arizona law then requires annual Board meetings.
Step VII: Incorporation
Incorporating Your Non-Charitable Nonprofit
If your nonprofit is not a charity, you can use the nonprofit Articles of Incorporation forms on the website of the Arizona Secretary of State, with these instructions. You must print these, fill them in, and then physically file them. The state does not currently have online form capabilities.
Incorporating Your Charitable Organization
You cannot use the forms on the Secretary of State website if you are starting a charitable organization. The Arizona Corporation Commission states that the specific charitable organization language contained in Internal Revenue Service regulations regarding charities must be included in the organization's articles of incorporation, and does not provide forms to do so. The ACC recommends hiring an attorney to prepare these papers.
Required Information for Your Articles of Incorporation
The articles of incorporation must contain the following:
- The name of the corporation.
- A brief statement of the “character of the affairs" that the corporation will conduct
- The name and address of each member of the founding Board of Directors
- The name, address, and signature of the Statutory Agent
- The street address of the known place of business for the corporation, unless it is the same as the address of the Statutory Agent
- The name, address, and signature of each incorporator
- Whether or not the corporation will have members
- Director Attachment for additional Directors' names that do not fit in the Articles of Incorporation.
- Statutory Agent Acceptance Form (see above)
- Certificate of Disclosure. Use the instructions for this form.
The fee for filing nonprofit incorporation forms with the ACC is $40. Expedited services are available for additional fees.
File Articles of Incorporation to the ACC
You must mail or hand-deliver your Articles of Incorporation. The ACC does not have online filing.
The ACC office is located at 1300 W. Washington, 1st Floor, Phoenix, AZ 85007. You will receive your approved Articles of Incorporation, or a rejection letter, in the mail.
Step VII: Publish the Articles of Incorporation
If your known place of business is not in Maricopa County or Pima County, then you must publish your Articles of Incorporation within 60 days of filing them with the ACC in a newspaper of general circulation in your county.
You May Be Paying Taxes
Even though the new business is a nonprofit and therefore is not subject to business taxation, there are still numerous forms that you will have to fill out with the various federal and state tax agencies. Remember that the nonprofit is not taxed on business income but is still responsible for employment and most sales taxes.
Step VIII: File for Your Federal and State Employer Identification Numbers (FEIN)
You must file for a Federal Employer Identification Number (FEIN) on the IRS website. There is no fee for this.
You can then file for your Arizona Department of Revenue ID Number and Transaction Privilege Tax License by filing an Arizona Joint Tax Application with the Arizona Department of Revenue if you are going to conduct business in the state.
Step IX: File to Register as a Nonprofit With the IRS and Arizona to Claim Your Tax-Exempt Status
Federal: Before you file for your tax-exempt 501(c)(3) status, you have to file a Form 1023 with the IRS. This registers your organization with the federal government as a nonprofit. Smaller organizations (under $250,000 in total assets) may use Form 1023 EZ.
The filing fee for Form 1023 is $600.00. The filing fee for Form 1023-EZ is $275.
Form 1023 is highly detailed with questions about the nonprofit's organization, history, policies, finances, and everything else you can imagine. Take the time necessary to obtain all of the information to answer these questions completely and truthfully. Then, file the form.
If your nonprofit is granted 501(c)(3) federal tax exemption status, you will receive a determination letter from the IRS within about a month (under normal circumstances) about your federal tax.
Arizona State Tax Exemption
After you receive your IRS determination letter, you automatically receive corporate tax exemption from the State of Arizona by sending your IRS Letter of Determination to The Arizona Department of Revenue, Corporate Income Tax Audit, 1600 W. Monroe, Phoenix, AZ 85007-2650.
Other Business Taxes, Fees, and Exemptions
If you are going to hire employees, you may have other state obligations. Under Arizona law, you may be required to file for workers' compensation insurance.
You may be required to pay unemployment insurance.
You will need to renew your nonprofit tax status annually. You will need to renew your nonprofit business status with ACC each year. There is a $10 fee for that. In addition, the nonprofit must file an annual report with the ACC.
Help Is Available
Any new business venture, including a nonprofit, will need legal help. Consider using a DIY nonprofit formation tool that will walk you through the registration process so that your nonprofit corporation is set up correctly and will be entitled to a federal tax exemption.
You can also contact an Arizona business organizations lawyer for help with starting your business.
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