How To Start a Nonprofit in Georgia
Nonprofits serve essential roles in the communities that they impact. From building up neighborhoods to helping kids get proper meals, nonprofit organizations do a lot of good for the public. If you're thinking about starting a nonprofit in Georgia, you probably already have ideas about how you can better your community. What you might need help with is taking the necessary steps to get your nonprofit up and running.
Forming a nonprofit corporation is similar to developing other kinds of corporations in many ways. However, you have to be careful regarding the requirements for tax-exempt status. Tax-exempt status is a benefit of certain types of organizations, and it could be vital to the success of your nonprofit.
What Is a Nonprofit?
Nonprofits are organizations formed to serve the public. They differ from for-profit organizations in that they are not created or operated to make profits. Instead, nonprofits funnel profits back into the organization to further their educational, literary, scientific, or other goals.
You can organize your nonprofit as a limited liability company (LLC) or corporation, but most people choose to create a nonprofit corporation. Limited liability companies and corporations are business structures that provide personal liability protection. This means that your personal assets, such as your house or car, will be protected if someone sues the business over a debt or obligation.
As you think about whether you'd like to form a corporation, there is one consideration that you should keep in mind. Most founders of nonprofits seek to make their organizations tax-exempt under Section 501 of the Internal Revenue Code. To be considered for this exemption from federal taxes, your business must be organized as a trust, association, or corporation.
There are many types of nonprofits, but the most common type of nonprofit is the 501(c)(3) charitable organization. 501(c)(3) organizations can qualify for tax exemption through the IRS. The following organizations are often classified as 501(c)(3) organizations:
- Youth centers
- Animal welfare organizations
- Religious organizations
Other types of nonprofit organizations include:
- Veterans' organizations
- Social or recreational clubs
- Trade associations
- Civic leagues
What Are the Steps to Start a Nonprofit in Georgia?
1. Do Your Research
If you're going to run a nonprofit, you'll need to show that your charitable organization meets the needs of people in the community. It will be essential to demonstrate the need for your services when you seek out grants and donations, so research the needs of the community you'd like to serve.
Next, research the nonprofits that already exist in the area. Consider if the nonprofits adequately meet the community's needs or if there is a gap you can fill. Also, think about whether you can reach your goals by volunteering or partnering up with an already existing nonprofit.
If, after conducting market research, you decide you'd like to move forward with your own nonprofit, then you should start thinking about your vision and your purpose. Once you become clear on that, you can draft a mission statement incorporating your vision, purpose, and goals.
2. Choose a Name for Your Nonprofit
Choosing a name for your nonprofit is a crucial first step in the process of starting a Georgia nonprofit. Take some time to brainstorm and create a list of potential names for your organization. When you have your list, conduct a business name search through Georgia business records and the trademark database. The purpose of this search is to make sure that you choose an available name. If you begin to operate your nonprofit under a name already in use or trademarked, you could face legal problems.
Also, note that, in Georgia, the name of a nonprofit corporation must include the word "corporation," "incorporated," "company," or "limited." In the alternative, you could use an abbreviation for one of these or a similar term.
The name you choose for your organization will be displayed on your website, brochures, and other items, so make sure that it is consistent with your mission statement and purpose. It should also be memorable and distinctive.
3. Appoint a Registered Agent
A registered agent is a person or company that can receive legal papers on your behalf. For example, if someone needs to provide you with legal documents as part of a lawsuit, your registered agent would be the person or company that could receive the paperwork for you.
If you can't think of a person who can serve as your registered agent, you can pay a company to provide registered agent services. The person or company that serves as your registered agent must be available to receive legal papers during regular business hours. They must also be physically located in the state of Georgia.
4. Select Directors and Officers
In Georgia, you must have a board of directors for your nonprofit organization. Choose the individuals who will serve as directors for your organization carefully, keeping in mind the requirements of the state of Georgia and the IRS (Internal Revenue Service). The state requires that you have at least one director for your organization. However, the IRS requires that the organization have at least three directors. If you plan to seek tax-exempt status, you should get three unrelated people to serve as directors for your organization. A director for a nonprofit organization should be at least 18 years of age. The board of directors has the task of overseeing operations.
You'll also need to have officers for your nonprofit corporation. Often it's the board of directors who elects the officers. Officers have the responsibility of handling the day-to-day tasks.
5. Prepare Bylaws
Corporate bylaws are essential because they typically contain rules and procedures that should be followed. In case of any disagreement, the individuals in the organization can look to the bylaws for guidance. In the event of a legal dispute, a court may look to the corporate bylaws to resolve it.
The individual who writes the bylaws should include the following information:
- Name and location of the corporation
- Names of directors and officers
- Duties of directors and officers
- Procedures for meetings
- Procedures for amending the bylaws
Often the individual who writes the bylaws is the incorporator (the person who files the Articles of Incorporation with the Secretary of State). However, there is no requirement to file the bylaws with any agency. It would help if you stored your corporate bylaws in a safe place after they're adopted.
6. File Articles of Incorporation
- Name and location of the corporation
- Statement of purpose
- Name and location of registered agent
- Name of incorporator
There are statements that you should include in your Articles of Incorporation, particularly if you're planning on applying for tax-exempt status. For example, you should have a statement that your organization will not engage in activities unrelated to the express purpose of the organization. If the entity is dissolved, there should also be a statement that the corporation's assets will go to another 501(c)(3) corporation or the government. You must submit a filing fee when you file your Articles of Incorporation. You should also submit a transmittal information form with your filing. The transmittal information form is a certification that you have filed your Articles of Incorporation and that you will publish a Notice of Incorporation.
The Notice of Incorporation must be filed the day of or the next business day after filing the Articles of Incorporation. It would be best if you have the Notice of Incorporation published in the county newspaper. Include the following information in your notice of intent to incorporate:
- Name of the corporation
- Name of the registered agent
- Location of the registered agent
You don't need to file your notice with the Georgia Secretary of State, but you should hold on to the affidavit you receive from publication for your corporate records.
Finally, you'll need to file your initial annual registration form. You must file this initial annual report within 90 days of incorporation. There is also a filing fee associated with the initial annual registration for nonprofit corporations.
7. Apply for an EIN
You will need to apply for an EIN (Employer Identification Number) through the IRS. Your EIN is similar to a social security number. You will use this number for tax purposes, and you might need it to open a bank account for the corporation. It's free and easy to apply for your federal EIN through the IRS website. You should also get a state tax number.
8. Hold Initial Board of Directors Meeting
You need to conduct the initial meeting of your Board of Directors as soon as possible. Be prepared to record the minutes of this meeting, as many important decisions will be made.
For example, at the initial meeting, it's typical for the Board to select officers, adopt the bylaws, and pass resolutions such as opening a corporate bank account. The Board may also approve of corporate policies at this time.
9. Apply for 501(c) Status
If you believe that your organization qualifies as a 501(c)(3) charitable organization, you can apply for federal tax exemption. Note that if you've chosen to form a nonprofit corporation, you need to have started the corporation before you apply for 501(c)(3) tax-exempt status. Tax exemptions also exist at the state level.
At the federal level, you can use IRS Form 1023 or IRS Form 1023-EZ to apply for tax-exempt status. Once your application has been reviewed, you may receive a determination letter.
Tax-exempt status on the federal level doesn't automatically make your organization tax-exempt on the state level. Most states, however, recognize the determination letter from the IRS. To get tax-exempt status on the state level, you can file your determination letter (and any other required documents) with the Georgia Department of Revenue (DOR).
Although you may get tax-exempt status for income tax in Georgia, sales and use tax is handled differently. Georgia generally doesn't grant sales and use tax exemption to nonprofit organizations. Only a few kinds of nonprofit organizations can qualify for a sales and use tax exemption. This means that you'll probably have to pay tax on purchases and sales.
Applying for 501(c) status not only helps with income taxes but can also open up opportunities. One benefit of 501(c) status is that it aids in securing grants. Grants can be one of the main ways that a nonprofit can grow.
10. Register with Georgia Charitable Organizations
Georgia Charitable Organization registration might be necessary. This registration allows you to solicit donations for your organization. Most likely, you'll need to rely on fundraising, in addition to grants, to keep your organization going.
Note that there may be a requirement to renew your registration yearly. If you fail to meet this requirement, there could be penalties.
11. Get Business Licenses and Permits
You may be required to have a business license to operate your Georgia nonprofit. The type of licenses and permits needed can depend on the type of corporation you're running, so it could be helpful to check with the SBA (Small Business Administration) for requirements for your business.
It's essential to make sure that you have any licenses and permits required by state and local governments. If you do not have the licenses or permits that you need to operate your business, you could face penalties, or it could be shut down.
12. Open a Bank Account for Your Nonprofit
You'll want to open a bank account in your nonprofit's name as soon as possible. Note that you will likely need to provide information to the bank to open an account for your nonprofit. Take the following items with you to your appointment to open up your bank account:
- Articles of Incorporation
In some cases, you may need to provide a copy of your directors' resolution to open a bank account, as well. Be sure to store your corporate documents in a safe place because you might also need them to complete other tasks for your organization.
How Much Does It Cost To Start a Georgia Nonprofit?
There are many expenses associated with the steps you have to take to form a nonprofit corporation in Georgia. When you start to calculate the costs of starting up your own Georgia nonprofit corporation, don't forget to factor in these common start-up costs:
- Articles of Incorporation: $100.00
- Notice of Incorporation: $40.00
- Initial Annual Registration: $30.00
- IRS Application for Recognition of Exemption: $600.00 or $275.00 (depending on the form used—Form 1023 or Form 1023-EZ)
- Georgia Charitable Organization Registration: $35.00
Be sure to factor in the costs if you decide to pay a company for registered agent services. You'll also need to consider the wages you're willing to pay contractors or employees if you plan to hire staff.
Are There Ongoing Obligations After Starting a Georgia Nonprofit?
It can take a lot of time and money to reach the point where your nonprofit has tax-exempt status. It takes hours to complete the Application for Recognition of Exemption, and it can take months for the IRS to process the application. If the IRS recognizes your organization as a tax-exempt organization, you should do what you can to maintain that status.
Familiarize yourself with the dos and don'ts for organizations that are exempt from federal income tax. For example, 501(c)(3) organizations can't support a political candidate. Also, 501(c)(3) organizations must operate within the purpose stated in the Application for Recognition of Exemption and other corporate documents.
It would help if you also stayed on top of renewals and annual requirements. You're required to renew the Georgia Charitable Organization Registration each year, for example. In addition to the yearly requirements that apply to corporations generally, nonprofit corporations are also required to submit an annual information return to the IRS. Using IRS Form 990, you'll need to submit information to the IRS each year regarding the nonprofit's income, activities, and structure.
Considering Forming a Georgia Nonprofit? Speak with an Attorney
Starting a nonprofit organization in Georgia may not be a quick or easy process, but it could be worthwhile. If you have an entrepreneurial mindset and would like to help the people in your community, then starting up a nonprofit in Georgia could be for you.
If you still have questions about nonprofit startups, you should reach out for assistance. An experienced lawyer can guide you through the process and help you to make these big decisions. Speak with an attorney in your area about starting a Georgia nonprofit organization today.
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