How To Start a Nonprofit in Maryland

The first step in organizing your nonprofit corporation should be choosing a name that best represents your organization. If you plan to incorporate your nonprofit in Maryland, that name also must be unique and meet other state requirements.

You can't register your nonprofit corporation in Maryland if another registered organization has already claimed the name. The best way to determine if a name is available is to search the Maryland State Department of Assessments and Taxation website.

The corporation's name must include one of these words or an abbreviation of it:

• Corporation
• Company
• Incorporated
• Limited

Finally, your business name can't use words that could be confused with a government agency, like the Federal Bureau of Investigation, Secret Service, or Treasury Department.

Every Maryland corporation must name a registered agent to receive legal notices on its behalf. Your registered agent must have a physical address in the state. They must also maintain an office open during regular business hours to accept service of process. Although not required, most new nonprofits name the organizer or one of the directors.

If you can't find a qualified person to serve as your registered agent, you can hire a registered agent service.

Your nonprofit's articles of incorporation will tell the state of Maryland when and where you formed your nonprofit. Your articles of incorporation also shares other important information about your corporation. Once you file your articles of incorporation with the state's Department of Assessments and Taxation, your organization is officially a nonprofit corporation.

When you form a nonprofit corporation in Maryland, you have three structures to choose from:

• Religious corporation for religious congregations
• Tax-exempt nonstock corporation for organizations applying for a federal tax exemption
• Nonstock corporation to run a nonprofit business

The state of Maryland requires you to provide the following information in your articles of incorporation:

• The nonprofit's name
• A description of its activities
• The name and address of the person incorporating the nonprofit (the incorporator)
• The nonprofit's business address
• The name and address of its registered agent
• The names of the initial corporate directors

Filing your articles of incorporation with the state requires a $100 filing fee and a $20 capitalization fee. You can pay an extra $50 fee for expedited processing.

If you're seeking tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, the Internal Revenue Service (IRS) requires some additional information in your articles of incorporation.

Specifically, it will look at the articles to ensure your corporation is organized and operates exclusively for exempt purposes. That means the IRS will be looking for language that restricts the corporation's activities to one or more of the following purposes:

• Charitable
• Religious
• Educational
• Scientific
• Preventing cruelty to children or animals
• Fostering amateur sports competition
• Testing for public safety

The IRS also needs to see statements indicating the following:

• No trustee, director, or officer will use any part of the nonprofit corporation's earnings for personal benefit. The nonprofit won't distribute any of its earnings or assets to one or more of these individuals in the event of dissolution, or closing of the nonprofit
• The corporation won't carry on activities other than those conducted for exempt purposes
• If the corporation dissolves, the directors will first pay its liabilities before distributing its remaining assets in accordance with its exempt purpose or to the federal, state, or local government
• The names of the initial corporate directors

It helps to consider these questions when you start the nonprofit formation process.

The first meeting of your nonprofit's board of directors is significant for your nonprofit. This initial meeting will address several key business issues, including approving corporate bylaws and adopting the organization's conflict of interest policy.

A conflict of interest policy details the process if a board member's personal interests conflict with the organization's best interests.

Board members must act before your nonprofit applies to the IRS for exempt status. The IRS usually rejects applications from corporations that haven't adopted bylaws or a conflict of interest policy.

You must get your organization's federal employer identification number (EIN) from the IRS as soon as possible. An EIN is a unique nine-digit number the IRS uses to identify its tax accounts. Your nonprofit will need one to apply for 501(c)3 status with the IRS and to open a corporate bank account.

Applying online on the IRS website is the fastest and easiest way to obtain your EIN. The IRS doesn't charge for an EIN and will issue one instantly to your organization when you apply online. Be sure to apply on the official IRS website. Some commercial websites mimicking the IRS website charge a fee for an EIN. If you're on a site that asks you to pay for your EIN, you're not on the official IRS site.

To apply by mail or fax, file Form SS-4.

Even if you formed your nonprofit organization to pursue charitable goals, it will still need IRS approval to qualify as a tax-exempt organization. Designation from the IRS as an exempt organization under Section 501(c)(3) grants two key benefits to your nonprofit:

• Your nonprofit has an exemption from paying federal income taxes
• Contributors to your nonprofit can claim a deduction for charitable contributions on their federal income tax returns

Organizations seeking exempt status from the IRS must apply by filing Form 1023-EZ or Form 1023. Most startup nonprofits can use the simplified Form 1023-EZ. To use the simplified form, a nonprofit must:

• Have gross receipts of no more than $50,000 in any of the previous three years
• Expect to have less than $50,000 in receipts for the next three years
• Have assets valued at less than $250,000
• Meet other qualifications

The filing fee is $275 for IRS Form 1023-EZ and $600 for the standard IRS Form 1023.

If the IRS approves your application for federal tax exemption, it will issue a determination letter. It will also include your nonprofit's name on its searchable list of exempt organizations.

Your organization is exempt from paying the federal income tax after the IRS approves its application. But you still must file a Form 990 informational return each year. Failure to file a Form 990 for two years in a row may result in the IRS revoking the organization's exempt status.

Once you've received your determination letter from the IRS, your nonprofit corporation can apply for its Maryland state income tax exemption. To request a state exemption, file the following information with the Comptroller of Maryland—Revenue and Administration Division:

• Request for an exemption from the Maryland income tax
• Description of your organization and its purpose
• Copy of your IRS 501(c)(3) determination letter
• Copy of your organization's latest financial statement
• Copy of your organization's bylaws

If the Revenue and Administration Division grants your nonprofit's request for a state tax exemption, it will not need to file income tax returns with the state.

Most nonprofits conducting charitable, educational, and religious activities are also eligible for an exemption from the Maryland property tax. The exemption application form is available upon request from the state Department of Assessments and Taxation office serving the county where the property operates.

Most charitable organizations soliciting contributions of more than $25,000 in Maryland must register with the Office of the Secretary of State's Charitable Organizations Division. You must complete this registration before your organization begins fundraising in the state. Use the form Registration Statement for Charitable Organizations (COR-92) to register.

Charitable solicitation includes phone calls, texts, social media, and fundraising for direct mail.

You may be exempt from the charitable registration requirement if your organization received less than $25,000 in eligible donations in the most recent fiscal year. Complete the Exempt Organization Fund-Raising Notice to claim this exemption.