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How To Start a Nonprofit in Maryland

Starting a nonprofit requires many of the same business planning and legal steps as a for-profit business. But nonprofits have other considerations due to their charitable nature and potential for tax-exempt status. Further, each state has its own governing agencies, forms, and regulations in addition to federal regulations.

Most Maryland nonprofit owners organize their nonprofits as corporations. While it takes more time, effort, and money to organize as a corporation, the personal liability protection it provides outweighs the costs.

If you don't classify your nonprofit as a corporation, its organizers, officers, and members may be personally liable for its unpaid debts and obligations. Those obligations may include any lawsuits filed against the organization.

This article explains how to start your own Maryland nonprofit corporation. The steps below will help you establish a tax-exempt nonprofit corporation that protects those involved from personal liability.

For more information on starting and operating a nonprofit, see our Nonprofits Organizations section.

We make business formation EASY. Click here to start your DBA or non-profit.

Choose a Name for Your Nonprofit

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.

Appoint Your Registered Agent

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.

Write and File Articles of Incorporation With the State

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.

Prepare Other Information for the IRS

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.

Hold an Organizational Meeting of the Directors

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.

Get an Employer Identification Number (EIN) From the IRS

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.

Apply for a 501(c)(3) Tax Exemption From the IRS

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:

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.

Apply for a State Income Tax Exemption

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.

Register as a Maryland Charitable Organization

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.

Does My Maryland Nonprofit Need a Business License?

Nonprofits in Maryland don't need a general business license if the IRS has certified their nonprofit status. But depending on your nonprofit's scope of work and where it operates, you may need local licenses or permits.

Contact your jurisdiction's Clerk of Circuit Court to see what local licenses and permits your organization may need. Find a directory of clerk offices here.

Resources for Maryland Nonprofit Business Owners

Maryland Nonprofits provides resources to nonprofits in the state. Find a comprehensive resource library, professional development, and more.

Visit the Nonprofit Guide Baltimore to find general and financial information for 5,000+ nonprofit organizations in Baltimore. Owners of Baltimore nonprofits can add their organization to the Guide's directory.

Maryland business owners can get help at any of the Small Business Development Centers (SBDC) across the state. Volunteer business mentors offer guidance on financing, business planning, and more. Find an SBDC near you here.

The Compliance Guide for 501(c)(3) Charities by the IRS is a helpful tool that nonprofits can use to understand IRS rules and how to keep their tax-exempt status. It covers filing tax forms, avoiding certain activities, keeping good records, and following the IRS guidelines for charitable organizations.

Use a Simple Process To Form Your Nonprofit

If you want to take the guesswork out of forming your nonprofit, consider using our trusted, simple-to-use online business formation tool. We'll guide you through creating your nonprofit and help you meet the legal requirements for tax exemption, charitable registration, and more.

Need More Help With Your Nonprofit Formation?

The state and federal tax exemption and charitable registration rules can be overwhelming for small business owners without nonprofit experience. For this reason, many entrepreneurs starting a nonprofit get professional help from an attorney.

An attorney can take on the complicated legal aspects of your nonprofit formation, leaving you more time and energy to focus on your organization's mission. Some of these legal processes (like applying for 501(c)(3) status for federal tax exemption) can be arduous, and you'll want to get it right the first time.

Contact a Maryland business attorney to learn how they can help you create a legally-sound, successful nonprofit.

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