How To Start a Nonprofit in New York

The first step in forming your New York nonprofit is selecting a unique name. Your name should be descriptive but simple and easy to remember. It should also convey what your organization does. Choose a name that resonates with your target audience.

There are also legal considerations when choosing your nonprofit's name. You must follow state guidelines, which specify the name must:

• Include an organizational designation, like “Incorporated" or “Inc."
• Be distinguishable from other business names used in the state (you can search for registered names on the New York Department of State website, also called NYS Department)
• Not be deceptive or imply the organization was formed for any purpose other than those included in its certificate of incorporation
• Not have any words that suggest that the organization is acting as an agent of the United States or New York government
• Not include obscene words, ridicule any person or group, or imply it engages in unlawful activities

New York has a list of words you cannot use to name your nonprofit without approval. Those terms include:

• Doctor
• Lawyer
• School, preschool, or nursery school
• Education
• Elementary
• Secondary
• Kindergarten or prekindergarten
• College or university
• Museum
• Library
• Historical society, history, historical
• Arboretum
• Labor
• Union
• Industrial organization
• Council
• Blind
• Handicapped

See the New York statute for a complete list of restricted words.

You can reserve your business name for up to 60 days if you are not ready to incorporate your business. To do this, file the Application of Reservation of Name with the NYS Department of State, Division of Corporations. This requires a $20 filing fee.

If you form your New York nonprofit as a corporation, you can organize as either a religious corporation or a non-religious corporation. Religious corporations are organized under the Religious Corporations Law to enable members to meet for worship or other religious observances.

All non-religious corporations are organized as one of the four following types:

Type A

This type includes corporations that fall into the following categories:

• Civic
• Political
• Social
• Athletic
• Fraternal
• Agricultural
• Horticultural
• Patriotic

Also included as Type A are associations organized for the following purposes:

• Professional
• Industrial
• Commercial
• Trade
• Service

These are organized for non-business purposes.

Type B

Type B includes corporations organized for non-business purposes:

• Charitable
• Educational
• Cultural
• Religious
• Literary
• Scientific
• Prevention of cruelty to children or animals

There are more types of corporations than those formed for business or non-business purposes. These types are hybrids noted in Type C and Type D.

Type C

Type C applies to nonprofits organized for public or quasi-public purposes, often those that a for-profit corporation usually performs. This includes Type A and Type B activities conducted by an organization that would otherwise classify as Type C.

Type D

Type D are nonprofit corporations organized for any other purpose.

Overlapping Types

Your nonprofit might be classified under more than one type. For example:

• If your nonprofit's activities could be classified as both Type A and Type B, it should be incorporated as a Type B nonprofit.
• If your nonprofit's activities could be classified as Type C along with any of the other types, you will be classified as Type C only.

If you don't know which type is best for your nonprofit and tax-exempt status, consult with a NY nonprofit lawyer.

New York is one of the few states where you do not need to appoint a registered agent for service of process. An agent receives legal documents on behalf of your organization.

The New York Secretary of State serves as the default statutory agent for service of process. The Secretary of State forwards any documents it receives to the organization.

When you register your nonprofit corporation with the state, you will be given the option of naming a registered agent. As the organizer, you can name yourself or anyone involved with your organization as the registered agent.

Your registered agent must live in New York. If you use a registered agent service, it must be authorized to transact business in the state. Your registered agent must also be available during regular business hours to accept service of process.

The board of directors serves as a corporation's governing body.

Until 2018, New York law allowed nonprofit corporations to have a single member elect its board. In December of that year, the state enacted a new law to increase the number of required voting members from one to three. The goal of this change was to prevent nonprofit corporations from furthering the private interests of a single person.

New York law requires that you name at least three directors to your nonprofit corporation. Each director must be at least 18 years old, but younger directors are allowed for organizations involved in youth activities. The director is not required to be a state resident or a member of the organization.

Terms for directors must be between one and five years. New York requires that you name the following positions:

• President
• At least one vice-president
• Secretary
• Treasurer

These specific offices require a one-year term.

You may need to get the written approval of a state agency to incorporate legally. Some common types of nonprofit corporations that must secure agency approval and the agency providing approval include:

• Educational or organizations founded to promote knowledge (Department of Education Office of Counsel)
• Facilities that offer adult daycare (Department of Health Division of Legal Affairs)
• Hospitals or health services (Department of Health Division of Legal Affairs)
• Organizations for the care of children, victims of domestic violence, or destitute mothers (Office of Children and Family Services)
• Programs for substance abuse (Office of Alcoholism and Substance Abuse Services Bureau of Certification)
• Trade or business associations (Office of the Attorney General's Antitrust Bureau)

Your nonprofit's purpose determines which agency you may need to contact.

To register your nonprofit corporation, you must file a certificate of incorporation with the New York Department of State, Division of Corporations. This certificate serves as your organization's articles of incorporation. This step is critical if you file for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code.

To be eligible for a federal tax exemption, your certificate of incorporation must include language stating your organization's purpose is one or more of the following:

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

The Internal Revenue Service (IRS) requires your certificate to state a clear plan for your organization's assets in the event of dissolution, or closing your business. Although not an IRS requirement, New York also requires your certificate to include:

• Your corporation's name
• The county where your corporate office operates
• The names and addresses of the initial directors
• If you have not named a registered agent, then list an address where the secretary of state should mail a copy of any service of process
• Provisions regarding how your corporation will govern its internal affairs

The Department of State website has a fillable form to file your certificate of incorporation.

The initial organizational meeting of your board of directors is crucial. At this meeting, board members will:

• Approve your corporate bylaws
• Elect directors
• Appoint officers
• Adopt a conflict of interest policy
• Approve financial matters, like opening a corporate bank account

Take thorough minutes (notes) at this meeting. You will likely need to reference the decisions made as you operate your nonprofit.

Corporate bylaws are governing documents of your nonprofit. They should be consistent with the information on your certificate of incorporation and comply with New York law.

There's a strong chance the IRS will reject your request for a 501(c)(3) exemption if your board has not adopted corporate bylaws and a conflict of interest policy when you file your application. A conflict of interest policy details a process your nonprofit will follow if the personal interests of a board member conflict with the best interests of the organization.

Your nonprofit corporation must obtain a federal employer identification number (EIN) from the IRS. An EIN is an identifying number that operates like a Social Security number for a business entity. You will need an EIN before your nonprofit can:

• Apply to the IRS for tax-exempt status
• Open a bank account
• Hire employees
• Register as a charitable organization with the state

You can get an EIN for free by applying on the IRS website. Watch out for commercial websites that charge a fee for an EIN. Many of them look like the official IRS website.

You can also get a free EIN by filing an IRS Form SS-4 application by mail.

Even though your corporation is a nonprofit or charitable organization, it is not automatically exempt from federal income taxes. You must apply for 501(c)(3) status and receive approval from the IRS.

The process of applying for a 501(c)(3) exemption can be the most intimidating and time-consuming aspect of establishing a nonprofit. 501(c)(3) designation grants many benefits to your organization, including:

• An exemption from the payment of the federal income tax
• Donors can deduct contributions made to your organization from their federal income tax returns

To apply for exempt status, your organization must file Form 1023 or Form 1023-EZ with the IRS. Form 1023-EZ is for smaller organizations. You can file this streamlined form if your nonprofit:

• Has projected annual gross receipts of less than $50,000 for the next three years
• Not earned $50,000 in the prior three years
• Does not have assets valued at more than $250,000
• Meets certain other qualifications

All other nonprofits must file the standard Form 1023.

There is a $275 filing fee for Form 1023-EZ and a $600 fee for filing Form 1023.

If the IRS approves your application for exempt status, you will receive a determination letter recognizing your exemption. The IRS will also add your organization to its list of exempt organizations. Donors often use this tool before donating to ensure an organization is tax-exempt.

When the IRS approves your organization for tax-exempt status, you must file a Form 990 informational return each year. The template of this form you will use depends on your gross receipts and assets:

• Organizations with $50,000 or less in gross receipts file Form 990-N.
• Organizations with gross receipts of less than $200,000 and total assets of $500,000 or less file Form 990-EZ.
• All other exempt organizations file the complete Form 990.

Failure to file a Form 990 for two consecutive years will result in the IRS revoking an organization's exemption.

After receiving your IRS 503(c)(3) determination letter, you can apply for an exemption from New York's corporate franchise tax using Form CT-247.

Your corporation can also obtain a state sales tax exemption by filing Form ST-119.2.

There is no filing fee for these forms.

For a property tax exemption, you must file with the Office of Real Property Tax Service with the Department of Taxation and Finance. Use the correct form for the type of property you want to exempt.

You must register with the New York Attorney General's Charities Bureau before soliciting donations in the state. This registration is necessary if your organization plans on fundraising from individuals, corporations, foundations, or government agencies in New York. The filing fee for this is $25.

Some organizations qualify for an exemption from this registration requirement. These include:

• Religious organizations and houses of worship
• Other charitable organizations run by religious organizations
• Parent-teacher associations

Once registered, you must renew every year. New York uses a sliding scale to determine renewal fees.

Once registered, your organization will appear on the Charities Public Registry searchable database.

The state of New York does not require businesses to obtain a general business license. Your nonprofit may need local licenses and permits, depending on your operations and location.

In particular, New York City has specific requirements for businesses operating in its jurisdiction. If you plan to operate in NYC, use this tool for a customized list of city requirements for your organization.

If your nonprofit has a physical office, you must also meet that area's commercial zoning regulations.