How to Start a Nonprofit in NJ
Starting a nonprofit organization in New Jersey is not a very difficult task but it does require time and effort. There are several steps that you'll have to take to form your own New Jersey nonprofit corporation. Take all of the relevant state and federal laws into account during the formation process.
It's up to you to decide if you'd like to tackle the business formation process on your own or talk to a professional for assistance. Either way, it helps to be aware of the necessary steps to forming your own New Jersey nonprofit organization.
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Step One: Name Your Nonprofit Organization
You'll need to pick a name for your nonprofit corporation. The organization's name also needs to be a name that represents the work that you plan to do with your nonprofit. There are both legal and marketing implications to the name that you choose to use for your nonprofit in New Jersey.
Under New Jersey law, the name you choose for your nonprofit:
- Must be distinguishable from all other corporate names on record with the New Jersey Secretary of State
- Must include one of the following terms or phrases: "a New Jersey nonprofit corporation", "incorporated", "corporation", "inc.", or "corp."
- Can't contain any restricted words unless the proper approval or licensing has been obtained
You might be wondering how you'd know if your business name is different from the others that have already been registered or reserved. You can find out if the name you'd like to use is available or not with a business name search through the New Jersey database.
Step Two: Select Directors and Officers for Your Nonprofit Organization
If you plan on seeking 501(c)(3) tax-exempt status for your New Jersey nonprofit organization, then you need to be aware of the IRS (Internal Revenue Service) requirements. For example, to be eligible for 501(c)(3) tax-exempt status, you'll need to select at least three directors for your organization. These directors make up the board of your organization and they are the governing body.
You'll also need officers for your organization. Individuals must be selected to serve as president, secretary, and treasurer for the nonprofit.
Step Three: Appoint a Registered Agent
You'll need to have a registered agent for your New Jersey nonprofit corporation to comply with the laws of the state of New Jersey. The registered agent for your company has the responsibility of accepting legal papers on behalf of the corporation if it gets sued.
You need to select either a person or company to act as your registered agent for service of process. Don't forget to make sure that the person or company that you select has a physical street address (no P.O. Boxes). Your registered agent also needs to be available during normal business hours to accept any legal documents that could be served. In New Jersey, your registered agent must consent to the appointment.
Step Four: File a Certificate of Incorporation
You'll need to file a Certificate of Incorporation, or Articles of Incorporation, with the New Jersey Department of the Treasury to form your nonprofit organization in the state of New Jersey. This filing comes with a filing fee of $75.
Generally, you can expect to provide the following type of information when you file the New Jersey Public Records Filing for New Business Entity:
- Business name
- Business entity type
- Business purpose
- Duration of the business
- Registered agent name and address
You must keep the IRS requirements for 501(c)(3) status in mind if you are to apply for federal income tax exemption. This is an important step because you'll need to take care with the information that you provide regarding the purpose of your business. Under the Internal Revenue Code (IRC), your organization must be organized for one of the following purposes to be eligible for 501(c)(3) tax-exempt status:
- Testing for public safety
- Fostering amateur sports competitions
- Preventing cruelty to children or animals
You must also be careful about the language that you use concerning dissolution. To comply with the requirements for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, you'll need to make it clear in your organizing documents that the assets of the organization will only be used for exempt purposes in the event of dissolution.
Step Five: Make Your Bylaws and Conflict of Interest Policy
You'll need to prepare a couple of internal documents after you file the New Jersey Articles of Incorporation. These important documents, bylaws, and the conflict of interest policy are not filed with the state of New Jersey.
The bylaws are essentially the rules of the organization. New Jersey bylaws often cover topics such as the decision-making process in meetings and how officers are selected. You may find that you need to refer back to this document if a conflict arises regarding how the organization is supposed to be governed.
The conflict of interest policy is intended to ensure that the individuals who are making the decisions for the organization are concerned with the best interests of the organization rather than their own self-interests. Any conflict of interest (which could lead them to make decisions based on their own self-interests) should be disclosed immediately.
Step Six: Hold Your First Organizational Meeting
There are several tasks that you want to accomplish at your first organizational meeting for your nonprofit organization. First, make sure that you get your bylaws and your conflict of interest policy adopted by the attendees. Next, appoint your officers.
You'll want to make sure that you also get the approval for a business bank account because you'll need to open one to help you keep your business funds separate from any personal funds. Be sure to have minutes for your meeting; this way you can look back and see what you accomplished.
Step Seven: Get an EIN
An Employer Identification Number (EIN) or FEIN is a number that's assigned to business entities by the IRS. You can think of it as a social security number (but for your business). It's easy to get one, and you'll need to have an EIN to open a business bank account and apply for 501(c)(3) tax-exempt status. Don't worry about the cost because applying for your EIN through the IRS website is free.
Step Eight: Submit Application for Recognition of Exemption to the IRS
If you're going to run a nonprofit in New Jersey, you're probably going to want to take advantage of the many benefits of tax-exempt status. To gain tax-exempt status, you'll need to apply for federal exemption using IRS Form 1023 or IRS Form 1023-EZ. You can only use IRS Form 1023-EZ if you are a qualifying organization (less than $50,000 in expected gross receipts and less than $250,000 in assets).
The cost of the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code depends on the form that you use. IRS Form 1023 costs $600 to file, and IRS Form 1023-EZ costs $275 to file.
If the IRS approves your application, then you should get a determination letter. Also note that, as long as your nonprofit is properly incorporated and operated as a New Jersey nonprofit corporation, you're automatically exempt from state corporation business tax. You can visit the New Jersey Division of Taxation website for more information about state tax exemptions, generally, and you can get the Application for ST-5 Exempt Organization Certificate for Nonprofit Exemption from Sales Tax (REG-1E) form for exemption from sales and use tax in the state of New Jersey.
Step Nine: Register as a Charity With the New Jersey Division of Consumer Affairs
You may need to register your nonprofit with the New Jersey Division of Consumer Affairs. Registration is required if you're going to do any professional fundraising for your organization. Note that you'll need to renew the registration annually.
Next Steps After Starting a New Jersey Nonprofit Corporation
There are several other steps you might want to take immediately after forming your nonprofit in New Jersey. Consider taking the following actions:
- Get business insurance
- Get a website for your organization
- Get any required licenses and/or permits
You'll also need to make sure that you keep up with the ongoing obligations that you'll have. For example, you'll need to fill out and submit IRS Form 990 each year if you get approval for federal tax exemption as a 501(c)(3) organization. You'll also need to submit your annual report to the New Jersey Department of the Treasury on time.
Not Sure About Forming Your Own New Jersey Nonprofit Organization?
Even after you've researched the nonprofit formation process, in detail, you might want to get a professional's opinion about your unique circumstances and business goals. An experienced attorney in your area could help you.
You can also use 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.
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