How To Start a Nonprofit in North Carolina

One of your first steps will be choosing and registering your business name. This process can be complex and requires some research.

Choose a name that resonates with your target audience. It should be memorable and accurately describe the nature of your organization. North Carolina law requires that the business name be unique and different from any other business name registered or reserved in the state.

In addition, North Carolina law requires that the name contain a word or abbreviation that designates the organization as a corporation:

• Incorporated
• Inc.
• Corporation
• Corp.

Search the North Carolina business name database to ensure your preferred name is not in use by any other North Carolina company.

Once you have a name that meets state requirements, register that name with the Secretary of State.

Corporation names that exist in other states and do not exist in North Carolina are permissible. However, if you want to register nationally or with another state, you must follow that state’s procedures.

Once you have registered your business name, you will want to protect it. Registering your business name with the state does not mean it receives intellectual property protections.

First, ensure the internet domain name for your business is available. If it is available, secure it at once. The cost varies by domain provider but shouldn’t exceed $20.

If you want to operate in other states, you should trademark the nonprofit’s name with the United States Patent and Trademark Office (USPTO). This requires a filing fee of at least $250 but can cost more per classification. A common law trademark protects your nonprofit’s name while the application is pending.

Once you receive your federal trademark, register it with the North Carolina Trademark Division of the Secretary of State.

Once you have a legal claim on your business name, you can enforce trademark rights if necessary.

Every North Carolina nonprofit must have a board of directors. North Carolina law requires your board to have at least one person. However:

• The IRS requires at least three unrelated individuals for a board
• The North Carolina Center for Nonprofits recommends at least five to seven directors
• A minimum of two board members is necessary to form a committee

Choose your board members for the skills they can bring to the organization, including:

• Fundraising experience
• Grant writing background
• Expertise in your nonprofit’s field
• Organizational and communication skills
• Networking and community connections

There is no residency requirement for board members.

North Carolina requires all corporations to create bylaws. Bylaws are the internal rules of the corporation. Your board must adopt the bylaws before the corporation can legally function.

Your bylaws should include:

• Business name and address for your organization
• How your nonprofit will distribute its assets in the event of dissolution or shutting down
• Names and offices of your board of directors
• The process for amending the bylaws
• Statement of your nonprofit’s purpose
• Rules and quorum for board meetings

You should also create a conflict of interest policy. This outlines what to do if a board member’s personal interests conflict with the organization’s best interests. The IRS must see both corporate bylaws and a conflict of interest policy before it will grant 501(c)(3) status.

Once you create your board, it should conduct its first organizational meeting. This meeting will cover several key points of business, including:

• Discussing the role of the board
• Formally adopting bylaws
• Appointing corporate officers
• Reviewing financial matters, like opening a business bank account
• Creating statements of organizational purpose

Take detailed minutes (notes) of this meeting. You’ll need to reference these minutes as you continue your formation process.

North Carolina requires every business entity registered with the state to appoint a registered agent for service of process (receiving legal documents). If someone sues your organization, your registered agent is responsible for accepting legal documents.

Your agent does not have to be a lawyer but the company attorney is often the agent. They must have a physical address in North Carolina (not a P.O. box). They should also be available during business hours to sign for legal papers.

You can use a registered agent service if you cannot find a qualified individual to serve as your registered agent.

Incorporators are those who sign your initial Articles of Incorporation. You only need one person to do this, but you can have more.

Your next step is incorporating your nonprofit with the North Carolina Secretary of State—Business Registration Division.

A corporation is the best business structure for your nonprofit for several reasons, including:

• It provides limited liability for yourself and other members. This means your personal assets are not at risk for your organization’s debts and liabilities.
• Your nonprofit will be eligible for more private and public grants and subsidized funding.
• The process of applying for federal income tax exemption is less complicated for nonprofit corporations.

Incorporating a nonprofit in North Carolina follows a different process than incorporating a for-profit company.

You will create your corporation with Form N-01, Articles of Incorporation for Nonprofit. You must file online with the NC Secretary of State.

Under the North Carolina Nonprofit Corporation Act, you must include the following in your Articles of Incorporation:

• Registered business name
• Name and address of your registered agent
• Names and addresses of incorporators
• Whether your nonprofit corporation will have members
• How your nonprofit will distribute its assets in the event of dissolution or closing down
• Street address and mailing address of your nonprofit’s primary location

You also must include a statement indicating whether your nonprofit was incorporated on or after the effective date of the relevant chapter in the North Carolina law. You need to state the official date you established your nonprofit related to the effective date of the law.

The fee for filing nonprofit incorporation forms is $60, or an additional $100-200 to expedite the process. Turnaround is about five to seven business days or 24 hours for expedited applications.

You must file for a federal Employer Identification Number (EIN) on the IRS website. An EIN is like a social security number for your business, which the IRS uses for tax and identification purposes. Your nonprofit will need an EIN to apply for 501(c)(3) tax-exempt status, open a bank account, and hire employees.

There is no fee to get an EIN from the IRS. Beware of websites that charge for an EIN. Some of them mimic the appearance of the official IRS website.

Next, register for a state tax account ID number with the North Carolina Department of Revenue. Use the Online Business Registration system to register or apply by mail with Form NC-BR.

Next, apply for federal tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. This designation from the IRS will exempt your nonprofit from federal income taxes. It also allows donors to deduct charitable contributions to your organization from their federal tax returns.

To apply, file IRS Form 1023. Smaller organizations under $250,000 in total assets may use Form 1023 EZ. The filing fee for Form 1023 is $600.00. The filing fee for Form 1023-EZ is $275.

The IRS will notify you via a determination letter if granted 501(c)(3) status. Under normal circumstances, processing time is about 30 days.

Once you have your IRS determination letter for federal tax exemption, you can apply for your state corporate income tax exemption. To do this, file copies of the following with the North Carolina Department of Revenue:

• Your nonprofit’s Articles of Incorporation
• Your nonprofit’s bylaws
• IRS determination letter

There is no fee for this. You will receive a tax questionnaire from the state when you incorporate.

Some nonprofit activities are also exempt from North Carolina sales and use tax. To see if your nonprofit qualifies for a sales tax exemption, complete Form E585 on the North Carolina Department of Revenue website.

Your nonprofit may also be eligible for a local property tax exemption. Contact your county assessor’s office to see if your organization qualifies.

You must register with the Charitable Solicitation Licensing Division of the Secretary of State before you begin any fundraising or charitable solicitation. Some types of organizations are exempt from this requirement. Use this list of exempt organizations to see if your nonprofit qualifies for an exemption.

Fees for this registration are on a sliding scale, up to $200.

Under North Carolina law, you must file for worker’s compensation insurance once you have three or more employees. You must pay unemployment taxes once you have four or more employees.

Even though your nonprofit is not subject to business taxation, there are still numerous forms you must complete with the various federal and state tax agencies. Although your nonprofit is not taxed on business income, it is still responsible for employment and some sales taxes.

You may also have fees for local business licenses, permits, or zoning.