How to Start a Nonprofit in NYC

You have a great idea for a nonprofit organization. You have a Board of Directors, statements of purpose, and a way to change the world for the better. And now you want to formalize the process and create a living, breathing nonprofit corporation in New York City.

First off, you will mostly be dealing with state law. There are only a few specific sets of rules, regulations, or laws for nonprofits located in New York City that are separate or different from the laws of the State of New York. For the most part, a New York City nonprofit is organized under state law.

The City of New York itself has a number of resources for nonprofits that are offered by the City's Nonprofit Resiliency Committee. The NRC is a good place to start to become familiar with the city's programs, initiatives, funding possibilities, and various committees, as well as information on how to connect with appropriate city resources.

The New York State statutes and rules governing nonprofits are very complex and require patience and great attention to detail, as well as professional advice and guidance.

This overview of how to create a New York nonprofit organization will guide you through the various steps necessary for the formation of a nonprofit but are not a substitute for professional legal advice in this highly technical and complicated area of law.

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Types of New York Nonprofit Corporations

There are no specific limitations to the types of nonprofit corporations that can be opened in New York City. The only limits are that the corporation has to be eligible for Internal Revenue Service (IRS) nonprofit taxation status. That status is generally limited to charitable organizations, churches and religious organizations, private foundations, certain political organizations, educational organizations, social welfare organizations, some social clubs, civic leagues, labor organizations, and business leagues.

Costs to Start a Nonprofit Corporation

It will cost a some money to start a nonprofit. There are various state filing fees, which will be noted in the appropriate sections below. In addition, unless you have a volunteer lawyer, you will have legal fees to pay. If you are opening a storefront of some kind, you may be dealing with local business licenses.

Step I: Create and Name Your Nonprofit Business

Creating a legally proper business name and then protecting it is one of the first actions that the nonprofit needs to undertake. This is a process that can be complex and time-consuming, but it is essential for the nonprofit to operate legally in New York City.

The first thing you have to do is create a great name (that's up to you). New York law requires that the name be unique and different from any other company's name, whether the other company is a nonprofit or not.

So your first task will be to search the New York City Department of State Business Entity Database to make sure that the name that you have chosen is not in use by any other New York City company.

Understand that just having your new name not be in that database does not mean that you will eventually be able to use that name. You will still have to go through the nonprofit incorporation process to have the state determine that the name you have chosen is acceptable and that you can use it.

Step II: Legally Protect Your Name

Next, make sure that no one else can use your name in business or on the internet. This means that you have to make sure that no one else is using that name. You can do this by making sure that the Internet Domain Name is available. If it is available, grab it immediately (that will only cost a few dollars).

If you want to do business nationally, or you want to operate in several other states, you should trademark the nonprofit's name with the United States Patent and Trademark Office (USPTO). This process takes some time and money. The nonprofit's name is still protected as a common law trademark while that application is pending.

Once you receive your federal trademark, register it with the New York Department of State. You may also trademark the name with just the state, without a federal trademark.

Now that name is yours, you can keep anyone else from using it, and it conforms to New York City law.

Step III: Establish a Board of Directors

Every New York nonprofit must have a Board of Directors. There are certain legal requirements for Boards of Directors, among which are that the Board must be composed of three or more people over the age of 18, with a few exceptions (like a Girl Scout organization). The IRS also requires a Board of at least three people.

Step IV: Create the Corporate Bylaws

New York City requires the creation of bylaws for any corporation. Bylaws are the internal rules of the corporation and must be adopted by the Board before the corporation can legally function.

Appoint the New York Secretary of State as Registered Agent for Service of Process

The New York Secretary of State is always appointed as the registered agent for service of process for a new nonprofit incorporation.

Step V: Hold the First Board Meeting

Once the Board is created, it should conduct its first meeting as soon as possible. That meeting should discuss the role of the Board, adopt bylaws, appoint a registered agent for service of process, appoint corporate officers, begin the process of incorporation, and create statements of organizational purpose, at the very least. If an incorporator has not been appointed yet, that needs to be done.

Step VI: Incorporate Your Nonprofit

The new nonprofit must be incorporated by filing a Certificate of Incorporation with the New York Department of State. All forms and instructions for filing nonprofit articles of incorporation forms are on the New York Department of State website. They must be downloaded, filled out, and then mailed to the address provided.

The incorporation forms are extensive. Follow all instructions.

The fee for filing nonprofit incorporation forms is $75. Expedited services are available for additional fees.

You can then register for a NY.gov business account for taxation purposes.

You May be Paying Taxes

Even though the new business is a nonprofit and therefore is not subject to business taxation, there are still numerous forms that you will have to fill out with the various federal and state tax agencies. Remember that the nonprofit is not taxed on business income but is still responsible for employment and most sales taxes.

Step VII: File for Your Federal and State Employer Identification Numbers

You must file for a Federal Employee Identification Number (FEIN) on the IRS website. There is no fee for this IRS form.

You can then file for your New York State Employer Registration Number with the Department of Taxation and Finance, Form NYS-100.

Step VII: File to Register as a Nonprofit With the IRS and New York State to Claim Your Tax-Exempt Status

Federal: Before you file as a not-for-profit corporation for your 501(c)(3) federal tax exemption, you have to file a Form 1023 with the IRS. This registers your organization with the federal government as a nonprofit. 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.

Form 1023 is detail-intensive and asks highly detailed questions about the nonprofit's organization, history, policies, finances, and everything else you can imagine. Take the time necessary to obtain all of the information to answer these questions completely and truthfully. Then, file the form.

If your nonprofit is granted 501(c)(3) status, you will receive a determination letter from the IRS within about a month (under normal circumstances). After you receive your IRS determination letter, you can then proceed to file for your nonprofit status with the State of New York City.

New York State Tax Exemption: You need to apply to the state for your New York exemption from state corporate franchise tax with the New York City State Department of Taxation and Finance by filling out and submitting Form CT-247.

Charities Have Their Own Rules

If you are creating a charitable nonprofit corporation, you will need to register and file annual reports with the New York State Attorney General's Office before you begin any fundraising or charitable solicitations. This is in addition to any other legal papers you have to file to create the nonprofit corporation itself. The state also runs a Charities Bureau to help charitable organizations.

Other Business Taxes, Fees, and Exemptions

If you are going to hire employees, you may have other state obligations. Under New York law, you may be required to file for workers' compensation insurance. You may be required to pay unemployment insurance.

You may file with the city Department of Finance for a local property tax exemption. Even if you get this exemption, there will still be other annual filing obligations.

If you are going to sell merchandise, you will register with the New York Department of Taxation and Finance. Certain nonprofits are will have a sales tax exemption.

Some New York City nonprofits are also exempt from property tax.

Ongoing Annual Obligations

You will need to renew your nonprofit tax status annually, as well as your charitable organization status.

Help Is Available

Forming a tax-exempt nonprofit corporation can be a complex process. However, it is made simpler through the use of online business formation services. By answering some simple questions, you can ensure that your organization is set up correctly.

You can also contact a New York City business and organization lawyer for help with starting your business. For more general help, you can contact the New York Council of Nonprofits.