How to Start a Nonprofit in Pennsylvania
Starting a Pennsylvania nonprofit could seem like an unreachable goal, but in reality, you can create a nonprofit organization in just a few steps. It'll take some time and effort to get the organization up and running, but it could be worth it to advance an important cause to you and better your community.
Whether you're interested in helping children or animals, providing access to educational services, or another cause, you could be able to start an organization that's exempt from federal income tax. This is a benefit available to the nonprofit organizations that qualify for it. If you'd like to be eligible for a federal tax exemption, you need to familiarize yourself with the requirements and keep these requirements in mind as you take the necessary steps toward becoming a 501(c)(3) organization.
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Steps for Starting a Pennsylvania Nonprofit
Step 1: Name Your Nonprofit
Naming your nonprofit organization is an essential first step because of both branding and legal implications. Your name needs to resonate with people you might want to reach from a branding standpoint. It should align with your mission and the goals of the organization. If the name that you choose is misleading or confusing, in any way, you might have problems connecting with the people you want to receive your message. From a legal standpoint, you need a name that doesn't violate any of the laws of the Commonwealth of Pennsylvania or the United States.
An excellent way to choose a name is to start off brainstorming. Make a list of the names that you like for your organization. Next, go through the list and ensure that you haven't used any words or phrases prohibited under the Commonwealth of Pennsylvania's laws. For example, you cannot use:
- Words or phrases that imply that your organization is a governmental agency
- Words or phrases that are profane or blasphemous
- Words or phrases such as "bank," "banking," "banker," or "trust" unless your organization is a financial institution
- Words or phrases such as "casualty," "fidelity," "insurance," or "assurance," unless your organization is licensed as an insurance company
Check state business records next to ensure that your name isn't already taken. In the Commonwealth of Pennsylvania, your business name must be unique and distinguishable from all other names in the business entity database. If you search the database on the Pennsylvania Department of State website and find that a name on your list is already in use, you need to cross that name off the list and choose an available name.
Step 2: Choose Directors and Officers
You'll need to choose individuals you can trust to maintain positions within your nonprofit corporation. The organizational structure for a nonprofit corporation consists of:
The directors make up the board of directors that governs the organization. To comply with IRS requirements, you'll need to have three directors who aren't related to each other. Consider the qualifications of the individuals as you decide who should serve as the officers (President, Secretary, and Treasurer). These individuals will have significant duties and responsibilities in daily operations.
Step 3: Appoint a Registered Agent
You'll need to appoint a registered agent for your nonprofit corporation in Pennsylvania. A registered agent is a person or company that receives legal papers on behalf of a business. For example, if your corporation is sued, the registered agent would be responsible for receiving the legal documents for you. The registered agent must have a physical address in Pennsylvania, not a P.O. Box.
Step 4: Prepare Bylaws and Conflict of Interest Policy
You'll need to prepare bylaws and a conflict of interest policy, among other policies of your choice, for your nonprofit corporation. Note that having bylaws and a conflict of interest policy is a requirement for tax-exempt status.
What are these critical documents? Bylaws are the rules and procedures that govern the operation of your organization. You'll likely need to look back at this document once your organization is up and running for guidance on how to handle the election of officers and other business matters. A conflict of interest policy is a policy that ensures that the individuals who make decisions in the organization make decisions that are in the best interest of the organization and not for personal gain.
Step 5: File Articles of Incorporation
Filing the Articles of Incorporation for your organization is the step that forms your corporation. You'll need to take care with the language that you use in your Articles of Incorporation if you plan to apply for 501(c)(3) tax-exempt status.
For example, the purpose that you state for your organization is important. This is because, to qualify for tax-exempt status as a 501(c)(3) organization, the purpose of the organization must be one of the following:
- Testing for public safety
- Fostering amateur sports competition
- Preventing cruelty to children or animals
When you're ready to file, you'll need to complete Form DSCB: 15-5306/7102. You may submit your Articles of Incorporation online using the PENN File system. Note that you'll need to include the PA docketing statement and your filing. The docketing statement is similar to a cover sheet. The cost for filing Articles of Incorporation for a Pennsylvania nonprofit is $125.
Don't forget that you'll need to publish notice of your filing or intent to file in two newspapers, one of which is a legal publication. The notice that you publish should include the name of the corporation and a statement that you have incorporated or will incorporate the organization in compliance with the Nonprofit Corporation Law of 1988. You will not need to submit proof of publication to the Commonwealth of Pennsylvania but instead file your proof with the minutes of your corporation.
Step 6: Get an EIN
An EIN (Employer Identification Number) is a number used to identify your business for tax purposes. The IRS (Internal Revenue Service) assigns these numbers for free. All you have to do is apply online.
Remember that getting an EIN is required if you plan to apply for tax exemption as a 501(c)(3) organization. You'll also need an EIN or Tax ID number to open a business bank account and hire employees for your organization.
Step 7: Have an Organizational Meeting
At the initial meeting of your organization, you'll need to handle quite a few matters. The most vital issue to consider if you're planning to apply for tax-exempt status is adopting the bylaws and the conflict of interest policy. It'll also be essential to install the officers and directors and maintain a record of everything that occurs at this initial meeting in the minutes.
Step 8: Apply for Tax-Exempt Status as a 501(c)(3) Organization
Before you apply for recognition of exemption as a 501(c)(3) organization, you'll want to go down the list and satisfy all of the IRS requirements. You risk getting rejected if you apply before you have:
- Articles of Incorporation
- Adopted bylaws and conflict of interest policy
- Three elected directors
Once you're ready to apply, you can find the appropriate form on the IRS website. IRS Form 1023 is commonly used for federal tax exemption, but you might be able to use the shorter version of this form. The shorter version, IRS Form 1023-EZ, is meant for smaller organizations. If you think you might be able to use the shorter version, you should complete the Form 1023-EZ eligibility worksheet.
The cost of your application for recognition of exemption will depend on the type of form that you use. IRS Form 1023 comes at the expense of $600. It costs $275 to apply using IRS Form 1023-EZ.
If you are approved for tax-exempt status, you should receive a determination letter from the IRS. This determination also means that your organization is exempt from state corporate income tax. However, you'll need to apply for sales tax exemption, if that's something of interest to you, through the Pennsylvania Department of Revenue.
Step 9: Register as a Charity in Pennsylvania
Most nonprofits rely heavily on donations from companies and individuals to keep their doors open. If you plan on conducting fundraising events or other activities involving the solicitation of funds for your organization, you'll need to register as a charity in the Commonwealth of Pennsylvania.
You may submit your charitable organization registration statement either online or by mail. Visit the Pennsylvania Department of State website for further instructions on registering.
Not Sure About Forming a Nonprofit Organization in PA?
There are many steps involved in forming your own nonprofit, and you may still have questions about the process or what comes after you've formed your nonprofit corporation. You must keep up with annual requirements to remain in compliance as a nonprofit.
To take the guesswork out of forming your nonprofit, consider using our trusted, simple-to-use online business formation tool. We'll walk you through the steps of creating your nonprofit and help you meet the legal requirements.
If you have additional questions about forming a PA nonprofit and staying in compliance with annual requirements and obligations, you should contact a legal professional. An attorney in your area could answer your questions and help you feel more confident to move forward.
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