How to Start a Nonprofit in SC

Starting a nonprofit may feel a bit intimidating, but there are a few simple steps that you can take to form your own nonprofit organization in South Carolina. Suppose you're thinking about starting an organization with a religious, charitable, scientific, literary, or educational purpose. In that case, you might be able to get tax exemptions under federal and state law for your organization. However, specific requirements must be met if you plan to apply for tax-exempt status.

It's essential to understand the requirements for tax-exempt status and the ongoing obligations that you may have as a 501(c) organization. Once you know the process, you can follow the steps to start your own South Carolina nonprofit corporation.

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Steps To Start a South Carolina Nonprofit

Step 1: Choose a Name for the Nonprofit

The name you choose for your nonprofit is significant for several reasons. First, business names are part of a brand. You want to make sure that the name you choose for your organization accurately conveys the organization's mission and goals. If your business name is confusing or misleading, it could interfere with your ability to get your message across to an audience. Secondly, the name you choose is important because South Carolina has guidelines regarding business names you must follow. Your organization's name must be distinguishable from other business names on record in South Carolina. The name can't violate South Carolina law or the articles of incorporation for the organization.

Search state business records to determine if the name you want for your organization is distinguishable from other business names in South Carolina. If another business entity is already using the name, you'd like for your organization, choose a different name and make sure that it's available. Once you have a business name picked out, you can secure the domain for your website.

Step 2: Pick Directors and Officers

There is a corporate structure that you'll need to abide by to meet the requirements of a nonprofit corporation. Directors have the power and authority to govern the organization. Officers have specific responsibilities in day-to-day operations.

You'll need the following roles in your organization:

• At least three directors
• President
• Treasurer
• Secretary

There are a few things that you should consider as you make your selections. Keep in mind that the three or more directors you choose must be unrelated. However, there's no requirement that they all reside within the state of South Carolina. When selecting your officers (president, treasurer, and secretary), keep in mind that one individual can hold more than one office within your organization.

Step 3: Select a Registered Agent

You'll need to have a registered agent appointed to receive legal papers. For example, if someone sues your business, the registered agent would be the individual or company responsible for accepting service of legal documents. The registered agent you choose must have a physical address in South Carolina.

Step 4: File Articles of Incorporation

You will need to file articles of incorporation to form your nonprofit corporation. The information that you submit to the South Carolina Secretary of State is important because not only must it satisfy state requirements but federal requirements for tax-exempt status, as well.

Under 501(c)(3) of the Internal Revenue Code, a corporation may be exempt from federal income tax if it's organized and operated for one of the following purposes:

• Religious
• Charitable
• Scientific
• Literary
• Educational
• Testing for public safety
• Amateur sports competitions
• Prevention of cruelty to animals or children

If you plan to apply for tax-exempt status, then you should take the IRS (Internal Revenue Service) requirements into consideration as you prepare your articles of incorporation. If it's not clear in the articles of incorporation that your organization is organized and operated for an exempt purpose, you risk being denied tax-exempt status. Also, have a statement in your articles of incorporation addressing how assets of the organization will be used and later distributed in the event of dissolution. This statement is vital because the assets of a 501(c)(3) organization can only ever be used for an exempt purpose.

You can submit your articles of incorporation either by mail or online. To submit by mail, complete the Articles of Incorporation Section 33-31-202 Form and attach the 501(c)(3) Attachment. This attachment is necessary for filers who want to be eligible for federal and state tax exemptions. Add in the filing fee of $25 and mail to: Secretary of State, Attn: Corporate Filings, 1205 Pendleton Street, Suite 525, Columbia, SC 29201.

Step 5: Prepare Bylaws and Policies

Your nonprofit corporation must have bylaws and a conflict of interest policy. The bylaws are the rules and procedures that govern the organization. Although the bylaws aren't filed with the state, they are essential. Be prepared to refer to your bylaws as your organization grows. They will help you handle things such as the election of officers.

There may be many different policies you'd be interested in adopting in your organization, but perhaps the first one you should consider is the conflict of interest policy. This policy ensures that the members in your organization are making decisions based on the organization's interests, not based on their self-interest or personal gain.

Step 6: Hold Initial Meeting

You'll need to hold the first meeting of your organization to handle essential business matters. Typical matters for discussion at the initial meeting include:

• Adoption of bylaws
• Adoption of policies (such as the conflict of interest policy)
• Selection of officers
• Opening of corporate bank account

Don't forget to have minutes of the initial meeting. It'll be important to look back at the minutes to see what was accomplished at the initial meeting.

Step 7: Get an EIN

An EIN (Employer Identification Number) or Tax ID number is like a social security number for your business. It identifies the corporation for tax purposes, and you'll need it to open a business bank account and hire employees. Getting an EIN is easy and free. Apply online through the IRS website.

You'll also need to get a state tax identification number. You can apply for one of these numbers through the South Carolina Department of Revenue. Submit your application either online or by mail.

Step 8: Apply for Federal Tax Exemption

There are different types of nonprofits referenced under Internal Revenue Code Section 501, but the most common type of nonprofit is the 501(c)(3) organization. Because these are charitable organizations focusing on the public interest, they are allowed benefits such as exemption from federal income taxes. However, you must apply for and get approved for this exemption.

Before you get started on the application process, check to make sure that you've satisfied the following IRS requirements:

• Registered nonprofit corporation
• At least three directors for the nonprofit corporation
• EIN
• Adopted bylaws and conflict of interest policy

When you're ready to apply for federal tax exemption, you can go to the IRS website and select the appropriate form for your organization. You'll need either IRS Form 1023 or IRS Form 1023-EZ to apply for exemption as a 501(c)(3) organization. Whether you need to complete IRS Form 1023 or IRS Form 1023-EZ depends on the size of your organization. Smaller organizations can use the IRS Form 1023-EZ, which is shorter.

The cost of your application for federal tax exemption depends on the form you use. The IRS Form 1023 application costs $600, and the IRS Form 1023-EZ application costs $275.

If your application is approved, you should receive an IRS determination letter. You'd then need to submit a separate application for state income tax exemption in some states. However, in South Carolina, you're automatically exempt from state income tax when you get your IRS determination letter. Send a copy of the determination letter to the South Carolina Department of Revenue so that it'll be in their records.

What Do I Need To Do After Forming a South Carolina Nonprofit?

If you haven't already formed a plan for marketing and hiring, you should begin to work on this once you've established your nonprofit corporation. Don't forget to look into business insurance and permits.

As a 501(c)(3) organization, you also have special requirements and obligations. You'll need to file the IRS Form 990 annually. You'll also need to register as a charitable organization in South Carolina if you plan to solicit donations for your organization.

Still Not Sure About Starting Your Own Nonprofit in SC? 

There are many decisions to make when it comes to starting up a nonprofit, and you should take the time that you need to make sure that you're making the right moves.

We 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.

Don't hesitate to reach out for help if you still have questions or concerns about starting your nonprofit organization. Contact an attorney in your area today to discuss forming a nonprofit organization in South Carolina.