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How To Start a Nonprofit in Virginia

Starting a nonprofit in Virginia requires much of the same business planning as a for-profit startup. You'll also need to navigate the legal requirements unique to nonprofits.

nonprofit corporation is a legal entity formed for a charitable, social, or public benefit. Unlike for-profit corporations, nonprofits reinvest revenue to further their mission rather than turning a profit. Because of their charitable nature, some nonprofits enjoy benefits like federal income tax exemption. But these benefits aren't easy to obtain. It requires time, money, and rigorous planning.

In the following sections, you will learn how to create a nonprofit in Virginia. You'll also learn how and why to incorporate your nonprofit.

Also, see FindLaw's Nonprofit Organizations section for more information, resources, and FAQ on starting and operating a nonprofit.

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1. Describe Your Nonprofit's Purpose

The Internal Revenue Service (IRS) requires nonprofit organizations to have a purpose statement.

Nonprofit organizations with the following purposes can receive tax-exempt status:

  • Charitable
  • Religious
  • Educational
  • Scientific
  • Literary
  • Testing for public safety
  • Fostering national or international amateur sports competitions
  • Preventing cruelty to children or animals

Clearly defining your nonprofit's purpose will help you apply for grants and determine your eligibility for federal and state tax exemptions.

2. Register Your Organization's Name

A business must have a unique name. Virginia requires that your business name does not conflict with any other registered or reserved business name in the state.

Virginia law also states a business name may not contain misleading information. For example, if your company isn't a registered limited liability company (LLC) in Virginia, you cannot use "LLC" or "limited liability company" as part of your organization's name.

Virginia requires you to register your nonprofit's name. Visit the Virginia State Corporation Commission (SCC) website to check the availability of your preferred business name. The SCC also includes the names of all appropriately registered or reserved Virginia businesses.

From a branding and marketing perspective, you should choose a name that:

  • Resonates with your target audience
  • Is easy to remember
  • Accurately describes the nature of your nonprofit

You can also reserve your business name for up to 120 days using the SCC's Clerk's Information System.

3. Incorporate Your Organization

Structuring your nonprofit as a corporation protects yourself and other members from the organization's liabilities and debts. It also provides a formal legal structure for your nonprofit and streamlines the process of applying for federal tax-exempt status.

You'll incorporate your nonprofit organization with the state. In Virginia, business owners formally incorporate any company (including a nonprofit) by filing articles of incorporation with the Virginia State Corporation Commission (SCC). The application fee is $75, with an approximate processing time of 3-7 business days.

Some states allow a nonprofit to organize as a limited liability company (LLC). But, forming a nonprofit as an LLC instead of a corporation is uncommon. It can complicate applying for tax exemptions and securing funding from private donors or grants.

Specifically, the IRS will not grant an LLC tax-exempt status unless each member is a corporation recognized as a 501(c)(3) charitable organization. The IRS requires LLCs to meet several other conditions to qualify for 501(c)(3) status.

4. Hold Your First Organizational Meeting for the Board of Directors

Your nonprofit's board of directors provides overall governance and leadership for your organization.

You will need to have an initial meeting with your board of directors. Your board will accomplish several key business objectives at this meeting, including:

Your board will oversee strategic and financial oversight and make key decisions for your nonprofit.

5. Obtain an EIN

Every business must have a federal employer identification number (EIN) through the IRS. Applying on the IRS website is the fastest and easiest way to get your EIN. The IRS issues these numbers for free. Commercial sites will charge a fee for an EIN—they look similar to the official IRS website.

You can apply for an EIN by phone, online, or mail. Response time differs depending on how you apply:

  • Apply by phone or online and get a response immediately
  • Apply by mail and get a response in 4-5 weeks

Your nonprofit will need an EIN before you can apply for 501(c)(3) status, open a bank account, or hire employees.

6. Appoint a Registered Agent

Every business entity in Virginia must have a registered agent. A registered agent is an organization's designated party for service of process. "Service of process" is the legal procedure of officially delivering legal documents, such as lawsuits or other legal notices.

Every state has its own rules for registered agents. In Virginia, a registered agent must have a physical address in the state. They also must maintain an office open during regular business hours.

If you can't find a qualified individual to serve as your registered agent, you can hire a registered agent service.

7. Apply for a Federal Tax Exemption

Some nonprofits are eligible for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. 501(c)(3) status is a legal designation allowing eligible organizations an exemption from federal income tax. Donors can also deduct charitable contributions to 501(c)(3) organizations from their federal tax returns.

Organizations seeking exempt status from the IRS must apply by filing Form 1023-EZ or Form 1023. Most small nonprofits can use the simplified Form 1023-EZ. To use the simplified form, a nonprofit must:

  • Have gross receipts of no more than $50,000 in any of the previous three years
  • Expect to have less than $50,000 in receipts for the next three years
  • Have assets valued at less than $250,000
  • Meet other qualifications

The filing fee is $275 for IRS Form 1023-EZ and $600 for the standard IRS Form 1023.

You will receive an IRS determination letter after approval. The IRS will also add your organization to its Tax Exempt Organization Search Tool on its website. Potential donors may use this list to confirm they can deduct financial contributions to your nonprofit before donating.

8. Apply for State Tax Exemption

After receiving your determination letter from the IRS for federal income tax exemption, you'll automatically receive a state of Virginia income tax exemption. There is no need to apply or notify the state.

Your nonprofit may also be eligible for a state sales and use tax exemption on eligible purchases. This isn't automatic like the sales income tax exemption. You must apply through the Virginia Department of Taxation using Form NP-1 or Nonprofit Online.

9. Register for Charitable Solicitation

Every charitable organization soliciting charitable donations must register with the Virginia Office of Charitable and Regulatory Programs. Your organization must meet the office's filing requirements before any fundraising activities.

Charitable solicitation includes phone calls, texts, social media, and using Venmo and PayPal to fundraise.

Some charitable organizations (including ones that solicit less than $5,000 in donations annually) are exempt from the registration requirement. Use Form 100 to apply and see a full list of exempt organizations.

10. File Periodic Reports

Once your startup nonprofit is operating with the proper exemptions and registrations, you want to ensure you remain in good standing and maintain your tax-exempt status. There are a few ongoing obligations you will need to stay on top of:

  • File an annual report with the Virginia SCC annually. The filing fee for the report is $25.00.
  • File the appropriate template of IRS Form 990 annually with your federal tax return. The filing fee depends on the specific form your organization must use.
  • Renew your charitable organization registration with the Virginia Office of Charitable and Regulatory Programs annually. Renewal fees are on a sliding scale, depending on your annual gross contributions.
  • Renew your Virginia sales and use tax exemption every five years. The Virginia Department of Taxation will notify you 120 days before the deadline. But mark your calendars as an extra precaution.
  • File all appropriate state tax returns annually.

Does My Virginia 501(c)(3) Nonprofit Need a Business License?

Your nonprofit does not need a general business license from the state of Virginia. But you may need local licenses or permits depending on the location of your organization and the scope of your operations. Cities and counties oversee licensing and permits—contact your county clerk to see what your organization may need.

If you plan to have a physical location, you should also research zoning ordinances and requirements.

You May Want Legal Help With Your Virginia Nonprofit

Navigating the legal requirements of starting a nonprofit organization can get overwhelming quickly. You must perform the extensive business planning required for any small business, on top of securing tax exemptions, charitable organization registration, and articles of incorporation.

Sometimes, getting professional legal help makes the most sense. An experienced attorney can take on the legal aspects of your business formation, leaving you more time and energy to focus on your nonprofit's mission. Contact a Virginia business organizations attorney to learn how they can help you.

You can also use FindLaw's DIY nonprofit formation tool. This DIY option will guide you through each step of your nonprofit formation. Use the tool's services and support to confidently establish your nonprofit while ensuring compliance with state and federal legal requirements.

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