How To Start a Nonprofit in Vermont in Nine Steps

There are specific rules for naming your business in Vermont, such as using corporation, incorporated, company, limited, or their abbreviations in the business name. The name of your organization should be unique and not already in use by a Vermont business entity. You can search for the name in the business search section on Vermont’s Business Services Division website.

You should then determine if you can use the name on the internet. Enter the name in a search engine to see what appears. If the name is not a registered domain name, it is available for use. As an added step, use the United States Patent and Trademark Office online trademark database to ensure the name is not protected under a trademark registration.

Under Vermont state requirements, you must have at least three members on your board of directors. Find professionals or people with a shared passion for your cause are good candidates. Board members should bring their experience to help oversee finance and compliance and help with fundraising efforts. The members have a fiduciary duty to act in the best interests of the organization and avoid conflicts of interest.

In Vermont, you must file articles of incorporation with the Vermont Secretary of State Corporations Division to create a nonprofit corporation.

The articles of incorporation must contain the following:

• The name of the corporation

• A statement if the corporation is a public benefit or mutual benefit corporation

• The registered agent’s name and address

• The incorporator’s name and address

• The purpose of the corporation

A public benefit corporation benefits everyone while a mutual benefit corporation only benefits its members. A homeowner’s association is an example of a mutual benefit corporation.

You can register your corporation online by creating an account with the Business Services Division. The filing fee for a domestic nonprofit corporation is $155.00.

Or you can let our trusted partner LegalZoom handle your nonprofit creation starting at $99 plus filing fees.

Bylaws are the playbook for your nonprofit corporation, and explain how to run the organization. Your nonprofit must have bylaws to obtain tax-exempt status from the Internal Revenue Service (IRS). When writing bylaws, you should include topics such as:

• The nonprofit’s mission or purpose

• How to organize the board of directors

• When to hold board meetings

• The officers’ roles and duties

• How to handle the finances

• How to amend bylaws in the future

Your board of directors should hold an initial meeting to adopt the bylaws, elect officers, and handle any organizational tasks. You should take notes, or minutes, of this meeting and all other board meetings and keep them with your corporate records and legal documents.

A federal Employer Identification Number (EIN) identifies your business the same way a social security number identifies a taxpayer. Your nonprofit will need an EIN to open a bank account and file tax returns. To get an EIN, go to the IRS website to fill out an online application or fax an SS-4 form. If you apply online, you usually get your EIN right away.

To get tax-exempt status, you must apply to the IRS. This designation will allow your nonprofit to avoid paying federal income taxes and state income taxes. The tax form you file depends on the federal tax exemption status under the Internal Revenue Code. For example,

• If your nonprofit is a 501(c)(3), which includes charities, religious, and educational groups, you file Form 1023 or Form 1023-EZ. If you're eligible to use the 1023-EZ, you file it through the Pay.gov website.

• If your nonprofit is a 501(c)(4) social welfare organization, you file Form 1024-A.

• For other types of tax-exempt organizations, like those under 501(a), you file Form 1024.

Once approved, you’ll receive an IRS determination letter confirming your income tax exemption.

According to the Vermont Department of Taxes, “Most tax-exempt nonprofit organizations do not have to file a Vermont corporate income tax return or pay corporate income tax or the minimum business entity income tax.” However, your corporation must have tax-exempt status from the IRS.

Set up a Vermont Business Tax Account with the Vermont Department of Taxes. If you want to apply for exemption from sales tax, complete Form S-3 Vermont Sales Tax Exemption Certificate for Resale and Exempt Organizations.

If your nonprofit has paid fundraisers and paid solicitors “who directly or indirectly solicit donations for charitable organizations or charitable purposes,” you must register annually with the Vermont Attorney General’s Office and pay a registration fee.