How To Form A Nonprofit Corporation

Are you ready to form a nonprofit corporation, and give back to others? A nonprofit corporation is defined as a corporation founded for a charitable purpose.

Forming a nonprofit corporation has several similarities to incorporating a regular corporation. Ask these questions to figure out if you should form a nonprofit business model.

  • Would you like your business to benefit the general public? This may include conducting charitable work, aiding in disease prevention, addressing social issues, and/or advancing environmental goals.
  • Are you comfortable knowing your nonprofit may not earn a major profit, but still be able to pursue a social mission?
  • Can you maintain ongoing compliance necessary once you have filed for 501(c)(3) tax exempt status?
  • Once you form a nonprofit, are you ready to establish a fundraising plan? Can you persuade others to donate to the cause?

Did you answer “yes” to all of the above? Do you feel confident you can work hard to achieve each goal? If so, you are ready to start a nonprofit corporation.

Entrepreneurs interested in forming a nonprofit corporation will quickly discover the process is not too different from incorporating as an LLC or corporation. Therefore, follow our step-by-step guide to get started and form a nonprofit corporation.

1. Choose A Name For The Nonprofit

Once you have decided your business meets the requirements to become a nonprofit, you should choose a name. The nonprofit’s name should represent the business clearly, and must be unique in your state to qualify for registration.

You can find out if a name is available for registration in your state by conducting a business name search, or contacting the Secretary of State. Some states may also require a corporate designator, like ‘INC.’ or ‘Incorporated,’ to be included in the name. If so, your name may be rejected if the designator is not included with your filing.

2. Incorporate Your Nonprofit

Now that you are ready to register your business, it’s time to determine the requirements that are specific to your state. The easiest way to do this is to use our nonprofit filing services, where we take care of fulfilling the requirements for you.

You begin by preparing the articles of incorporation with the state where your business will operate. Each state has its own specific requirements, but generally these documents require the name and address of your business, information about the directors, business purpose, and information about the registered agent.

3. Create Bylaws

The bylaws work as a set of rules that guide how the corporation is run, and are determined by the board of directors during the incorporation process. Generally, this is one of the first actions taken by the board of directors for any new corporation.

Bylaws are not filed with the state where you incorporate, unlike the articles of incorporation. Instead, they are kept as part of the corporate records and referred to in cases of an audit or other legal matters.

The bylaws should contain the basic details about the business and where it operates. Often, information about the board of directors is included, along with the number of directors, how they will serve, and how voting is conducted. Information about meeting frequency and procedure is also fairly common. Bylaws are generally complex and should be reviewed by an attorney in order to ensure they comply with the legal requirements of the state. You can also purchase customized corporate bylaws that have already been reviewed by an attorney, which can offer substantial savings while helping you avoid common pitfalls.

4. Create A Mission Statement

Identifying a mission statement allows your nonprofit to define its mission and values. Similarly, detailed mission statements help answer the following questions:

  • What do you hope to accomplish with your nonprofit?
  • Who do you want to help?
  • What kind of vision does your nonprofit have?

Clearly answering these questions allows your mission statement to create actionable goals. This will help guide the nonprofit corporation to raise money and become successful. Donors, volunteers, employees, and the government are all looking at your mission statement. Once a nonprofit has a mission statement they adhere to, the IRS will review it. This helps determine whether to grant the corporation nonprofit status.

5. File For Tax Exempt Status

Let’s recap! You’ve established a nonprofit corporation that will benefit the public or a specific group of individuals. You named your nonprofit and incorporated it. The nonprofit has bylaws and a clear mission statement. The next step is to file for nonprofit tax exempt status. This status is filed with the state and federal governments.

The most popular type of exemption is 501(c)(3) status. This status exempts corporations that qualify from having to pay federal and state taxes because the corporation is pursuing a nonprofit mission.

Ready to file for tax exempt status? Nonprofit corporations must file Form 1023 Interactive, Application for Recognition of Exemption Under 501(c)(3). Each application requires applicants to disclose all compensatory arrangements and answer the form’s questions. Further, applicants must also pay a required filing fee. Smaller nonprofit organizations may be eligible to apply using Form 1023-EZ instead.

Once the agency has received the application, they will review to determine whether or not to grant tax exempt status. However, there is a possibility that the nonprofit may also need to file additional forms.

For example, some state governments may require their own forms before exempting corporations from state taxes. Check in with your local Secretary of State to see if you need to file additional paperwork or if Form 1023 is sufficient.

6. Maintain Ongoing Compliance

Congratulations! You’ve been approved for nonprofit corporation status!

From here on out, you may begin fundraising. You may find sponsors and donors to contribute to your nonprofit corporation. As you focus on establishing a fundraising budget, however, do not forget to maintain ongoing compliance.

What does the state and federal government expect from a nonprofit corporation to maintain its status?

  • Keep corporate and financial records maintained and updated. Likewise, minutes from organizational meetings must also be logged and accounted for.
  • Proof that you are pursuing the nonprofit corporation’s mission. For example, the nonprofit’s board of directors must be guiding the company to fulfill its mission. What happens if the board involves themselves in banned activities, like donating to political campaigns? The IRS may revoke the nonprofit’s 501(c)(3) status.

Should the IRS require additional information from your nonprofit corporation, you should be ready to provide it. This will ensure you are able to maintain the nonprofit’s tax exempt status.

Ready To Form A Nonprofit Corporation?

As a nonprofit corporation, you are empowered to pursue a social mission close to your heart. Your nonprofit may positively impact its community. In short, it may change the world!

Forming a nonprofit corporation helps formalize your business and adds credibility to potential donors. This entity protects your personal assets with liability protection. Likewise, it gives you the ability to apply for tax exemption with a 501(c)(3) status. Let MyCorporation, and our team of professionals, help you form a nonprofit corporation today! We’ll walk you through the filing process, step by step. This ensures your nonprofit corporation is registered and ready to pursue its mission.