Before taking the steps to form a non-profit corporation, one must first decide that this is the best form for that corporation to take. There are several advantages that a group can receive by becoming a non-profit corporation. They can obtain grants from government agencies, as well as qualify for grants from private foundations. These groups can have access to lower postal rates on third class bulk mailings. This status will provide legal protections for an organization’s directors and officers, as well. In addition, if the group qualifies for a tax exempt statues, it can provide their donors with tax deductions for gifts to the organization, and can gain exemptions from federal, state, local, income, property, sales and excise taxes.
There can be some disadvantages to choosing this form or organizational structure as well. There can be a cost involved in filing for the different applications that are necessary to incorporate as a non profit group. In addition, legal incorporation documents must be prepared and filed to begin the process, as well as annual tax returns needing to be prepared, and the various record keeping chores that accompany the responsibility of running a non-profit corporation.
Once the decision has been made to form a non-profit corporation, there is a very detailed process which must be followed in order to receive approval from the government. Requirements may vary from state to state, and the best way to ensure legal compliance is to consult a lawyer in your state who is versed in this field of law. The following may serve as a set of general guidelines, however, for forming a non-profit corporation.
The first step in this process is the contact your Secretary of State to request the necessary materials and supplies for incorporation. A name then needs to be selected for the organization. One of the most detailed steps in this process is the preparation and filing of the Articles of Incorporation for the Organization. These Articles must be filed with the Secretary of State, and should include the following. Article I indicates the chosen name of the organization. Article II lists the name and address of the registered agent of the corporation. The registered agent is the person who is authorized to receive or sign the legal papers on behalf of the corporation. Article III states the purpose for which the corporation is being formed. Article IV is a statement of the number of initial directors of the corporation, along with their names and addresses. Article V includes the names and addresses of the persons who are forming the corporation. Article VI tells the period of existence for the corporation. If the time frame is indefinite, it is termed to be perpetual. Otherwise a specific time frame is listed. Article VII speaks of provisions for members, including member classifications, qualifications, obligations, rights, and principles. This section usually indicates that these topics will be further detailed in the organization’s by-laws, so that changes can be made without refiling with the Secretary of State. Lastly, Article VIII includes the state’s required language for indicating that the organization is a 501( c ) ( 3 ) organization. After this has taken place, the corporation should write governing by-laws, which will include procedures for electing officers and directors, holding meetings, handling money, corporate records and other business affairs.
Because of the complex nature of this procedure, as stated before, it is advisable to consult a lawyer throughout the entire process. While several IRS and government forms were mentioned in relation to this process, they are not the only ones that will be necessary. A good attorney will be familiar with all of the forms that need to be filed. In addition, they can review the articles of incorporation (which it is not necessary for them to write), as well as the other legal documents before they are filed with the government. This is especially important because one does not want to have their application rejected for technical reasons related to the way forms were filled out or filed.
After the incorporation certificate has been received, then it is necessary to file this certificate and the Articles of Incorporation with the Recorder of Deeds. This must be done within 15 days. Additionally, a Federal Employer Identification Number must be filed for with a Form SS-4.
The next step in the procedure is to file for the corporation’s tax exempt status, if they choose to do so. Not all non-profit organizations are tax exempt. In order to qualify for this status, the organization must submit a letter indicating their non-profit status from the state, plus the appropriate IRS application forms to file for recognition as a tax exempt organization. IRS Publication 557 can help you determine if your organization falls into one of the categories that can receive tax exempt status. It is important to remember, however, that the organization must be incorporated as a non-profit organization before the IRS will consider this application.
Annual reports to several organizations, including the Secretary of State and IRS, must be filed to retain the organization’s charter. If this does not take place, then involuntary dissolution of the corporation may take place. In addition to this yearly report, any time there is a change made to the articles of incorporation, a report must be filed to the Secretary of State as well.
The Internet sites which I found to be the most helpful in finding information on the topic of forming a non-profit corporation were:
This site had many links that each detailed a step of the process of forming a non-profit corporation. It is especially beneficial for information on the contents of the Articles of Incorporation. This site was helpful for information on what to do after incorporation was completed, and the annual reports which must be filed in order to retain the non-profit status. This site had some useful information about what was necessary in order to file for the tax exempt status. In addition, it listed some other reference books on the subject of forming a non-profit organization, as well as some other web site links.
By
Jessica B. Meltzer