How to Start a Nonprofit Organization - Summary of basic steps for a new entity
If you are deeply committed to a charitable cause, you may decide to establish a nonprofit organization with a specific mission. However, you must be careful to observe all the technicalities in this area. Here are the basic steps to forming a nonprofit.
*Decide on the nonprofit's name. The name must be different from any one already registered with the state. (Hint: Try to be descriptive.) Check with the appropriate state office to determine if the name is still available. For a relatively small fee, you may be able to reserve the name.
*File articles of incorporation with the state. This documentation-which includes basic information like the nonprofit's name, address and telephone number-should have specific language that will help you obtain favorable tax status. If you are unsure of the procedures, seek professional assistance.
*Apply for tax exemptions. You must submit the proper forms, along with a copy of the articles of incorporation and the requisite fee, to the IRS in order to secure a federal income tax exemption. In a handful of states, you must follow similar procedures on the state level. In other states, obtaining the federal tax exemption will also qualify your organization for a state tax exemption. Check on the requirements for your state.
*Have bylaws drafted. The bylaws cover the rules relating to board meetings, voting on issues, and selecting a board of directors and officers. Typically, the bylaws are adopted by the corporation's directors at the nonprofit's first board meeting. Make sure you are well prepared for this occurrence.
*Appoint the board of directors. The board is responsible for making the main operational and financial decisions of the nonprofit. Depending on state law, you may be required to designate a specific number of board members (usually, at least three).
*Hold your first meeting. Besides adopting the bylaws at the first meeting, the board of directors will usually elect the nonprofit officers, record the federal and state tax exemptions and handle other pressing matters. After the meeting, ensure that the minutes are promptly filed in a binder.
*Obtain licenses and permits. Check with your appropriate state office about licensing requirements for the organization. For instance, if you are planning to offer products for sale to donors, you will need a sales tax permit. In addition, some activities may require a zoning permit.
Don't hesitate to contact your legal and business advisers for assistance. They can help guide you along the way.