The Nonprofit Guide
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US Nonprofits are formed at the state level with many state sales, property, and income tax benefits. If properly organized, many nonprofits can also obtain federal tax exempt status by applying to the IRS.
Curious on how to start a nonprofit? Read through our easy start a nonprofit guide and get your business started.
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What is a Nonprofit?
A nonprofit is an organization that exists to benefit the public or serve a group’s shared interests. When you start a nonprofit, your organization can take many forms, including trusts and unincorporated associations, but the most common business structure for nonprofits is the nonprofit corporation.
Most nonprofits serve one of three general purposes:
- Public benefit nonprofits benefit their communities by providing or supporting education, the arts, health care, or social services.
- Mutual benefit nonprofits promote the shared interests of their members and include homeowners’ associations, chambers of commerce, veterans groups, and labor unions.
- Religious nonprofit organizations focus on preserving or spreading religious beliefs and values and include churches, synagogues, mosques, and their affiliated organizations.
Nonprofit corporations do not issue stock or distribute dividends to their members, which is why some states call nonprofit corporations “nonstock corporations.”
How to Start a Nonprofit
Use our DIY nonprofit guide to learn the steps to get your nonprofit up and running. If you’d like to check out our state specific nonprofit guides, head to our state map at the bottom!
1. Choose Your Nonprofit’s Name
You’ll need to make sure your nonprofit name is clearly distinguishable from the names of other business entities on record with the state. Fortunately, every state has an online database where you can search through the business names already registered with the state. In every state except Alabama, you do not need to reserve your organization’s name prior to filing nonprofit Articles of Incorporation.
Check your nonprofit’s name availability in your state with a Free Business Name Search.
2. Appoint a Nonprofit Registered Agent
A registered agent is an individual or business authorized to receive service of process (legal notices). When you start a nonprofit organization, you will need to appoint a registered agent in every state where your nonprofit operates. A registered agent provides a reliable channel of communication between your nonprofit and the state in case your organization ever gets sued.
Discover everything you need to know about appointing a Registered Agent for your nonprofit.
3. Submit Nonprofit Articles of Incorporation
Once you’ve decided to start a nonprofit, you’ll need to make it official by filing paperwork with the state. Every state requires nonprofits to submit a document usually called nonprofit Articles of Incorporation and pay a state filing fee. The forms, fees, and requirements vary from state to state, but at minimum your nonprofit Articles of Incorporation will need to include:
- your organization’s name
- registered agent information
- business address
- a statement of purpose
- an incorporator’s signature.
If your organization intends to seek federal 501(c)(3) tax-exempt status, your nonprofit Articles of Incorporation must also include specific language and provisions required by the IRS.
We offer a free template for creating Nonprofit Articles of Incorporation. Want the particulars—forms, filing times, and fees—for how to start a nonprofit your state? Select your state from our menu above or the map below.
4. Adopt Nonprofit Bylaws
After you start a nonprofit with the state, you should hold an organizational meeting and adopt nonprofit bylaws. Your nonprofit bylaws outline how your organization functions by defining the duties of its officers and directors, its procedures for maintaining meeting minutes, and any other matters essential to the nonprofit’s day to day business. You’ll need to adopt your nonprofit bylaws prior to opening a bank account in your organization’s name or applying for 501(c)(3) tax-exempt status with the IRS.
Not sure how or where to start writing nonprofit bylaws? We offer our clients a template for writing nonprofit bylaws, along with numerous other nonprofit forms, when you hire Northwest.
5. Get an EIN for Your Nonprofit
Every nonprofit corporation needs to get an employer identification number (FEIN or EIN) from the IRS, which basically functions like the organization’s social security number. You can apply for an EIN by filing Form SS-4 with the IRS. It’s free to get an EIN, and you can apply online at the IRS website, by fax, or by mail.
Everything you need to know about getting an EIN.
6. Apply for 501(c)(3) Tax Exempt status
Currently, the IRS recognizes more than two dozen types of tax-exempt organizations under Section 501(c) of the Internal Revenue Code, but most nonprofits seek 501(c)(3) status for public charities and private foundations. To obtain 501(c)(3) status for your nonprofit, you will typically need to submit an Application for Recognition of Exemption (Form 1023 or 1023-EZ) to the IRS, pay an application fee, and put your organization’s purpose, history, and finances under the IRS microscope.
How do nonprofits make money?
Despite the term “nonprofit,” nonprofit organizations can and often do earn a profit—they can’t usually be successful otherwise. But nonprofits don’t distribute those profits to their members as personal income. Instead, a nonprofit’s surplus revenue goes toward furthering the organization’s goals, whether that means expanding the organization’s reach, paying its employees, supporting fundraising efforts, or providing support for other nonprofit organizations with similar goals.
Learn more at our detailed Guide to 501(c)(3) Tax-Exempt Status, or check out the following nonprofit-related articles by Northwest:
7. Apply for State Nonprofit Tax Exemptions
Nonprofits are often eligible for state sales, property, and income tax exemptions, though the available exemptions (and the types of nonprofits that qualify for each) vary from state to state. Applying for state tax exemptions usually involves submitting an application to the department of revenue in each state where your organization operates, though some states grant exemptions from some taxes automatically when the organization obtains 501(c)(3) tax-exempt status from the IRS.
Ready to learn more about obtaining state tax exemptions for your nonprofit? Head to our state map at the bottom and select your state.
8. Obtain Required Nonprofit Licenses/Permits
Depending on the different functions and activities of your nonprofit, you may need to obtain licenses and permits to do business in the state. This will require some research, since few states and municipalities lay out their requirements in a single place.
A good place to start checking for licensing requirements is with state departments. Here’s contact information for your state’s Secretary of State and licensing agencies.
9. Register Your Nonprofit as a Charity
If your nonprofit intends to solicit donations from the public, you’ll likely need to register as a charity with your state’s office of the attorney general or secretary of state. When you organization registers as a charity, you can expect to pay a state registration fee, and most states will require you to renew your charitable solicitation license each year.
Want the particulars for how to register as a charitable organization in your state? Head to our state map at the bottom and select your state.
What’s the difference between nonprofit and not for profit?
The main difference between nonprofits and for-profit corporations is the way nonprofits spend their revenue. For-profit businesses exist to enrich their owners, members, or shareholders, but nonprofit organizations dedicate their income and assets to the pursuit of their nonprofit goals.
Learn more about other kinds of corporations on our Start a Corporation page.
10. Submit Required Nonprofit State Reports
Most states require a nonprofit to submit occasional state reports updating or confirming the organization’s information on the state’s records. These updates are usually called annual, biennial, or periodic reports. Some states also require nonprofits to file an initial report (a report due upon or shortly after starting your nonprofit). Charitable organizations, moreover, usually need to renew their charitable solicitation licenses every year.
Learn what you need to know about your state’s Nonprofit Reporting Requirements.
*This is informational commentary, not advice. This information is intended strictly for informational purposes and does not constitute legal advice or a substitute for legal counsel. This information is not intended to create, nor does your receipt, viewing, or use of it constitute, an attorney-client relationship. More information is available in our Terms of Service.
Ready to Start a Nonprofit?
Click on one of the state names below to learn more about how to start a nonprofit in your home state. Better yet, click “Get Started” now to sign up for any of our services—from registered agent services to nonprofit incorporation—and let Northwest Registered Agent guide you.