The Nonprofit Guide
Corporate Compliance by Local Corporate Guides®
Nonprofits are formed at the state level in the US and are often eligible for state sales, property, and income tax exemptions. If properly organized, many nonprofits can also obtain federal tax exempt status, such as 501(c)(3) status for charitable organizations, by applying to the IRS.
We recommend working through this start a nonprofit guide to understand the general concept and then following the linked pages to learn more about how to start a nonprofit organization in your state.
Starting a Nonprofit - Now What?
- Choose your nonprofit's name
- Appoint a registered agent
- Submit NP Articles of Incorporation
- Adopt nonprofit bylaws
- Get an EIN from the IRS
- Open your nonprofit bank account
- Apply for 501(c)(3) tax exempt status
- Apply for state tax exemptions
- Obtain required licenses and permits
- Register as a charity
- Submit any required state reports
- File IRS Form 990
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. Nonprofit corporations do not issue stock or distribute dividends to their members, which is why some states call nonprofit corporations “nonstock corporations.”
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.
How are nonprofits different from for-profit companies?
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.
Can nonprofit organizations make a profit?
Yes. 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.
How to Start a Nonprofit
Before you start a nonprofit organization, you’ll need to name it, and you’ll need to make sure that 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.
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.
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 formation 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, and 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.
After you start a nonprofit by filing Articles of Incorporation with the state, you should hold an organizational meeting and adopt nonprofit bylaws. Your nonprofit bylaws should outline how your organization functions by defining the duties of its officers and directors, its conflict of interest policy, its procedures for maintaining meeting minutes and other important records, and any other matters essential to the organization’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.
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, by mail, or by phone.
Everything you need to know about getting an EIN.
Nonprofit Bank Account
Once you start a nonprofit at the state level, it becomes a legally distinct business entity, which means the organization needs to have its own business bank account and keep its income and assets separate from those of its members and managers. Opening a bank account for a nonprofit organization usually requires a few key documents: your nonprofit Articles of Incorporation, nonprofit bylaws, and EIN. Some banks will always want a board-approved resolution authorizing you to start a bank account in the organization’s name.
Be prepared. We offer a free resolution for opening a corporate bank account that you can adapt to the needs of your nonprofit.
501(c)(3) Federal 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.
Curious about the special language and provisions the IRS requires for 501(c)(3) organizations? Wondering if your nonprofit can take part in lobbying or influence political campaigns? How about the effects of new tax laws on fundraising? Check out our articles on these topics.
State 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? Select your state, go to “Opening” on the drop-down menu, and select “[Your State] Tax Exemption.”
Business Licenses and 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.
Charitable Solicitation Registration
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? Select your state, go to “Opening” on the drop-down menu, and select “Register a Charity” to learn more.
Nonprofit State Compliance
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.
The IRS Form 990 Series
If your nonprofit isn’t tax exempt, it will pay taxes like any other business entity based on the business structure you choose. But if you obtained tax exempt status under Section 501(c) of the Internal Revenue Code, you’ll typically need to submit an annual informational return to the IRS. For 501(c)(3) organizations, this annual return will come from the IRS Form 990 series, which includes IRS Form 990, 990-EZ, 990-N, and 990-PF. The form you submit will depend on your nonprofit’s purpose, structure, and annual revenue, and it is due on the 15th day of the 5th month after the end of your nonprofit’s taxable year.
Learn more about IRS Form 990 at Northwest’s Guide to 501(c)(3) Tax-Exempt Status.
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.