This page is a guide to setting up a new nonprofit — with or without 501(c)(3) tax-exempt status. This is just a guide, not legal advice. Consult a lawyer, accountant, or other professionals as needed for detailed procedures. The list below provides the next steps after the organization’s name and mission are established. As the process will vary, the steps do not need to follow this order.
Confirm Organization Name
Check online, trademarks, and with the Secretary of State to confirm that your organization’s name is available. See below of DBA info.
Choose a State
Often the state chosen is where the founder(s) resides, but it can be in another state. We recommend an online search for the pros and cons of different states. Delaware is considered a good choice for organizations that are mostly remote. Here also is Florida. [compare states]
Choose Board Members
Most states require a minimum of three board directors. A notable exception is Delaware, which only requires one (often the founder). [more info]
Select a Registered Agent
A registered agent is an individual or company that is located in the state of incorporation and accepts mail on behalf of the organization. It can be an individual (often the founder), another organization, or a registered agent company (for a fee). If there is no office, this is often the public-facing address for the organization, but it can be exclusively used for government and business administration.
Create Articles of Incorporation
The Articles of Incorporation specify the organization’s structure. It is the most robust of the founding documents. The specifics will vary by state, but generally include statement of purpose, dissolution clause, board of director names, and voting processes. Even if the organization is not intended to be a 501(c)(3), we highly recommend matching the national IRS requirements – IRS language requirements. [more details]
Create Bylaws
Bylaws are the basic rules of an organization. They spell out procedures such as how many board meetings there will be a year (the federal minimum is one, but having more is recommended). Bylaws are an internal document that can be changed later. They can be written in plain language and don’t have to be long. Oftentimes, they do NOT need to be filed with the state. Some of the information in the Bylaws will be repeated in the Articles of Incorporation. Difference between Bylaws and Articles of Incorporation.
Hold Founding Board Meeting
- Approve Bylaws.
- Officially elect board directors.
- Establish accounting period (usually fiscal year: January 1 – December 31).
- Approve initial organization set up tasks (such as setting up bank account).
- Approve registered agent.
- Grant authority to sign paperwork and act on behalf of the organization (usually the founder and/or board director).
- Create minutes afterwards that detail what’s been approved.
- Choose a location to hold these and other documents (Google drive is popular for online access).
Register Nonprofit with the State
File the Articles of Incorporation and other supporting documentation to register with the state (ex: Delaware and Florida). Depending on the state, the organization’s full Articles of Incorporation may be submitted and/or the state will have a specific form asking for the relevant pieces.
Apply for an EIN
After the organization is formed as outlined above (as a corporation), apply for an EIN (Employer Identification Number). This is the organization’s ID that is needed for most official business. It is essentially the social security number for the organization. The person considered the “responsible party” (usually the founder) has to provide their social security number. The EIN is provided immediately on completion of the online EIN application. You can also apply for an EIN by mail.
Set Up a Business Bank Account
Choose a bank and set up a business account (advice). The founder is usually the primary account holder. It is recommended to have another trusted party, such as a board director and/or the executive director. Traditional “brick-and-mortar” banks with physical buildings may require one or more of the authorized signers to apply in person. There are pros and cons to fully online banks, but we recommend traditional banking, especially if large sums of money are involved.
Apply for 501(c)(3)
IF applying for federal tax-exempt status, complete Form 1023 – Instructions – Resource #1 – Resource #2.
Alternatively, consider a fiscal sponsorship.
Manage Ongoing Business and Tax Requirements
Now that the organization is officially established, determine which state and federal business reports are due and when. States often have an annual report. Similar to individual taxes, an annual federal tax report is due by April 15th or May 15th of the following year. Regardless of size or type, every organization must file a federal tax report. Nonprofits that are not a 501(c)(3) tax-exempt organization are responsible for paying taxes.
Overview of management responsibilities (partial):
- Annual Federal Tax Report (990) and Audit (annual – extensive)
- Annual Report to State (each state with employee – nominal)
- Fundraising State Registrations (annual – extensive)
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Payroll Taxes – Federal (quarterly/annual/W2/1099 – notable)
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Payroll Taxes – State (quarterly/annual – varies)
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Bookkeeping (ongoing – varies)
- Unemployment Forms (annual – nominal)
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New Hire Filing (once – nominal)
BONUS: DBA (Doing Business As)
A DBA is similar to a nickname. In addition to doing business as your official name, you are also Doing Business As the alternate name. This is especially useful to create a user-friendly business name for a sole proprietorship (instead of just your own name).
It is also, an option for organizations to have alternate names for different programs and/or target audiences. For example, we sometimes use: “Plants-4-Hunger.” Here’s more info on DBAs. They are registered in your state of incorporation.