How To Register a Nonprofit

Many entrepreneurs have greater goals than just making money. They want to give back to their communities or help solve problems, too. Doing so at a large scale often requires formalizing your vision by starting a nonprofit organization (NPO). An NPO is a legal entity formed for a public benefit, not for private financial gain. Any “profit” generated must be reinvested back into the non-profit’s mission and progress.

Registering a nonprofit grants it a unique legal and tax status that makes it eligible for grants and tax-deductible donations, and reduces its taxable liability. If you have a dream of giving back, you’ll need to know how to register a nonprofit. Here, we give you a comprehensive roadmap.

What to Do Before You Register a Nonprofit

Before you start the official process, there’s some foundational work to do. It’s crucial to take the time to think through your nonprofit’s identity. You’ll need to define your mission and vision, creating a mission statement that defines your organization’s core purposes and its primary activities. This will help inform your work, your culture, your decisions, and clarify who you do this work for.

In addition to crafting a mission statement and defining your purpose, you’ll also need to:

• Choose and secure a name: Check name availability with the Secretary of State’s name database to ensure it’s available.
• Assemble a board of directors: Most states require at least three board members to incorporate a nonprofit, but you should check your state’s specific requirements. Board members have important governance, fundraising, and strategic duties, so make sure you’re working with experienced, passionate people.
• Draft bylaws: These are the operating manual for your nonprofit. They should define board member duties and terms, officer roles, and more.
• Appoint a registered agent: A registered agent is an individual or entity authorized to receive legal and tax documents on behalf of the nonprofit. All states require a registered agent for official communications.

How to Register at the State Level

With your foundational elements in place, you’re ready to take the first official step: Registering your nonprofit with your state

Incorporate Your Nonprofit

To become an official nonprofit, you must file Articles of Incorporation with your state’s Secretary of State or equivalent state agency. Typically, you must include your nonprofit’s official name and address, a clear purpose statement (crucial for 501(c)(3) eligibility), registered agent information, names and addresses of initial directors, and a specific dissolution clause (mandated for 501(c)(3) status).

Once your Articles are approved, the state will issue a Certificate of Incorporation, confirming your nonprofit’s legal existence.

Obtain State Tax Exemptions

Federal 501(c)(3) status does not automatically grant state tax exemptions, so if you do want to pursue state tax exemption status, there’s a separate process. It varies by state, but usually you’ll submit a copy of your nonprofit’s official name and address, a clear purpose statement (crucial for 501(c)(3) eligibility), registered agent information, names and addresses of initial directors, and a specific dissolution clause (mandated for 501(c)(3) status).

Register for State Charitable Solicitation

Most nonprofits rely on donations, but you’ll need to register your nonprofit in many states before you can start soliciting donations. If you plan to fundraise across state lines (e.g., through online campaigns), you may need to register in multiple states.

How to Register at the Federal Level

Registering a nonprofit at the federal level is the most important step because 501(c)(3) federal tax-exempt status is a major benefit for nonprofits.

Obtain an Employer Identification Number (EIN)

First, like a business, you must obtain an Employer Identification Number (EIN). You need an EIN to open a bank account, file tax returns, and hire employees. Applying for an EIN is simple, and you can do it through the IRS website. The application is free and quick.

Understand 501(c) Classifications

The IRS recognizes various types of tax-exempt organizations under section 501(c) of the Internal Revenue Code. The most common is 501(c)(3) (charitable, educational, etc., with tax-deductible donations), but other types include 501(c)(4) (social welfare) and 501(c)(6) (business leagues).

The type you apply for will depend on your primary goals, but most organizations pursue 501(c)(3) status since it allows donors to deduct contributions.

Apply for 501(c)(3) Status with the IRS (Form 1023)

Finally, when you’re ready, it’s time to formally apply to the IRS for recognition of your tax-exempt status. To be eligible, your organization must be organized and operated exclusively for exempt purposes, ensure no private inurement, limit lobbying, and refrain from political campaign intervention.

To apply, follow these steps:

1. Complete Form 1023: The 501(c)(3) application is necessary for all nonprofits, but smaller ones with gross receipts under $50,000 annually and total assets under $250,000 may use a more streamlined Form 1023-EZ.
2. Provide documentation: You’ll need to submit your filed Articles of Incorporation, adopted Bylaws, Conflict of Interest policy, detailed financial data, and a comprehensive narrative of activities.
3. Pay fees: The IRS charges a non-refundable application fee.
4. Receive IRS Determination Letter: After a few weeks or months, you will receive an IRS Determination Letter informing you of your approval (or rejection).

Take the time to fill out the application clearly and completely because accuracy and completeness are of paramount importance.

Ongoing Compliance

Achieving federal tax-exempt status is a huge milestone, but it’s not the end of your legal responsibilities. Ongoing compliance is crucial to maintain your nonprofit’s good standing and tax-exempt status. That means:

• Annual IRS filings: All tax-exempt organizations are required to file Form 990 (Form 990-N for $50,000 or less, Form 990-EZ for less than $200,000, Form 990 for $200,000 or more) annually with the IRS. These forms are due by the 15th day of the 5th month after your fiscal year ends. Failure to file on time for three consecutive years can result in the automatic revocation of your tax-exempt status.
• Annual state filings: Most states also require annual or biennial reports to maintain corporate good standing. If you registered for charitable solicitation, you will likely need to renew these registrations annually.
• Maintaining accurate records: You are legally required to keep detailed records of your nonprofit, including finances, board meeting minutes, donor records, and volunteer hours.
• Keeping records public: Your annual Form 990s are public documents, and you must ensure they’re made available to the IRS.