How to Form Nonprofit Organizations

Forming a non-profit organization requires registering with state and federal governments.

A non-profit organization or not-for-profit organization is a type of business that is not allowed to distribute any profits amongst the owners. Non-profit businesses are eligible for certain tax benefits from the Internal Revenue Service (IRS). Many registered non-profit businesses have been further organized into corporations and associations, but it is also acceptable to remain an unincorporated non-profit organization and still receive the same tax benefits that non-profit corporations receive from the IRS.

Instructions

1. Write an original mission statement for the organization. Describe the organization's purpose and define why the organization exists. Outline the services the organization will offer and what groups of people will benefit the most.

2. Create a unique name for the new non-profit organization. Choose a name that accurately represents the services provided by the non-profit organization and to whom these services might be provided. The name can be changed in the future, if necessary.

3. Recruit a small number of board members to help set up the new non-profit. Choose people who can devote about 10 hours per month to help set up the non-profit, have some sort of expertise in their area and who are interested in the non-profit's overall mission.

4. Draw up a list of by-laws for the non-profit. These are the board's own rules that regulate how the non-profit will be set up and managed, as well as how the board will operate.

5. Draw up the official Articles of Incorporation. Check with the state in which the non-profit will reside to obtain that state's proper documentation. Many people find it necessary to consult with a lawyer or attorney to help draw up proper Articles of Incorporation.

6. File the necessary Articles of Incorporation with the Secretary of State's office in the state where the non-profit is being set up.

7. Wait for the state to approve the Articles of Incorporation and any other documents required by the state in which the non-profit is to reside. In the meantime, meet with the board members and draw up a budget plan for the non-profit. Determine how much money should be spent on what when the non-profit receives any income.

8. Set up an accounting system that will function to regulate and keep track of the non-profit's budget plan. This will exist as a system of checks and balances that will keep the non-profit in order, and further define the ways in which money is routinely handled within the non-profit.

9. Obtain and fill out the IRS form 1023. Return the completed form to the IRS in order to file for 501(c)3 status.

10. File an application to obtain a federal employer identification number (EIN) for the non-profit. This can be obtained from the IRS.

11. File the applicable state and local tax exemptions for the non-profit. This is required by law, and exists to assist the non-profit in becoming exempt from having to pay various taxes normally paid by other companies.

12. Obtain the proper permit or license required by the state in which the non-profit resides. Contact the state's attorney general's office for the necessary information.

13. Contact the United States Postal Service and obtain Publication 417, the Nonprofit Standard Mail Eligibility document. If eligible, apply for a non-profit mailing permit. If approved, the non-profit will receive special postage rates for the non-profit's mailing needs.

References

• Management Help: "How to Start a Nonprofit"
• Starting A Non Profit: "What Are The Key Steps to Forming a Non profit?"
• IRS: Topics for Charities & Non profits"

Resources

• United States Postal Service: Publication 417, Nonprofit Standard Mail Eligibility
• Starting A Non Profit: List of Nonprofit Requirements by State