How to Start a Nonprofit in Illinois

1. Name Your Organization

   Your organization’s name establishes its brand and is also important for incorporating with the state. The legal name of your nonprofit corporation may not conflict with any other organization registered in the state. Make sure the name is available and meets state requirements.

   Name Search:

   Illinois Secretary of State - Business Services Department Name search

   Suffix:

   May contain, separate and apart from any other word or abbreviation in such name, the word "corporation," "company," "incorporated," or "limited," or an abbreviation of one of such words. Must end with the letters "NFP" if the corporate name contains any word or phrase which indicates or implies that the corporation is organized for any purpose other than a purpose for which corporations may be organized under this Act or a purpose other than a purpose set forth in the corporation's articles of incorporation.  805 ILCS §105/104.05

2. Recruit Incorporators and Initial Directors

   The incorporator is the person who signs the Articles of Incorporation for your nonprofit. You will need at least one, but can have more than one. Directors make up the governing body of your nonprofit corporation and are stakeholders in your organization’s purpose and success. You’ll want to identify three, unrelated individuals to meet IRS requirements. You will also want to be aware of any age or residency requirements.

   Illinois director requirements:	Number: minimum 3 Qualifications: None. No residency requirement. No membership requirement. Term: until next election unless staggered as provided in the articles of incorporation or bylaws Quorum: majority Committee: minimum 2 directors and directors must be the majority of membership, except for committees involved in electing directors
   Illinois officer requirements:	Defined in articles or bylaws. One officer certifies corporate records (e.g. the Secretary). Two or more offices may be held by the same individual, if the bylaws so provide.

3. Appoint a Registered Agent

   A registered agent is responsible for receiving legal notices on behalf of your organization. The appointed registered agent must be physically located in the state and maintain an office that is open during regular business hours. As a nationwide registered agent, our service is designed to receive your legal documents and provide secure access to those documents through your online account. Our local Illinois registered agent office is located in Springfield, IL. We offer registered agent service independently or as part of our nonprofit formation packages.

4. Prepare and File Articles of Incorporation

   Your nonprofit’s articles of incorporation officially mark the creation of your organization. They document where and when the organization was formed and capture other information necessary to verify its existence. While requirements for language vary from state-to-state, there are some basic provisions that the IRS will look for when you apply for 501(c)(3) exemption. It is important to customize the articles for your organization and make sure you meet the state and IRS requirements. Meeting these requirements from the start will help avoid having to make amendments later or risk getting your 501(c)(3) application rejected. Some states will also require you to publish your articles of incorporation, so be mindful of any deadlines and publishing instructions.

   Agency:	Illinois Secretary of State - Business Services Department
   Form:	Form NFP 102.10: Articles of Incorporation
   Filing Method:	Mail, fax (only if you have a prepaid account), or online
   Agency Fee:	$50 by mail or $75 online
   Turnaround:	~2 weeks by mail or fax. ~1-5 business days if you file online and pay the $100 expedite fee.
   Law:	805 ILCS 105
   Notes:	The purpose of the corporation must be selected among the 33 purposes listed in Section 103.05(a) of the General Not-For-Profit Corporation Act. You must file by paper to include additional provisions such as those required for 501(c) tax exemption. When you file by mail you must submit the original articles with signatures in black ink and one copy.

5. File Initial Report

   After filing articles of incorporation, you must file an initial report.

   Not required

   
   
   

6. Obtain an Employer Identification Number (EIN)

   This unique, nine-digit number is assigned by the IRS to identify your nonprofit. All types of nonprofits will apply for an EIN, not only those that hire employees. You will use your EIN to open a bank account, apply for 501(c)(3) status, and submit 990 returns to the IRS.

   Agency:	Internal Revenue Service (IRS)
   Form:	IRS Form SS-4
   Filing Method:	Mail, phone, fax, or online.
   IRS fee:	$0
   Turnaround:	Immediately online or by phone. 4 business days by fax. 4-5 weeks by mail.
   Notes:	The IRS website is only available during certain hours. Print your EIN before closing your session. For additional guidance, see IRS Pub 1635: Understanding Your EIN.

7. Store Nonprofit Records

   As you launch your nonprofit, you will receive a number of official documents. Organizing these documents in one place will save you headaches down the road. You will soon have numerous items to keep in your records including your EIN letter, bylaws, meeting minutes, 501(c)(3) determination letter, and more.

   
   
   

   A great way to maintain necessary documentation is Records Manager, our software for storing records securely, tracking directors and officers, and getting notified of meetings.

8. Establish Initial Governing Documents and Policies

   Your bylaws are the governing document for your nonprofit. They serve as your organization’s operating manual and should be consistent with your articles of incorporation and the law. When your Board of Directors meets for the first time, you’ll review and ratify the bylaws and they will be a roadmap for governance from there.

   At the same time, you’ll also want to create and adopt a conflict of interest policy. A conflict of interest is when someone in a key position in your nonprofit has competing interests and is making choices that could benefit themselves to the harm of the organization. Personal interests should be set aside and organizational interests prioritized. If a conflict of interest does arise, it should be disclosed immediately.

   Your application to the IRS for 501(c)(3) exemption will require that both the bylaws and the conflict of interest policy are approved and adopted. Once they’ve been adopted, safely store them in your Nonprofit Records Kit.

9. Hold Organizational Meeting of the Board of Directors

   The initial organizational meeting of your Board of Directors will be incredibly productive. At this meeting you will approve the bylaws, adopt the conflict of interest policy, elect directors, appoint officers, and approve resolutions such as opening the organization’s bank account. Important decisions are being made so be sure to record them in the meeting minutes.

10. Get Illinois State Tax Identification Numbers/Accounts

    Illinois offers a consolidated state tax registration application.

    Submit to:	Illinois Department of Revenue http://www.revenue.state.il.us/
    Form:	Form REG-1: Illinois Business Registration Application
    Filing Method:	Mail or online
    Fee:	State fee varies depending on tax accounts needed

11. Apply for 501(c)

    Applying for 501(c) tax exemption can feel like the most daunting step in bringing your nonprofit dream into reality, but obtaining tax exemption comes with many benefits. You will be able to apply for grants and grow your fundraising success in addition to being exempt from IRS income tax. 501(c) is the chapter of the Internal Revenue Code that regulates nonprofit organizations. Like others, you may be most familiar with 501(c)(3) nonprofits, including charities and foundations. 501(c)(3) nonprofits apply using Form 1023 or Form 1023-EZ. Review the criteria for each application and make sure you meet the eligibility requirements set out by the IRS. Other types of nonprofits, including 501(c)(4)s and 501(c)(6)s, apply using Form 1024. After reviewing and approving your application, the IRS will return a Determination Letter officially recognizing your exemption.

    Completing the federal application for tax exemption is significantly easier with the assistance and support of a professional. Find someone with the expertise to ensure the correct application is being used and is completed accurately. A well-prepared application takes time, over 100 hours by IRS estimates, so put yourself on the path to success by finding a specialist to walk alongside you in the journey - from start to tax-exempt finish!

    Agency:	Internal Revenue Service (IRS)
    Form:	IRS Form 1023, IRS Form 1023-EZ, or IRS Form 1024
    Instructions:	IRS Instructions for Form 1023, IRS Instructions for Form 1023-EZ, or IRS Instructions for Form 1024.  Also see guidance IRS Pub 557: Tax-Exempt Status for Your Organization.
    Filing Method:	Mail
    Agency Fee:	$275 for organizations filing Form 1023-EZ and $600 for organizations filing Form 1023.
    Turnaround:	1023-EZ average: <1 month. 1023 average: 3-6 months.

    

    Tax-Exempt in 2 Weeks!

    Download the case study of how our client, Reform It Now, obtained 501(c)(3) tax exemption in only two weeks using the new IRS Form 1023-EZ!

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    Dr. Bob A.Reform It Now, Inc.

12. Apply for State Tax Exemption(s)

    With your IRS Determination Letter in hand, make sure you familiarize yourself with your state’s requirements for recognizing your nonprofit’s tax-exempt status. This is an area where requirements vary state-by-state. Many states issue their own tax-exempt certificate that can be used for sales and use tax purposes, but it may require application and periodic renewal.

    To file to obtain exemption from state income tax:

    Not required

    
    
    

    If your corporation receives a federal tax exemption, it is exempt from Illinois income tax. No reports need to be filed and no tax is due.

    More information: Illinois Department of Revenue

    To file to obtain Sales Tax:

    Agency:	Illinois Department of Revenue
    Form:	STAX-1: Application for Sales Tax Exemption
    Agency Fee:	$0

13. Register for Charitable Solicitation (Fundraising)

    This is another area where laws differ from state to state, but most states require any nonprofit soliciting donations to register to do so on an annual basis. This means registering in the state prior to soliciting any resident of that state. Registering in your home state is essential, but you may also need to register other states depending on the scope of your organization.

    Illinois Charitable Organization Registration

    Agency:	Illinois Attorney General - Charitable Trust Bureau
    Law:	225 ILCS 460/2 and 760 ILCS 55/5
    Foreign Qualification is Prerequisite:	Yes
    Registered Agent (Special Agency) Required?	Yes

    Automatic Exemption

    More Details

    Exemption Eligible Organizations:

    The University of Illinois, Southern Illinois University,Eastern Illinois University, Illinois State Normal University, Northern Illinois University, Western Illinois University, all educational institutions that are recognized by the State Board of Education or that are accredited by a regional accrediting association or by an organization affiliated with the National Commission on Accrediting, any foundation having an established identity with any of the aforementioned educational institutions, any other educational institution confining its solicitation of contributions to its student body, alumni, faculty and trustees, and their families Fraternal, patriotic, social, educational, alumni organizations and historical societies when solicitation of contributions is confined to their membership Persons requesting any contributions for the relief or benefit of any individual if the contributions collected are turned over to the named beneficiary, first deducting reasonable expenses for costs of banquets, or social gatherings, if any, provided all fund raising functions are carried on by persons who are unpaid, directly or indirectly, for such services Any bona fide union, bona fide political organization or bona fide political action committee, which does not solicit funds for a charitable purpose Any charitable organization receiving an allocation from an incorporated community chest or united fund provided certain conditions are met A bona fide organization of volunteer firemen, or a bona fide auxiliary or affiliate of such organization, provided all its fund raising activities are carried on by members of such an organization or an affiliate thereof and such members receive nocompensation, directly or indirectly Any charitable organization operating a nursery for infants awaiting adoption providing that all its fund raising activities are carried on by members of such an organization or an affiliate thereof and such members receive no compensation, directly or indirectly Any corporation established by the Federal Congress that is required by federal law to submit annual reports of its activities to Congress Any boys' club which is affiliated with the Boys' Club of America provided, however, that such an affiliate properly files the reports required by the Boys' Club of America and that the Boys' Club of America files with the Government of the United States the reports required by its federal charter Any veterans organization chartered or incorporated under federal law and any veterans organization which is affiliated with, and recognized in the bylaws of, a congressionally chartered or incorporated veterans organization Any parent-teacher organization that is controlled by teachers and parents of children attending a particular public or private school for which the organization is named and solicits contributions for the benefit of that particular school provided that certain conditions are met

    Notes:

    Fax a letter to the charitable trust bureau requesting exemption.

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	Religious organizations
    Form:	Form CO-3: Religious Exemption Form
    Agency Fee:	$0
    Notarize:	Required
    Notes:	Exemptions do not expire as long as the organization continues to qualify under the exemption criteria.

    Initial Registration

    More Details

    Form:	Form CO-1: Registration Statement
    Filing Method:	Mail
    Agency Fee:	$15
    Turnaround:	4-6 weeks
    Notes:	President and CFO or another authorized officer must sign. They must be two individuals. Notarization of signatures is not needed. Some Illinois counties and municipalities may require charities that solicit in-person to register prior to fundraising.
    Before you Apply:	Domestic Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Illinois. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application. Foreign Applicants: Check the available exemptions to see if your charity is eligible for exemption from the full registration requirement. Appoint a registered agent to receive legal documents in Illinois. Obtain certified copies of your articles of incorporation (including amendments) to file during the foreign qualification process. These documents must be dated within 90 days of the date of application for foreign qualification. If your charity meets the audit threshold, obtain an audited financial report to submit with your registration application. Look through the list of required attachments and make sure that you have each required document in hand before starting the registration application.
    How to Apply:	Domestic Applicants: File entity formation documents with the Illinois Secretary of State - Business Services Department. Submit a Registration Statement and all required attachments to the Illinois Attorney General - Charitable Trust Bureau. Foreign Applicants: File foreign qualification documents with the Illinois Secretary of State - Business Services Department (The foreign qualification requirement may be waived by sending a letter to the department notifying them that the charity is not required to register with the Secretary of State). Submit a Registration Statement and all required attachments to the Illinois Attorney General - Charitable Trust Bureau.
    Required Attachments:	IRS form 990 Audited financials (if applicable) Articles of incorporation (or Constitution and all amendments and By-Laws if an unincorporated association) Bylaws IRS determination letter List of officers and directors Professional fundraising contracts A signed statement indicating no funds were solicited or held in Illinois at any time prior to registration Certificate of authority to do business in Illinois If a representative of a probate estate, Will and Letters of Office. Inventory; Declarations of Trust for any trusts into which the Will pours over and all Amendments thereto. If a charitable trust or a living inter vivos trust, Declaration of Trust, and all Amendments thereto; Inventory and recent accounting. If the organization has been in existence for less than 1 year, also submit Form CO-2: Financial Information Form

    Registration Renewal

    More Details

    Form:	Form AG990-IL: Illinois Charitable Organization Annual Report
    Filing Method:	Mail
    Agency Fee:	$15
    Due:	Annually 6 months after the close of your fiscal year. So if your fiscal year ends December 31, then renewal is due June 30. There is no official start to the renewal period, so renewals may be submitted as soon as financials become available for the most recently completed fiscal year.
    Due Date Extension:	Due dates can be extended for 60 days beyond the original due date by sending a letter including the name, CO number, and EIN number of the charity to the attorney general's office. If more time is needed, a second extension of an additional 2.5 months is available. When applying for a second extensions, charities must submit an unsigned AG990IL with "draft" written at the top, a letter requesting extension, preliminary income statement and balance sheet, IRS Form 8868, and the $15 renewal fee.
    Original Ink:	Not required
    Penalties:	There is a late fee of $100.
    Notes:	Include all required attachments, including finanical audit if needed.
    Required Attachments:	IRS form 990 Audited financials (if applicable) IFC Report of Individual Fund-Raising Campaign (if applicable)

    Change of Fiscal Year

    More Details

    Form:	Form AG990-IL: Illinois Charitable Organization Supplement
    Agency Fee:	$0
    Notes:	Send a letter indicating change of fiscal year and then draft AG990-IL (unsigned) and letter requesting extension.

    Cancellation

    More Details

    Form:	AG990-IL Charitable Organization Annual Report
    Agency Fee:	$15
    Notes:	To close out your registration, file a final annual report with "FINAL" written across the top and original signatures. Organizations must also provide a letter indicating that they wish to withdraw and proof of dissolution or withdrawal from the Secretary of State.

    To fundraise nationally or online, please see our Fundraising Compliance Guide. Our services manage your initial, renewal, and exemption filings in every state.

14. Obtain Other Business Licenses & Permits

    Running your nonprofit corporation legally also means securing all applicable licenses and permits. The range of local, state, and federal requirements is wide. Access resources like the Small Business Administration Business License & Permit look-up tool and search by your business type and locality.

    Illinois nonprofits who wish to conduct bingos, raffles, and other charitable games must register with Illinois Department of Revenue - Office of Bingo and Charitable Games to be compliant with the Illinois Charitable Games Act. You must apply at least 30 days before the event. One annual application is good for four events. To apply, submit:

    • Form RCG-1: Charitable Games Application for License
    • Form RCG-2: List of Charitable Game Workers
    • Form RCG-10: Diagram of Charitable Games Event Playing Areas
    • Any other required attachements
    • $200 state fee

You’ve made it! You turned your passion into a legitimate nonprofit corporation exempt under IRS 501(c) and are benefiting your community. That solid foundation on which you built your organization requires ongoing maintenance. Investing in maintaining compliance with all of the government agencies is an ongoing responsibility and commitment needed to ensure your vision continues long into the future. Check out our compliance guide to learn more!

Once you have registered your nonprofit per the steps listed above, you will need to maintain compliance with all of the government agencies. Staying current with the IRS and state requirements is an ongoing responsibility. Continue reading our Illinois nonprofit compliance guide to learn more!

Continue reading "Illinois Nonprofit Compliance"

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