How to Start a Nonprofit in Maryland

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:	Maryland State Department of Assessments and Taxation (SDAT) Name search
   Suffix:	The name of a corporation must include one of the following words or an abbreviation of one of the following words: (1) "Company", if it is not preceded by the word "and" or a symbol for the word "and"; (2) "Corporation"; (3) "Incorporated"; or (4) "Limited".  Maryland Code §1-502(a)

2. Choose a Maryland nonprofit corporation structure

   Maryland offers three types of nonprofit corporations:

   Religious Corporation	This type of corporation is appropriate only for incorporating a religious congregation which will be requesting tax-exempt status.
   Tax-Exempt Nonstock Corporation	This type of corporation would be most appropriate for one or more individuals engaged in a nonprofit enterprise. Use this version if you intend to apply for federal income tax exemption under §501(c)(3) or similar IRC subsection.
   Nonstock Corporation	This type of corporation would be most appropriate for one or more individuals engaged in a nonprofit enterprise.

3. 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.

   Maryland director requirements:	Number: minimum 1 Qualifications: None. No residency requirement. No membership requirement. Term: next annual meeting and until successor elected and qualified Quorum: majority Committee: minimum 1 director
   Maryland officer requirements:	A president, a secretary, and a treasurer are required. Term: 1 year and until successor elected and qualified Two or more offices may be held by the same individual, if permitted by bylaws, except the offices of president and vice president. This person may sign instruments in only one capacity when the signatures of two officers are required.

4. 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 Maryland registered agent office is located in Oakland, MD. We offer registered agent service independently or as part of our nonprofit formation packages.

5. 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:	Maryland State Department of Assessments and Taxation (SDAT)
   Form:	Articles of Incorporation for Tax-exempt Nonstock Corporation
   Filing Method:	Mail, fax, in-person, or online.
   Agency Fee:	$100 filing fee + $20 organization & capitalization fee + $50 development center fee if applying for 501(c)(3),(4), or (6) + optional $5 return mail fee + optional $50 expedite fee. The expedite fee is required to file online, by fax, or in-person.
   Turnaround:	~10+ weeks. ~7 business days with expedite fee online or by fax. Same-day if filed in-person with expedite fee by 4:15pm.
   Law:	Code of Maryland - Corporations and Associations - Title 5: Special Types of Corporations
   Notes:	If you do not pay the expedite fee, you could have to wait 10+ weeks for the secretary to process your articles. Upon processing, you will only receive notice of filing if you pay the $5 return mail fee; otherwise, look in the secretary's online records ~10 business days later to see your entity record.

6. File Initial Report

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

   Not required

   
   
   

7. 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.

8. 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.

9. 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.

10. 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.

11. Get Maryland State Tax Identification Numbers/Accounts

    Newly formed organizations are automatically enrolled in Maryland property tax.
    
    Register for a Maryland tax accounts and licenses by filing:

    Submit to:	Comptroller of Maryland http://www.comp.state.md.us/
    Form:	Form CRA: Maryland Combined Registration Application
    Filing Method:	Mail or online
    Fee:	$0
    Notes:	This registration includes an admissions and amusement tax account, alcohol tax license, income tax withholding account, motor fuel tax account, sales and use tax license, use tax account, transient vendor license, sales and use tax exemption certificate (for nonprofit organizations), tire recycling fee account, tobacco tax license, and/or unemployment insurance account.

    Other local taxes in Maryland require no additional registration. Questions can be directed to Maryland local taxing agencies.

12. 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.

    

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13. 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:

    Agency:	Comptroller of Maryland
    Agency Fee:	$0
    Notes:	Submit: Request for exemption from Maryland income tax, an explanation of the nature, purpose, and scope of your organization, IRS tax determination letter, by-laws, and latest financial statement of your organization.

    To file to obtain Sales Tax Exemption:

    Agency:	Comptroller of Maryland
    Form:	Sales and Use Tax Exemption Certificate Application
    Agency Fee:	$0
    Notes:	Must have IRS tax determination letter first.

    Apply for exemption from Maryland property tax with the Maryland SDAT office where the property is located. Certain charitable, fraternal, educational, and religious organizations may be eligible. Apply by September 1st or the exemption will be delayed until the following year. Find your assessment office and exempt application.

14. 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.

    Maryland Charitable Organization Registration

    Agency:	Maryland Secretary of State - Charitable Organizations Division
    Law:	Maryland Ann. Code, Business Regulation Article, § 6-401 et seq
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	No

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	A volunteer organization of firefighters or rescue or ambulance personnel for its ambulance, fire fighting, or rescue operations   Charitable organizations that do not use a professional solicitor and either: solicit charitable contributions for a named individual and the gross amount is delivered to the individual; are a religious organization, a parent organization of a religious organization, or a school affiliated with a religious organization and have in effect a declaration of tax-exempt status from the government of the United States; solicit charitable contributions only from their members (including accredited educational institutions that limit solicitations to students, former students, parents of a student or former student, present or former board members, and staff members); or only receive contributions from for-profit corporations and organizations determined to be private foundations by the government of the United States   Additionally, the Secretary of State may exempt from the requirement of a registration statement or annual report a charitable organization that: is organized under the laws of another state that has a statute substantially similar to this title; has been exempted from the submission of a registration statement by that other state; has its principal place of business outside of Maryland; and gets its money principally from sources outside of Maryland.
    Law:	Maryland Ann. Code, Business Regulation Article, § 6-102 and Maryland Ann. Code, Business Regulation Article, § 6-413
    Notes:	There is no registration requirement, but charities must submit a letter to the Secretary of State stating their claim of an exemption.

    Registration to Obtain Exemption

    More Details

    Exemption Eligible Organizations:	Charities that received less than $25,000 in contributions during their most recent fiscal year
    Form:	Exempt Organization Fundraising Notice
    Agency Fee:	$0

    Renewal to Maintain Exemption

    More Details

    Exemption Eligible Organizations:	Charities that received less than $25,000 in contributions during their most recent fiscal year
    Form:	Exempt Organization Fundraising Notice (Renewal)
    Agency Fee:	$0
    Due:	Annually within 8 months after fiscal year end.

    Initial Registration

    More Details

    Form:	Form COR-92: Charity Registration
    Filing Method:	Mail or email to dlcharity_sos@maryland.gov.
    Agency Fee:	$0-300, depending on charitable contributions
    Turnaround:	4-6 weeks
    Notes:	The nonprofit's president, chairman, or principal office must sign. The signature need not be notarized. Upon approval, you will receive a Certificate of Solicitation. Some Maryland 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. 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. 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. If you will foreign qualify in Maryland, obtain a certificate of good standing from your home state to submit during the foreign qualification process. The certificate cannot be more than 90 days old when filing foreign qualification documents.
    How to Apply:	Domestic Applicants: File entity formation documents with the Maryland State Department of Assessments and Taxation (SDAT). Submit a Charity Registration application or URS and all required attachments to the Maryland Secretary of State - Charitable Organizations Division. Foreign Applicants: Determine whether or not your charity will need to foreign qualify based on your activity in Maryland. If not required, skip to number 3. File foreign qualification documents with the Maryland State Department of Assessments and Taxation (SDAT). Submit a Charity Registration application or URS and all required attachments to the Maryland Secretary of State - Charitable Organizations Division.
    Required Attachments:	IRS form 990 Audited financials (if applicable) Articles of incorporation Bylaws IRS determination letter (or IRS form 1023 if exemption is pending) List of officers and directors Professional fundraising contracts

    Registration Renewal

    More Details

    Form:	Annual Update of Registration
    Filing Method:	Mail or email to dlcharity_sos@maryland.gov.
    Agency Fee:	$0-300, depending on charitable contributions
    Due:	Annually within 6 months after the close of your organization's fiscal year. So if your fiscal year ends December 31, then renewal is due by 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 are automatically extended for 4.5 months beyond the original due date.
    Penalties:	There is a late fee of $25 for each month that passes after the due date.
    Notes:	Make sure to include all required attachments, including annual financial report
    Required Attachments:	IRS form 990 Audited financials (if applicable) List of officers and directors Professional fundraising contracts Only if amended: IRS determination letter, articles of incorporation, and bylaws

    Change of Fiscal Year

    More Details

    Form:	Maryland Annual Update of Registration
    Agency Fee:	Varies
    Notes:	Fiscal year can be changed during the standard renewal process.

    Cancellation

    More Details

    Agency Fee:	$0
    Notes:	To close out your registration, submit articles of dissolution or a letter stating the organization is no longer soliciting in Maryland. Past due filings or fees are not required in order to close an organization's registration.

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

15. 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.

    Maryland nonprofits who wish to conduct bingo, raffles, tournaments, and other charitable games are subject to Maryland Charitbale Organization Gaming Laws. Charitable gaming laws differ by city or county in Maryland.

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 Maryland nonprofit compliance guide to learn more!

Continue reading "Maryland Nonprofit Compliance"

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