How to Start a Nonprofit in North Carolina

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:	North Carolina Secretary of State - Business Registration Division Name search
   Suffix:	The name of a corporation must contain the word "corporation", "incorporated", "company", or "limited", or the abbreviation "corp.", "inc.", "co.", or "ltd.".  NC General Statutes § 55D-20(a)

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.

   North Carolina director requirements:	Number: minimum 1 Qualifications: Natural person. No residency requirement. No membership requirement. Term: 1 year Quorum: majority Committee: minimum 2 members
   North Carolina officer requirements:	Defined in bylaws or board resolution. Two or more offices may be held by the same individual. This person may sign instruments in only one capacity when the signatures of two officers are required.

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 North Carolina registered agent office is located in Raleigh, NC. 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:	North Carolina Secretary of State - Business Registration Division
   Form:	N-01: Articles of Incorporation for Nonprofit
   Instructions:	Instructions for Completing Articles of Incorporation Nonprofit Corporation
   Filing Method:	Mail, in-person, or online.
   Agency Fee:	$60 + optional $100-200 expedite fee
   Turnaround:	~5-7 business days. 24 hours for $100 expedite fee. Same day for $200 expedite fee (submit by noon).
   Law:	North Carolina Nonprofit Corporation Act
   Notes:	If the corporation is a charitable or religious corporation, NC statute requires a statement to that effect (N.C.G.S. § 55A-2-02). Typically any organization that will apply for 501(c)(3) should include this statement. Explicitly declare whether or not the corporation will have members (N.C.G.S. § 55A-2-02). A member votes to elect directors. You may include an optional provision limiting or eliminating the personal liability of any director for monetary damages arising out of an action whether by or in the right of the corporation or otherwise for breach of any duty as a director. Filing of the articles of incorporation by the NC Secretary of State is proof that the nonprofit has fulfilled the minimum statutory requirements to incorporate. They will stamp the articles with the date the corporation is created. The signed original will be retained by the state and a copy will be returned to the incorporator. Articles of Incorporation are not required to be filed with the NC Register of Deeds.

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 North Carolina State Tax Identification Numbers/Accounts

    The NC Secretary of State automatically notifies the NC Department of Revenue of your incorporation. The Department of Revenue send you a six-part questionnaire (Form CD-345) to be used for determination of tax status in regards to corporate and franchise taxes.
    
    For other state taxes, North Carolina offers a consolidated state tax registration application:

    Submit to:	North Carolina Department of Revenue http://www.dornc.com/
    Form:	Form NC-BR: Business Registration Application for Income Tax Withholding, Sales and Use Tax, and Machinery and Equipment Tax
    Guidance:	Nonprofit Education
    Filing Method:	Mail or online
    Fee:	$0

    Additional registrations might be required for other NC business tax types.

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!

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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:

    Agency:	North Carolina Department of Revenue
    Agency Fee:	$0
    Notes:	Send your Articles of Incorporation, Bylaws, and other organizational documents along with your IRS Determination letter to the Department of Revenue.

    To file to obtain Sales and Use Tax Exemption:

    Not required

    
    
    

    North Carolina currently does not offer an exemption from sales tax. However, the state offers semiannual refunds for qualified organizations. You will file Form E585: Nonprofit and Governmental Entity Claim for Refund with the North Carolina Department of Revenue.

    Apply for NC property tax exemption, if qualified, under the Machinery Act (G.S. 105282.1(a)).

    Certain nonprofit organizations that purchase and use motor fuel may receive a quarterly refund for the excise tax paid by applying with Form Gas 1200, Application for Refund of Road Tax Due on Motor Fuels (G.S. 105449.106).

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.

    North Carolina Charitable or Sponsor Organization Solicitation License

    Agency:	North Carolina Secretary of State - Charitable Solicitation Licensing Division
    Law:	North Carolina General Statutes §§ 131 F-2 to 131f-8. CSL Statute and Rule Reference
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	No

    Automatic Exemption

    More Details

    Exemption Eligible Organizations:

    Religious organizations Government agencies Any hospital licensed pursuant to Article 5 of Chapter 131E or Article 2 of Chapter 122C of the General Statutes Any noncommercial radio or television station A qualified community trust as provided in 26 C.F.R. § 1.170A-9(e)(10) through (e)(14) A volunteer fire department, REACT (Radio Emergency Associated Communications Teams), rescue squad, or emergency medical service A Young Men's Christian Association or a Young Women's Christian Association A nonprofit continuing care facility licensed under Article 64 of Chapter 58 of the General Statutes Any tax exempt nonprofit fire or emergency medical service organization involved in the sale of goods or services that does not ask for a donation

    One-Time Exemption Registration

    More Details

    Exemption Eligible Organizations:	Educational institutions
    Form:	Questionnaire for Exemption Under 131F-3(4)
    Agency Fee:	$0
    Law:	NC Stat § 131F-3(3)

    Registration to Obtain Exemption

    More Details

    Exemption Eligible Organizations:	Charities with less than $25,000 in contributions in any calendar year
    Form:	Request for Exemption Under 131F-3(3)
    Agency Fee:	$0

    Renewal to Maintain Exemption

    More Details

    Exemption Eligible Organizations:	Charities with less than $25,000 in contributions in any calendar year
    Form:	Request for Exemption Under 131F-3(3) (Renewal)
    Agency Fee:	$0
    Due:	Annually within 4.5 months after the organization's fiscal year end.

    Initial Registration

    More Details

    Form:	Initial / Renewal License Application for Charities or Sponsors
    Filing Method:	Mail or online.
    Agency Fee:	$0-200, depending on contributions
    Turnaround:	2-3 weeks
    Notes:	Note the list of attachments required. The CFO / treasurer must sign and it must be notarized. Some North Carolina 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. 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. 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 North Carolina, obtain a certificate of good standing from your home state to submit during the foreign qualification process. The certificate cannot be more than 6 months old when filing foreign qualification documents.
    How to Apply:	Domestic Applicants: File entity formation documents with the North Carolina Secretary of State - Business Registration Division. Submit an Initial License Application for Charities or Sponsors and all required attachments to the North Carolina Secretary of State - Charitable Solicitation Licensing Division. Foreign Applicants: Determine whether or not your charity will need to foreign qualify based on your activity in North Carolina. If not required, skip to number 3. File foreign qualification documents with the North Carolina Secretary of State - Business Registration Division. Submit an Initial License Application for Charities or Sponsors and all required attachments to the North Carolina Secretary of State - Charitable Solicitation Licensing Division.
    Required Attachments:	Either IRS form 990 or audited financials IRS determination letter List of officers and directors Professional fundraising contracts A certificate of good standing from the organization's home state

    Registration Renewal

    More Details

    Form:	Initial / Renewal License Application for Charities or Sponsors
    Filing Method:	Mail or online.
    Agency Fee:	$0-200, depending on contributions
    Due:	Annually within 4.5 months after the close of your fiscal year. So if your fiscal year ends December 31, renewal is due by May 15. 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 60 days beyond the original due date.
    Penalties:	$25 for each month that passes after the due date. Capped at $900.
    Notes:	Note the list of attachments required (including annual financial report).
    Required Attachments:	Either IRS form 990 or audited financials List of officers and directors Professional fundraising contracts Certificate of good standing in home state

    Contract Filing

    More Details

    Form:	Fund Raising Disclosure Form for Charities or Sponsors
    Agency Fee:	$0
    Due:	Charities must submit a disclosure form for each contract they have with fundraising consultants, professional solicitors, and commercial co-venturers during initial charitable registration and with charitable renewal filings.
    Notes:	Copies of contracts do not need to be submitted, but the disclosure form asks for a variety of contract details. Contracts with commercial coventurers must include: The projected amounts of gross sales The projected sales for each vending unit The charitable organization or sponsor's share per unit, and The charitable organization or sponsor's projected total dollar share

    Change of Fiscal Year

    More Details

    Form:	Initial / Renewal License Application for Charities or Sponsors
    Agency Fee:	Varies
    Notes:	Fiscal year can be changed during the standard renewal process.

    Cancellation

    More Details

    Agency Fee:	$0
    Notes:	Submit a letter signed by an authorized officer or member of the organization along with an IRS form 990, audited financial statement, or a completed Annual Financial Report Form for the immediately preceding fiscal year.

    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.

    North Carolina nonprofits who wish to raise funds by hosting charitable gambling should be aware:

    • NC regulates bingo to prevent commercialized gambling. Nonprofits must apply for a NC Bingo License.
    • NC limits raffling. Your nonprofit may hold two raffles per year with prizes limited to $5,000 cash or $25,000 personal property per raffle (N.C.G.S. § 14-309.15).

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 North Carolina nonprofit compliance guide to learn more!

Continue reading "North Carolina Nonprofit Compliance"

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