How to Start a Nonprofit in Tennessee

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:	Tennessee Secretary of State - Division of Business Services Name search
   Suffix:	Not required.  Tenn. Code Ann. §48-54-101

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.

   Tennessee director requirements:	Number: minimum 3 Qualifications: Natural persons. No residency requirement. No membership requirement. Term: default is 1 year, 5 year maximum Quorum: majority Committee: minimum 1 natural person who need not be a director
   Tennessee officer requirements:	A president and a secretary are required. One officer prepares minutes of the directors' and members' meetings and authenticates records of the corporation. Two or more offices may be held by the same individual, except for president and secretary.

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 Tennessee registered agent office is located in Memphis, TN. 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:	Tennessee Secretary of State - Division of Business Services
   Form:	Charter (ss-4418)
   Filing Method:	Mail, in-person or online.
   Agency Fee:	$100
   Turnaround:	~4 business days by mail. ~2 days online. Immediately in-person.
   Law:	Tennessee Code Title 48. Corporations and Associations § 48-52-102
   Notes:	A certificate of incorporation is issued upon approval.

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 Tennessee State Tax Identification Numbers/Accounts

    Tennessee offers a consolidated registration application for new business state tax registration.

    Submit to:	Tennessee Department of Revenue http://www.tn.gov/revenue/
    Guidance:	Instructions on Opening a Business in Tennessee
    Form:	Form RV-F1300501: Tennessee Department of Revenue Application for Registration
    Instructions:	Form RV-F1300501 - Instructions
    Filing Method:	Mail or online
    Fee:	$0

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!

    From filing the 1023EZ on August 1st to receipt of the determination letter on August 14th is, in my humble opinion, simply breathtaking and I dare say, ONLY Harbor Compliance could have achieved that.

    

    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

    
    
    

    Franchise and excise taxes are not applicable to nonprofit corporations as defined by law. The Application for Exemption - Franchise and Excise Taxes form is for other exemptions.

    More information: Tennessee Department of Revenue

    To file to obtain Sales Tax Exemption:

    Agency:	Tennessee Department of Revenue
    Form:	Form RV-F1306901: Application for Registration - Sales and Use Tax Exempt Entities
    Agency Fee:	$0
    Notes:	Exemption certificates are only issued to Tennessee nonprofits. Out-of-state nonprofits should instead present their IRS determination letter to vendors.

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.

    Tennessee Charitable Organization Registration

    Agency:	Tennessee Secretary of State - Division of Charitable Solicitations and Gaming
    Law:	Tennessee Code Annotated §48-101-501 and following
    Foreign Qualification is Prerequisite:	No
    Registered Agent (Special Agency) Required?	No

    Automatic Exemption

    More Details

    Exemption Eligible Organizations:

    Bona fide religious institutions An organization organized and operated exclusively for educational purposes and which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, and which is accredited by a recognized accrediting agency. Included in such definition are organizations composed of parents of students and other persons connected with the institution, which are organized and operated for the purpose of conducting activities in support of the operations or extracurricular activities of such institutions. “Educational institution” also includes private foundations soliciting contributions exclusively for such organizations. Cooperative scholarship corporations regulated by title 49, chapter 4, part 1 Volunteer fire departments, rescue squads or local civil defense organizations Community fairs, county fairs, district fairs and division fairs, as defined in § 43-21-104, that have been qualified by the commissioner of agriculture to receive state aid grants, pursuant to title 43, chapter 21, part 1 Political parties, candidates for federal or state office, and political action committees required to file financial information with federal or state election commissions Hospitals and nursing homes that are subject to regulation by the Tennessee Department of Health Any corporation established by an act of congress of the United States that is required by federal law to submit annual reports of its activities to congress containing itemized accounts of all receipts and expenditures after being fully audited by the department of defense

    Law:

    Tenn. Code Ann. § 48-101-502

    Registration to Obtain Exemption

    More Details

    Exemption Eligible Organizations:	Charities with less than $50,000 in gross contributions during the preceding fiscal year
    Form:	Form SS-6042: Annual Request for $50,000 and Under Exemption
    Agency Fee:	$0
    Notes:	Charities must register within 30 days if they exceed $50,000 in contributions.

    Renewal to Maintain Exemption

    More Details

    Exemption Eligible Organizations:	Charities with less than $50,000 in gross contributions during the preceding fiscal year
    Form:	Form SS-6042: Annual Request for $50,000 and Under Exemption (Renewal)
    Agency Fee:	$0
    Due:	Annually within 6 months of the organization's fiscal year end.

    Initial Registration

    More Details

    Form:	Form SS-6001: Application for Registration of a Charitable Organization
    Instructions:	Filing instructions for registration of a charitable organization
    Filing Method:	Mail or online.
    Agency Fee:	$10
    Turnaround:	1 month
    Notes:	The CFO and another officer must sign. Signatures need not be notarized. Remember to attach the Summary of Financial Activities form. If your nonprofit registers during its first year, it must file a quarterly financial report. Some Tennessee 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 Tennessee, obtain a certificate of good standing from your home state to submit during the foreign qualification process. The certificate cannot be more than 2 months old when filing foreign qualification documents.
    How to Apply:	Domestic Applicants: File entity formation documents with the Tennessee Secretary of State - Division of Business Services. Submit an Application for Registration of a Charitable Organization, a quarterly or annual summary of financial activites form, and all required attachments to the Tennessee Secretary of State - Division of Charitable Solicitations and Gaming. Foreign Applicants: Determine whether or not your charity will need to foreign qualify based on your activity in Tennessee. If not required, skip to number 3. File foreign qualification documents with the Tennessee Secretary of State - Division of Business Services. Submit an Application for Registration of a Charitable Organization, a quarterly or annual summary of financial activites form, and all required attachments to the Tennessee Secretary of State - Division of Charitable Solicitations and Gaming.
    Required Attachments:	IRS form 990 Audited financials (if applicable) Articles of incorporation Bylaws IRS determination letter List of officers and directors Professional fundraising contracts

    Registration Renewal

    More Details

    Form:	Form SS-6002: Application to Renew Registration of a Charitable Organization
    Instructions:	Filing instructions for renewing registration of a charitable organization
    Filing Method:	Mail or online.
    Agency Fee:	$10
    Due:	Annually within 6 months after the close of your fiscal year. So if your fiscal year ends December 31, then file 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 can be extended for 150 days beyond the original due date by submitting a request for extension through the online portal. A copy of IRS form 8868 must be included when requesting an extension.
    Penalties:	There is a late fee of $10 for each month that passes after the due date.
    Notes:	The CFO and another officer must sign. Signatures need not be notarized. Remember to attach the Summary of Financial Activities form
    Required Attachments:	IRS form 990 Audited financials (if applicable) List of officers and directors Professional fundraising contracts

    Contract Filing

    More Details

    Agency Fee:	$0
    Due:	Charities must submit copies of every contract they have with professional fundraisers, fundraising counsels, and commercial co-venturers during initial charitable registration and during charitable registration renewal.

    Financial Reporting
    Quarterly Financial Report

    More Details

    Form:	Quarterly Financial Report
    Filing Method:	Mail or online.
    Agency Fee:	$0
    Due:	Within 30 days after the end of each quarter of the organization's current fiscal year.
    Notes:	During their first year of operation, newly registered charitable organizations must provide quarterly financial reports to the Secretary of State.

    Change of Fiscal Year

    More Details

    Agency Fee:	$0
    Turnaround:	1-2 business days
    Notes:	Send the state a copy of the short IRS 990 once it is available.

    Cancellation

    More Details

    Form:	Notice of Intent to Cease Solicitation Activity
    Agency Fee:	$0
    Notes:	To close out your registration, submit a Notice of Intent to Cease Solicitations, the most recently filed IRS form 990, and a brief letter of explanation.

    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.

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 Tennessee nonprofit compliance guide to learn more!

Continue reading "Tennessee Nonprofit Compliance"

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