Nonprofit Frequently Asked Questions

Incorporating is a key step in formalizing your cause.

• Incorporating limits the liability of directors, officers, and members (provided you properly maintain the corporation).
• Incorporating builds credibility with donors and grantmakers.
• As you form your board of directors and elect officers, you can gain support and involvement from others committed to your mission.

Liability refers to financial or legal debt. Limited liability means containing the amount of liability directors and members have.

A nonprofit must be properly set up and run to establish and maintain the “corporate veil” that protects its stakeholders from liability.

Nonprofits do not have owners. Nonprofits do not distribute profits.

Nonprofits are managed by a board of directors (also called a board of trustees) who set strategic direction for carrying out the nonprofit's mission. The directors hire an Executive Director (also called a CEO) who receives a salary and who has primary responsibility for executing the direction set by the directors.

Learn more by reading “Nonprofit Governance”

Nonprofits are not automatically tax exempt. They apply for federal income tax exemption with the IRS by filing Form 1023 or Form 1024 for recognition under IRC 501(c). The most common scenario is a public charity seeking tax exemption under 501(c)(3).

Federal income tax exemption under 501(c) is just one of many tax exemptions available to nonprofits. You can also apply for state income tax exemption, state sales tax exemption, and local property tax exemption, to name a few.

Running a nonprofit requires ongoing compliance with the state corporations code and IRS 501(c) regulations. If you fall short of maintaining compliance, you risk losing your tax exemption, exposing your directors to liability, facing fees or penalties, or having the nonprofit dissolved by the state.

After forming the nonprofit, you should have an organizational meeting of the incorporators or initial directors and adopt bylaws, which documents how the nonprofit will be run. You should keep company records, including meeting minutes and resolutions.

Some states require the nonprofit to file an annual report, filing fees, and "business" license for the continued authority to conduct business in that state. All states require the nonprofit to maintain a registered agent. Keeping up with statutory requirements is important to preserve the good standing of the nonprofit, liability protections, and to avoid government penalties (up to and including administrative dissolution of the nonprofit).

Fiscal sponsorship is an arrangement with an umbrella 501(c) organization to incubate your charitable nonprofit. By working with a fiscal sponsor your cause can receive tax-deductible donations and avoid or delegate a great deal of administrative paperwork.

Please see the article “Types of Nonprofit Organizations”

The hard costs to set up and run a nonprofit are defined by the state fees in your state of incorporation. All states charge some filing fee to process your Articles of Incorporation to set up the nonprofit. Some states will require an initial report, publication, and other set up to your nonprofit which incur further costs. Beyond the hard costs of the state fees, setting up a nonprofit also requires registering for tax IDs, establishing records, and otherwise setting up. We simplify your start-up expenditures by offering nonprofit formation packages.

After your nonprofit is set up, you are responsible for running it in compliance with your statutory corporations code and 501(c) guidance. This often requires filing an annual report, filing annual tax returns (or tax exempt returns), and, in some states, remitting an annual franchise tax or license for the privilege of operating. Operating an organization in compliance with 501(c) is a lengthy topic, but an important one to keep tax exemption. Finally, many states require annual charitable solicitation registration. The costs to accomplish these tasks vary by state. In some states there is minimal cost and in others you may have to spend hundreds every year. Please contact us if you would like more information about the business compliance aspects of running your nonprofit.

A nonprofit is formed by filing Articles of Incorporation (sometimes called a Certificate of Formation or Charter) with the governing statutory body, usually the Secretary of State. This document outlines the company name, registered agent, and other basic information required for the state to create the legal entity of the corporation. Some states require publishing or an initial report before the corporation is truly finalized.

After forming the nonprofit corporation, the organization should register for federal and state tax IDs, hold an organizational meeting, adopt bylaws, issue membership certificates (if applicable), otherwise establish records, register for business licenses and permits, submit charitable solicitation registrations, and set up a foundation to ensure compliance with ongoing statutory and 501(c) requirements.

An attorney is not required to form an nonprofit. In most states any natural person age 18 years or older may file the Articles of Incorporation to create an nonprofit. You have several options:
- Learn how to do it yourself
- Invest in the expense and expertise of an attorney or accountant
- Consider our affordable nonprofit formation service

Most new organizations want to set up their nonprofit intelligently and in the most economical way possible. For this reason, it is common to form your nonprofit in the state in which your organization has an office and carries out its mission. Registering in a different state such as Delaware or Nevada adds another set of state filings and ongoing reporting requirements. While popular states such as Delaware do have certain advantages in terms of case law and court systems, these benefits are most often realized by large businesses such as Fortune 500 companies.

Some start ups naturally have presence in multiple states from Day 1. If this is the case, we can help you file a domestic registration for your nonprofit in your preferred state as well as foreign registrations in each other state where the nonprofit will operate. Please contact us for a custom quote.

If you purchase our nonprofit formation service, a filing specialist will check availability of your desired name and, if needed, help you find an acceptable alternate name.

You must choose a name for your nonprofit that is distinguishable from all other registered entities in your state of formation. The name must contain a corporate designator that is approved by that state's corporations code. Certain words are restricted and either may not be used in the name or may only be used in the name with prior approval.

Before filing Articles of Incorporation, a name availability check should be conducted to ensure the desired business name is available. Most states have searchable public records. Every state has a slightly different search protocol. Some require a name reservation in addition to a name availability search.

Nonprofits that wish to have multiple names accomplish this by filing a fictitious name in addition to the corporate name. We can help you avoid the common mistake of filing the fictitious name under your personal name instead of under the corporation. Please contact us for a custom price quote.

To get started with your nonprofit, click here to learn about our nonprofit formation service.

Ordering your desired nonprofit package is easy. You probably already know all the information you need such as your desired organization name (if it's not available, we'll help you find one that is), a description of your purpose or mission, and the names of those starting the organization.

We are responsive and work quickly to prepare and file the government forms to create your nonprofit. As soon as we receive your order, we route it to the nonprofit filing specialist that is the best fit for your organization. Your specialist calls you for an initial consultation to learn more about you and your organization. This is a critical step because 501(c) exemption requires certain language in the articles of incorporation; we want to understand your end goals before filing any paperwork.

If you have all the information we need, we can file your nonprofit in 1-2 business day. During this time we will contact you with the results of your name availability search and may require your signature on certain documents.

State processing times vary. Some states permit us to form your nonprofit immediately online while others can take 10+ weeks to respond. We're experienced in the best ways to submit your nonprofit, advise you when to pay state expedite fees for a reasonable turnaround time, and we communicate directly with the state government to resolve any delays.

Some secretaries of state offer expedited processing for a fee, all the way up to 1-hour processing. If you're in a rush, contact us and a formation specialist can explain state rush options, take your order by phone, and, with your help, submit your formation documents in a matter of hours.

Absolutely. Our affordable document filing service complements the personalized advice you obtain from licensed experts.

We want to support you before, during, and after you form your nonprofit. Please contact us to speak with a formation specialist.