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10 Best Nonprofit Formation Services of 2021 Launch Your Nonprofit Organization Today

Looking to start a nonprofit organization? Compare the top online nonprofit filing services and avoid paying high lawyer fees. Get compliant & start accepting donations.

Last Updated: December 2021

What is a nonprofit organization

A nonprofit corporation is a business entity organized to raise money or distribute funds for certain types of organizations. They may be taxable or need to meet tax-exempt requirements. They are formed to benefit the public, a group of individuals or the members of the nonprofit. Examples are religious organizations, charity groups, political groups, and membership clubs. Forming a nonprofit takes advantage of private and public grants, lower postage rates, tax exemption statuses and allows individuals to donate money tax-free while protecting your personal assets.

How to start a nonprofit organization?

Forming a nonprofit corporation is a little more complicated than forming other business entities and it is recommended that you consult with a specialist to make sure you compliant with all state and federal regulations. Here are the general steps to forming a nonprofit corporation:

  1. Business Name – Choose a business name and perform a search of the Secretary of State to ensure it is available. Nonprofits have perpetual existence. If one of the directors leaves the company or passes away, the nonprofit does not cease.
  2. File documents with the Secretary of State incorporate online with one of our top filing services – While you can prepare and file all paperwork yourself, it is recommended that you consult with a specialist who will ensure you are compliant with all rules.
  3. IRS tax exemption application – In order to accept charitable contributions from donors, filing as a 501(c)(3) organization is a must. This is done through Form 1023. There are limits on gross receipts, a level of transparency, limitations on political activity. While you are filing information with the IRS, apply for an EIN number.
  4. State tax exemption application – States have specific filing requirements and rules for nonprofits as well if they would like to have tax exempt status.
  5. Create Bylaws – Bylaws are specific rules and regulations written and adopted to control the actions of the members or employees. They must be filed along with other paperwork and are a requirement by the IRS.
  6. Appoint directors – Nonprofits are governed by a Board of Directors. This is the governing body for the corporation. They have decision-making authority to set company policy, adopt bylaws, name members of committees, hire and monitor the executives, determine dividends and issue additional shares. The board of directors is liable for the actions of the firm’s policies and actions.
  7. Hold an initial board meeting – The initial meeting of the board is held to appoint directors and bylaws.
  8. Apply for licenses and permits – Certain nonprofits require licenses and permits before starting fundraising efforts.

Where should I form my nonprofit organization?

Similar to other formation entities, you have options as to where it is best to file your paperwork. In general, most nonprofit corporations are formed in the state in which they will primarily operate. There are some advantages of this, including ease of filing if you are going to concentrate your work in one particular state, and there are no franchise taxes. In short, filing in your home state is less expensive and cumbersome with relation to filing annual reports.
If your intention is to have business locations in multiple states or abroad, you will need to choose a single state to file in and then register to do business, file annual reports and pay feeds in every other state where you do business.

Do I need a registered agent?

Yes, all corporations are required to designate a Registered Agent and physical address with the Secretary of State. A person must be located at the address and able to accept and sign for legal documents and state correspondence. If your business has more than one location or operates in multiple states, there are services available to perform this function.

If I want to organize a fundraiser, do I need to register my nonprofit?

Yes, in order to receive donations from residents of the state, many states require registration as a nonprofit with the secretary of state. If the nonprofit has more than $25,000 in annual income. The IRS requires disclosure of all states where you are doing business. There are harsh penalties for failing to register and report your income.

What tax forms are required for a nonprofit organizations?

Consult with an accountant or tax professional to determine which forms are required for your specific nonprofit. Here are some common tax forms used for charitable entities:

  • Form 990: Return of Organization Exempt from Income Tax
  • Form 990-EZ: Short Form Return of Organization Exempt from Income Tax
  • Form 1023: Application for Recognition of Exemption for 501(c)(3) Charitable Organizations
  • Form 1024: Application for Recognition of Exemption for 501(a) Organization
  • Form 1120: U.S. Income Tax Return for Certain Political Organizations

Publicly supported organization vs private foundation

IRS section 509(a) outlines how collected funds are classified. Publicly supported organizations and private businesses are differentiated by where funds come from. Public organizations have less regulations and are exempt from certain taxes that private foundations must pay. It is highly recommended that legal counsel be consulted to determine all of the nuances behind everything.

Ready to file

A nonprofit corporation is a wonderful way to give back to the community and be of service to those less fortunate. Filing Articles of Incorporation will legitimize your cause in the eyes of your donors and keep you compliant with rules and regulations of the IRS and State Agencies. You can go through this whole process on your own, or hire an online agency.